‘MCOs have evolved into multiple generations and forms’
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Health insurance as the main modality of universal health coverage (UHC) now looks to be indisputably confirmed to be ingrained in Indian health policy thinking. Aided by the digital revolution, it is opening doors to potential reforms that are redolent of the United States, albeit with local adaptations that avoid its profligate spending on health. Recently, a notable health-care chain in South India announced its foray into comprehensive health insurance by combining insurance and health-care provision functions under one roof — what can be called the Indian iteration of a managed care organisation (MCO). It is timely to reflect on whether MCOs hold promise for the bigger Indian health-care landscape, particularly when it comes to extending universal health care.
The background
Having its precursors in some rudimentary prepaid health-care practices in the United States of the 20th century, the strongest impetus for mainstreaming MCOs in U.S. health care came in the 1970s, when cost containment concerns in health care loomed large. Hitherto dominated by generously reimbursed providers in cahoots with insurers, high premiums became increasingly unattractive for health insurance purchasers following the economic slowdown after the 1970s. This 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 this was against a fixed premium paid by the enrollee.
Ever since then, MCOs have evolved into multiple generations and forms, and have penetrated deep and wide into the health insurance space. Although robust evidence on their contribution to improving health outcomes and prioritising preventive care has been lacking, evidence indicates that they did help in reducing costly hospitalisations and associated costs.
In India, ever since the first public commercial health insurance was promulgated in the 1980s, the focus has been on indemnity insurance and covering hospitalisation costs, despite a near $26 billion market for outpatient consultations in the country. As Thomas (2011) has discussed, health insurance, playing second fiddle to life and general insurance, has seen scant innovation and high, often unsustainable, costs of operation.
A contrast
In an early analysis of how the HMO — or health maintenance organisation, a type of MCO) — experience panned out for developing nations, Tollman et al. identified some important characteristics: MCOs tended to be urban-predominant, attracted the high-income cohort, and caught on in contexts where the public sector was failing or lacked strong socialist moorings. In addition, it required that players brought in enough financial clout, managerial capabilities, and manpower, and found well-off and well-defined beneficiary bases to serve.
Much in contrast to the U.S., 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. And, while unprofitable operations coupled with unaffordable premiums can serve as incentives in theory, they are a far cry from engendering a strong systemic push towards managed care.
A few successful initiatives are likely to stem from big health-care brands having a loyal urban patient-base, and pockets deep enough to forge networks and invest in administrative capacities and infrastructure. However, prospects of them transmuting into a consequential contributor to UHC purely based on private initiative are far-fetched. That said, 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 lies significant scope in reducing health-care costs through early interventions afforded by comprehensive outpatient care coverage. The health insurer today has little control over the patient’s journey before they reach the hospital.
NITI Aayog report
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 easily be many times over. And its positive spillovers in terms of consolidation of dispersed practices, streamlining of management protocols, and embedding a much-needed preventive care focus in the private sector can imply a sustainable solution to the problem of outpatient care coverage over the longer term.
Under the Ayushman Bharat Mission, incentives were announced for promoting the opening of hospitals in underserved areas which would preferentially cater to beneficiaries of the Pradhan Mantri Jan Arogya Yojana (PMJAY). Similar incentives could be conceived for MCOs, which would insure and cater to PMJAY patients apart from a private, self-paying clientele on a limited scale initially and on a pilot basis. The same applies to other public sector social health insurance schemes. This would also contribute to increasing awareness and expanding the reach of MCOs over time, as the self-paying pool expands and grows the demand base.
UHC is a complex maze, and as in all complex systems, there is never a solitary answer to a complex question. Neither is there a solution that does not beget a problem in turn. While MCOs cannot be expected to be the perfect solution, they can be part of the bigger answer that Indian health care seeks today.
Dr. Soham Bhaduri is a physician and an independent researcher who specialises in health policy and leadership
