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Transcript of Sustainable Healthcare Financing through Health Insurance Swiss Re Healthcare Services Pvt. Ltd....
Sustainable Healthcare Financing through Health Insurance
Swiss Re Healthcare Services Pvt. Ltd. Blr.
Slide 2
A Balanced System is the Answer ( PPP )
Income
Age
Very Poor
Near Poor
Moderate
Wealthy
Young Working Ages Retired
Public Health Insurance
Private Health Insurance and some Out-of-Pocket Payments
Slide 3
Current Scenario of Healthcare Spend in India
Even among the BRIC countries India lags behind on Public and Private per capita spend as a % of GDP
75% Out of Pocket (OOP) spending - Too high by far and definitely not a healthy model of financing
40% of hospitalised are pushed below poverty line or into life long debt due to lack of financial planning
85% of In-patient Care delivered on the Private Hospital platform with unregulated and variable pricing methods
Slide 4
Pattern of healthcare financing in India
Total health spend per capita
Composition of health spend – India vs.World
Source:: National Health Accounts, WHO
0% 20% 40% 60% 80% 100%
Out-of-pocket Private InsuranceGovt Expenditure Social InsuranceOther
2,900
6,096
2,823
359
293
290
245
43
36
33
424
277
943
30
31
- 1,000 2,000 3,000 4,000 5,000 6,000 7,000
UK
USA
Japan
Chile
Thailand
Brazil
Russia
Sri Lanka
Philippines
Indonesia
Mexico
China
Singapore
Vietnam
India
World
IndiaOOP
Slide 5
Healthcare Market in India - Size and Growth
Indian healthcare market currently estimated at US$ 37.03 bn
Healthcare delivery and pharmaceuticals account for nearly 75% of the total market.
Private healthcare is estimated to be the largest component of the healthcare sector
The Indian Healthcare market is growing at a CAGR of 20%
Market is expected to grow to US$ 104 bn by 2010-2011.
Healthcare spending is expected to scale up to about 5.5% of GDP, by 2009
Indian Healthcare Industry Projections
Physicians per 1,000 population 0.60
Nurses per 1,000 population 0.80
Hospital Beds per 1,000 population 0.70
India’s Health Indicators
Source: WHO
Source: Ernst & Young, IBEF
CAGR -20%
24.6327.27 29.87
33.2137.03
60.32
-
10
20
30
40
50
60
70
2002-03 2003-04 2004-05 2005-06 2006-07 (E) 2007-08 (E)
Total Health Spend (US$ bn)
Slide 6
Public and Private expenditure on Healthcare - Asia
Spending benchmarks - Asia - 2002
0.70
1.301.40 1.40
2.13
1.30
2.43
1.101.00
0.40
1.00
1.58
2.30
2.97
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
Indonesia Phillipines Sri Lanka Malaysia Thailand Singapore South Korea
Country
%ag
e
Public expenditure on health (% GDP)
Private expenditure on health (% GDP)
Source: Health Insurance and Health Services in ASEAN – Asia pacific summit on health insurance and managed care 2003
Slide 7
The need for better healthcare financing
The “Uncertainty” of the occurrence and the intensity of Health problems in any individual – a barrier to planning
Changing Disease burden in the community – longevity, new infectious disease outbreaks and lifestyle diseases
Changing Healthcare seeking behaviour as affluence puts access to care within the reach of more people
Medical Inflation – very high in India and a harsh reality
Global experience analysis and the learnings from more developed nations reinforces this urgent requirement
Slide 8
Healthcare risk structure
Frequency of Occurrence
Cost of Medical Care
MA
JOR
SU
RG
ER
IES
INTE
RM
ED
IATE S
UR
GER
IES
MINOR SURGERIES MEDICAL MANAGEMENT
Medical Services currently financed by Health Insurance
CI
IN - PATIENT TREATMENT OUT - PATIENT TREATMENT
Slide 9
Law of large numbers is the basis for risk pooling
Mean Loss per Exposure Unit Mean + 1.96 SDMean - 1.96 SD
1000 Exposure Units
10000 Exposure Units
Probability
True Mean Sample Mean
Slide 11
Healthcare Systems Perpetual Stresses
demands good Stewardship
To create and manage a balanced healthcare system that addresses different needs, wants, interests, and perceptions of
various stakeholders and is sustainable.
Feasibility: Achieve simultaneous balance among Cost-Quality-Access goals and objectives in a society
Sustainability: Provide financing mechanism and healthcare resources needed to maintain balance among Cost-Quality-Access goals and objectives over time
Satisfaction: Fulfill all the key stakeholders’ expectations as healthcare and healthcare systems evolve
Slide 12
Healthcare Demand and Cost Drivers
Personal, Family, Medical and prevalent Social Ethics
Preventive care, Emergency care, Lifestyle Medicine, Long term care and End of Life care
Awareness, Access, Affluence and Affordability all modify the health-seeking behaviour of the masses
“Corporatisation” of Hospitals and Healthcare delivery
Health Insurance penetration and spectrum of benefits
Medical Tourism catering to overseas patients needs
Slide 13
Medical Inflation contributors
Medical Science advances
Higher cost of trained resources
Rapid technological development
Change in disease patterns and prevalence
Longevity and changing Health seeking behaviour
Early onset of many Chronic / Lifestyle diseases
Slide 14
Insurability / Infrastructure
Insurer’s involvement
Life only
Critical illness
Hospital cash
Full reimburse-ment
Managed care & Wellness
Administration Underwriting, Product
devtActive claims management
Risk not insurable - No
opportunity
Stay away
Regulatory burden, little incentive
Increasingly mature market and
sophisticated buyers
Integrated state and private offering
Source: Swiss Re Economic Research & Consulting; Swiss Re L&H
Evolution of Medical Insurance Business
No marketAll paid Out of
Basic Product supplements state system
Indemnity product – may be IP first.
Cost containment – PPO & Discounts
Full managed care / HMO
Market Development
India Market
Slide 15
Product platform – Health Insurance
Range of coverage
SimpleSimple ComplexComplex
Comprehensive Indemnity
Surgical Expenses
Crit. Illness
HCB
Surgical Expenses
Crit. Illness + TPD
HCB
Surgical Expenses
Crit. Illness + TPD
Catastrophic Event
Full Indemnity
Surgical Expenses
Crit. Illness
Catastrophic Event
In /out patient only
Cancer only
Ancillary services
Fixed BenefitsLink to savings
prod
Accel.Rider Benefit
Addl.Rider Benefit
Stand alone health insurance (Defined Benefit)
Slide 16
The Macroeconomics of Healthcare Financing
Sources of revenue for health care financing
– General revenue (taxation)
– Social health insurance
– Voluntary or private health insurance
– Out of Pocket payments (OOP) and
– Internal donation (private borrowings)
In Asia, health expenditure is funded as follows
– Taxation – 30%
– Social health insurance – 25%
– Out of Pocket (OOP) – 30%
– Private health insurance - 15%
* In India OOP is as high as 75%
Without the
developed markets of Japan and Australia,
the contributio
n of private
insurance would be
significantly lower
Slide 17
Economic Value of Insurance
Social Value of Insurance
Political process moves towards
consistency between:
Insurance Market
Behavior
… and …
external social, ethical and economic
considerations
Insurance Market Behavior Structure Consumer Behavior Insurer Behavior
Alternatives
Public - PrivateOpen - Closed
Characteristics Government rules
Consumer choice Competition
Demand driven by Risk Aversion
… and …
Consumer Behavioral Problems
Adverse Selection
Moral Hazard
Supply driven by Risk Management
Tools
designed around Consumer Behavioral
Problems
Feasibility Problems
Strategies & Tactics
affecting costs and profit
Insurance Market Failures
Slide 18
Current Scenario of Health Insurance in India
Source: World Health Organisation. Figures in year 2004
Low penetration of Insurance and low government expenditure in India has resulted in high Out-of-Pocket spend
Sources of Health Spend (India vs. World)Health Insurance Penetration in India
Uninsured82.65%
Community Insurance4.19%
Pvt. sector Enterprise (Self
Funded)4.61%
Indian Railways0.59%
Pvt.Health Insurance1.42% CGHS
3.35%
ESIS3.19%
Source: Business World (India) – Oct 2007
A Huge Opportunity
A Huge Opportunity
Slide 19
Challenges to development of the medical insurance market in India
Healthcare infrastructure
Mis-alignment of physical and human infrastructure at the point of demand for healthcare
Systems for provider accreditation, clinical protocols and medical coding standards for utilisation data are almost non-existent
Limited engagement of providers with insurers /TPA to pre-agree terms of business
Private medical insurance
Little focus to date on data management to steer the business
No systematic practice of re-pricing the business to account for claims cost trend
Lack of clarity on the health insurance regulatory landscape
Level playing field for all types of insurance Co. to write medical business does not yet exist
Role of the government
Elderly population face unaffordability of health insurance premiums; aggravated by historic under-pricing & high trend
Insurance is viewed politically as a panacea for ‘health for all’, but the poorest sections of society cannot afford products to meet even basic health needs
Fiscal incentives do not support pre-funding of healthcare costs
Slide 20
Future scenario of Health Insurance in India
Number of mass affluent urban households projected to increase
Increasing proportion of Working Age Population
Source: McKinsey Global Institute Source: Extrapolated from Census of India
Demand for quality Healthcare and affordability will increase significantly generating additional demand for innovative mechanisms of financing
healthcare
Slide 21
Solutions for Profitability & Sustainability
Fixed Benefit may show better profitability than reimbursement in unregulated and immature markets
Robust and reliable dataset a must for accurate pricing / re-pricing
Claims and IBNR (incurred but not reported) analysis is vital
Ability to accurately estimate medical inflation and cater for it
Annual price increases more sustainable than wild fluctuations
Key Aspects of PMI – most services provided by TPAs
Medical Underwriting
Network Management
Preauthorisations
Claims Adjudication
Slide 22
The Three-Pronged Solution
Sustainability of Medical Ins
P
R
O
D
U
C
T
P
R
I
C
I
N
G
P
A
Y
O
U
T
S
Slide 23
An optimal competitive health care system will NOT necessarily perform to the most preferred social state
No simple single solution can meet ALL the needs for healthcare access and financing in India.
Optimal use of Private and Public Health Insurance is the BEST OPTION for sustainable healthcare financing
Effective Government intervention is needed ESPECIALLY for the poorer sections and for the vulnerable extremes of age groups
Conclusions
Slide 24
A Balanced System is the Answer ( PPP )
Income
Age
Very Poor
Near Poor
Moderate
Wealthy
Young Working Ages Retired
Public Health Insurance
Private Health Insurance and some Out-of-Pocket Payments
Thank you
Dr. Nilima Kadambi
9th May 2008
Slide 26
Questions?
Nilima_Kadambi @ Swissre.com