Context-

Health insurance is now a key part of India's strategy for universal health coverage (UHC). With the help of digital advancements, it's opening up possibilities for reforms similar to those in the United States, but tailored to avoid high costs. Recently, a major health-care chain in South India introduced a model that combines insurance and health-care services, similar to managed care organizations (MCOs). This development prompts us to consider whether MCOs could effectively expand UHC in India.

Background on Managed Care Organizations

• MCOs have their roots in some rudimentary prepaid healthcare practices in the United States of the 20th century. The strongest impetus for mainstreaming MCOs in U.S. health care came in the 1970s, amid rising concerns about health care costs.
• Previously dominated by generously reimbursed providers working closely with insurers, the health insurance landscape saw high premiums becoming increasingly unattractive for purchasers following the economic slowdown after the 1970s. This situation prompted the fusion of insurance and provisioning functions under one roof, a focus on prevention and early management, and a strict emphasis on cost control — all against a fixed premium paid by the enrollee.
• Since then, MCOs have evolved into multiple generations and forms, penetrating deeply into the health insurance space. While robust evidence on their contribution to improving health outcomes and prioritizing preventive care is lacking, evidence indicates that they helped reduce costly hospitalizations and associated costs.

Evolution of Health Insurance in India

• In India, since the first public commercial health insurance was introduced in the 1980s, the focus has been on indemnity insurance and covering hospitalization costs, despite a near $26 billion market for outpatient consultations in the country. As Thomas (2011) discussed, health insurance, playing second fiddle to life and general insurance, has seen scant innovation and high, often unsustainable, operational costs.

Comparison with the United States

• In an early analysis of the HMO (health maintenance organization, a type of MCO) experience in developing nations, Tollman et al. identified some important characteristics: MCOs tended to be urban-predominant, attracted high-income cohorts, and thrived where the public sector was failing or lacked strong socialist moorings. Additionally, successful MCOs required players to bring substantial financial resources, managerial capabilities, and manpower, and they needed well-off, well-defined beneficiary bases.
• Contrasting this with India, the evolutionary trajectory of Indian health insurance has offered few natural incentives for consumer-driven cost control. Insurance has targeted the thin, urban well-off segment, informality has been rife among outpatient practices, and widely accepted clinical protocols have been lacking. While unprofitable operations and unaffordable premiums can theoretically incentivize change, they have not driven a strong systemic push towards managed care.

Potential for MCOs in India

• A few successful initiatives may stem from major health-care brands with loyal urban patient bases and deep pockets to forge networks and invest in administrative capacities and infrastructure. However, the prospects of these initiatives becoming significant contributors to UHC based purely on private efforts are far-fetched.
• Nonetheless, there could be promise in exploring the managed care route with cautious and incremental public patronage. With an average of three consultations per year per person and the negligibly small share of insurance in outpatient care spend, there is significant scope for reducing health-care costs through early interventions afforded by comprehensive outpatient care coverage. Currently, health insurers have little control over the patient’s journey before they reach the hospital.

NITI Aayog's Report and Recommendations

• In 2021, NITI Aayog released a report endorsing an outpatient care insurance scheme based on a subscription model, which would generate savings through better integration of care. The gains from a well-functioning managed care system can be substantial. Positive spillovers, such as the consolidation of dispersed practices, streamlining of management protocols, and embedding a much-needed preventive care focus in the private sector, could provide a sustainable solution to outpatient care coverage over the long term.
• Under the Ayushman Bharat Mission, incentives were announced for promoting the opening of hospitals in underserved areas to cater preferentially to beneficiaries of the Pradhan Mantri Jan Arogya Yojana (PMJAY). Similar incentives could be conceived for MCOs to insure and serve PMJAY patients, alongside a private, self-paying clientele, on a limited and pilot basis. This approach could also apply to other public sector social health insurance schemes, contributing to increasing awareness and expanding the reach of MCOs over time. As the self-paying pool expands, it would grow the demand base for managed care.

Conclusion

UHC is a complex maze, and as in all complex systems, there is never a solitary answer to a multifaceted question. While MCOs cannot be expected to be the perfect solution, they can be part of the broader answer that Indian health care seeks today. Managed care organizations, with appropriate public support and strategic implementation, could contribute significantly to achieving universal health coverage in India.

Source- The Hindu