Need for Alternative Healthcare Financing in India
It is no secret that the healthcare system in India is in a disarray. Successive governments have drafted grand plans to find a sustainable solution for India’s healthcare problem but action on ground has been negligible. India’s public spend on healthcare is abysmally low at about one percent of GDP and the private sector spends about four percent of GDP. As a result, 80-85 percent of India’s healthcare expenditure is out of pocket. Added to the above, insurance penetration in India is negligible with only around five percent of Indians having private insurance. If you include public insurance schemes like RSBY, CGHS etc. the number of insured comes to about 20 percent of the population. Moreover, 65 percent of the insured population is under insured. It is largely estimated that around six crore people in India are pushed below the poverty line annually on account of mounting healthcare expenses.Insurance penetration growth in India is encouraging but has its own challenges. Bulk of the growth in insurance is coming from metros and smaller city penetration is still negligible. Coverage amounts usually fall short of need as healthcare inflation in India stands at 15 percent. Moreover, healthy people don’t feel the need to pay a premium as they don’t see visibility on usage whereas people with ailments find it hard to get insured. As a result, a large chunk of people resort to loans to fund health expenses.
Currently, 30 percent of urban and 70 percent of rural Indians take loans for medical expenses. A large majority of these people take loans from loan sharks at exorbitant interest rates who then use unethical recovery processes.
Traditional banks don’t differentiate between a medical loan and a personal loan and hence take a lot of time in originating a loan. For a person in need of a medical loan,
speed of loan origination is paramount and as a result only 8 percent of the people who need medical loans go to a bank for the same.
The above facts necessitate a clear need for a provider of alternative financing through medical loans who understands healthcare, understands the patient, understands the treatment one is going for and originates loans fast at reasonable interest rates. Medical loans have to go hand in hand with insurance to allow a large chunk of the population to access quality healthcare without putting financial strain on the entire family. This will also allow
1. A large chunk of the population that currently goes to sub optimal hospitals to avail treatment at accredited institutions.
2. Allow people to avail treatment without putting a large one time financial strain on the family who currently have to sell/mortgage assets.
3. Allow hospitals to increase occupancy & revenue by making healthcare affordable for its patients.
4. Allow innovative products such as zero percent interest loans which further increases accessibility
5. Allows even the insured who have run out of coverage to avail treatment
Like an insurer, a medical loan provider will have to work very closely with hospitals to make the consumer aware of such a loan product, ensure there is no over billing and disburse the loan fast once the hospital raises an invoice. The availability of a standing credit line for borrowers acts like a proxy for insurance as people know they can get instant money when a healthcare need arises.
Healthcare financing is a complex problem and will require active participation by all stakeholders. In fact, financing healthcare is now a global problem as even developed countries like the USA are now grappling with rising Out of Pocket (OOP) expenditure. For instance, US OOP, which stood at USD 400 billion in 2016 will be significantly higher at USD 600 billion by 2019!
Since India has been struggling with OOP for a long time, it is best placed to produce an innovative health financing model which will be scalable across continents. Be it Narayana Hrudayalaya’s low cost cardiac care, AAP’s mohalla clinics, Aravinda Netralaya’s low cost eye care, India’s innovations have the potential to drive global change in healthcare practices. The government has to actively step in to nurture this innovation. Exempting healthcare from GST is a step in the right direction while giving healthcare infrastructure status, allowing for relaxation of RBI norms for medical lending, incentivizing healthcare service providers to setup infrastructure in smaller cities and rural areas are some steps the government can take to achieve the aggressive targets set out in the National Health Policy.
The availability of a standing credit line for borrowers acts like a proxy for insurance as people know they can get instant money when a healthcare need arises
The above facts necessitate a clear need for a provider of alternative financing through medical loans who understands healthcare, understands the patient, understands the treatment one is going for and originates loans fast at reasonable interest rates. Medical loans have to go hand in hand with insurance to allow a large chunk of the population to access quality healthcare without putting financial strain on the entire family. This will also allow
1. A large chunk of the population that currently goes to sub optimal hospitals to avail treatment at accredited institutions.
2. Allow people to avail treatment without putting a large one time financial strain on the family who currently have to sell/mortgage assets.
3. Allow hospitals to increase occupancy & revenue by making healthcare affordable for its patients.
4. Allow innovative products such as zero percent interest loans which further increases accessibility
5. Allows even the insured who have run out of coverage to avail treatment
Like an insurer, a medical loan provider will have to work very closely with hospitals to make the consumer aware of such a loan product, ensure there is no over billing and disburse the loan fast once the hospital raises an invoice. The availability of a standing credit line for borrowers acts like a proxy for insurance as people know they can get instant money when a healthcare need arises.
Healthcare financing is a complex problem and will require active participation by all stakeholders. In fact, financing healthcare is now a global problem as even developed countries like the USA are now grappling with rising Out of Pocket (OOP) expenditure. For instance, US OOP, which stood at USD 400 billion in 2016 will be significantly higher at USD 600 billion by 2019!
Since India has been struggling with OOP for a long time, it is best placed to produce an innovative health financing model which will be scalable across continents. Be it Narayana Hrudayalaya’s low cost cardiac care, AAP’s mohalla clinics, Aravinda Netralaya’s low cost eye care, India’s innovations have the potential to drive global change in healthcare practices. The government has to actively step in to nurture this innovation. Exempting healthcare from GST is a step in the right direction while giving healthcare infrastructure status, allowing for relaxation of RBI norms for medical lending, incentivizing healthcare service providers to setup infrastructure in smaller cities and rural areas are some steps the government can take to achieve the aggressive targets set out in the National Health Policy.
