The Government’s Health Insurance cost conundrum – a look at various models.

Arun Joseph VargheseArun Joseph Varghese on February 23, 2015

As it’s that time of the year when everyone is filing their income tax returns – I’m sure many of us are familiar with the Sec 80D which provisions taxable income to be exempt from the health insurance premium up to Rs 15,000.

India’s Health Insurance penetration levels are abysmal with less than 20% of the total population being insured. In fact hadn’t it been for incentives such as tax exemptions, CGHS, ESI or other special government schemes, such as the Yeshasvini, Vajpayee Arogyashree Scheme or others meant to benefit the lower strata of society the Health Insurance penetration levels in India would have been even worse.

In this article I attempt to take a look at various Health Insurance models around the world:

1> The Beveridge Model: named after William Beveridge, the one known to have designed UK’s NHS (National Health Services). Under this model most hospitals and clinics are owned by the government and care givers are also government employees. The healthcare facilities are mostly free for any legal resident of the country. This single payer model is financed by the government through tax payments. The model is adopted in the UK, Spain, New Zealand, Norway, Denmark, Sweden, Cuba, Hong Kong etc.

2> The Bismarck Model: named after the Prussian chancellor, Otto von Bismarck is a multi-payer model where there are multiple insurers managing sickness funds financed jointly by employers and employees through payroll deductions. Tight government regulation keeps a hawk eye on the utilization of the sickness funds managed by various insurers. This model is adopted in Germany, Switzerland, , Japan, France. Belgium, Netherlands, some Latin American countries.

3> The National Health Insurance Model: followed in Canada, South Korea, Taiwan is a hybrid model of the Beveridge and Bismarck where a single payer model covers all aspects of healthcare provided by private Healthcare providers. The single payer here is the Government where every citizen contributed towards through tax payments. The single payer model allows for better negotiating power with the pharmaceutical companies.

4> Out of Pocket Model: is the largely unregulated insurance model followed in countries where only the rich can afford to cover their Healthcare expenses.

Though the 4 above mentioned are the standard health systems models and all models fall within one of these groups I would like to list a 5th Model where I would list all the mixed models of various health systems not because those systems are unregulated but since they are highly fragmented. One such hybrid model is that of the USA.

The American Health System: has differently designed schemes based on affordability and age. For the elderly there is the Medicare, for the poor Medicaid, for the government officials (retired/active) there are other schemes. These schemes are funded by general taxation. For the rest of the 15% of the population the people are covered either under various private health insurance policies or pay out of pocket.

Some examples of health schemes adopted in other countries:

The Singapore Health System: This country has implemented what they call a shared responsibility of healthcare through MSA accounts mandatorily for its employed citizens. The Medical Savings Accounts and the Medi-shield and Medi-fund programs have proved to be very effective leading to Singapore spending less than 4% of its GDP on healthcare.

The National Health Insurance Fund system in Kenya is another government scheme implemented to share the responsibility of health with its citizens. It is mandatory for those above the age of 18 earning at least 1,000 KSH per month. This scheme has 3 million contributors and 6 million dependants. The scheme implemented covers out-patient and in-patient treatments at x per day up to an amount y above which the patient needs to pay out of pocket.

Health Insurance is mandatory to be held by expatriates in the Middle Eastern oil rich countries such as UAE, Qatar, Oman, Saudi – Though healthcare is free for all the citizens due to its large population of expatriates who work in these counties, private health insurance is mandated in some of the Gulf countries. The UAE for example is highly regulated by the HAAD and DHA has the FFS, DRG and Per Diem based form of reimbursement schemes ensuring access and quality of healthcare to all.

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February 23, 2015


February 23, 2015