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Key Text Reduction of Catastrophic Health Care Expenditures by a Community-Based Health Insurance Scheme in Gujarat, India: Current Experiences and Challenges

Author: M Kent Ranson
Date: 2002
Size: 9 pages (153 KB)

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Summary

Spending on medical care can be a major financial burden on poor people in developing countries. Can community-based health insurance schemes reduce health care costs for the poor? This study published by the World Health Organisation investigates the impact of a community-based medical insurance scheme in Gujarat, India on the use of health care and the financial burden of medical expenses. Such community-based health insurance schemes can protect poor households from the uncertain risks of medical expenses.

The study assesses the Self Employed Women’s Association’s (SEWA) Medical Insurance Fund in Gujarat, India. Members pay an annual premium in exchange for protection from the risk of catastrophic medical costs (costs that consume greater than ten per cent of annual household income). The pooling of many people’s resources allows the risk of covering unpredictable medical expenses to be shared. Four factors are important in assessing the performance of a community-based insurance scheme: (i) Insurance coverage of poorer income groups (ii) Protection from hospitalization expenses (iii)Time between submission and reimbursement of claims (iv) Frequency of use of the scheme.

The SEWA Medical Insurance Fund has successfully targeted and included the poor. It has also provided financial protection to poor households by reducing the costs of hospitalization. Specifically, the Fund has halved the percentage of catastrophic hospitalizations and hospitalization costs that would have resulted in a household falling below the poverty line. Other features of the scheme include:

Women benefiting from the Fund were much poorer than the general population.
The percentage of households living below the poverty line was similar for claimants and the general population.
A high percentage of claims for hospitalization were reimbursed.
Reimbursement was more effective in preventing catastrophic hospital expenditures among the poorer income groups.
The time between discharge from hospital and the receipt of reimbursement was about four months, with a longer lag time in rural areas.
The frequency of submission of claims was very low compared with the expected frequency of hospitalization in the population.

The experience of the SEWA Medical Insurance Fund suggests that community-based health insurance schemes can effectively protect poor people from the burden of medical costs. They can also be implemented in areas where institutional capacity is too weak to organise nationwide risk pooling. However, the design of an effective insurance scheme needs to take into account the following:

An affordable premium is important for including the poor but this affects the financial viability of the scheme. The financial viability of the scheme can be improved by seeking subsidies from government or donors.
Inclusion of the poor is also facilitated by nesting the scheme within a larger organisation addressing other needs of the poor (like education).
A cap on reimbursements is necessary to limit the financial risk borne by the scheme. However, this also limits the degree of financial protection provided to members.
Claims need to be processed as close to the claimants as possible so that reimbursements are made quickly.
A system of monitoring and evaluation is vital as adjustments to the design of the scheme are an ongoing process.

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Source: Ranson, M., 2002, ‘Reduction of Catastrophic Health Care Expenditures by a Community-Based Health Insurance Scheme in Gujarat, India: Current Experiences and Challenges’, Bulletin of the World Health Organisation, vol. 80, no. 8
Author: World Health Organisation (WHO), http://www.who.int