The cost of illness

A friend working in public health once told me that while mortality rates were highest in Africa, morbidity rates (the rate of non-fatal illness) were highest in India. If I remember correctly, she told me that this had to do with relatively high rates of innoculation – which cut all the nasty childhood diseases that lead to low life expectancy at birth – but a poor health system over all.

While I’m not sure if this is still true, what I do know is that getting sick is expensive, anywhere. Consider the impact of illness on financial health in the USA:

50 percent of all bankruptcy filings were partly the result of medical expenses… Every 30 seconds in the United States someone files for bankruptcy in the aftermath of a serious health problem. [Link]

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p>And this is even though “68 percent of those who filed for bankruptcy had health insurance” [Link].

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p>If illness wipes out the savings of relatively high (by world standards) earning Americans, you can imagine what it does to the poor in India. While the cost of medical care is cheaper in absolute terms in India, it is still a large share of already meager resources. Couple that with lost earnings, and the impact can be dire.

About one-fourth of hospitalized Indians fall below the poverty line as a direct result of their hospital expenses, according to a 2002 World Bank report. Many people take out steep loans or sell their homes in order to pay. And for the poor, losing even a day’s wages while waiting in the hospital can be devastating.

“A health event is a bigger risk to farmers than an unsuccessful crop. Once they sell their land or livestock, they become indentured laborers. That takes a generation to fix,”… [Link]

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p>Free public health clinics are limited as a solution to this problem. The quality of care is poor, absenteeism is very high, and medicines go missing. In practice, even free services become privatized, as access is restricted to those who will pay.

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p>A new approach involves the market, in particular, micro-insurance:

India is a world leader in this emerging field, with 5 to 10 million people enrolled in micro health insurance nationwide. Fewer than 10 percent of India’s 1.1 billion people have any sort of health insurance, much of which covers only government employees. Poor people usually work in informal jobs or are self-employed, so they are extremely unlikely to be included in employment-related plans.

the poor are willing to pay an average of 600 rupees ($13.40) per year, or a little over 1 percent of their income, for their family’s premium. This amount exceeds the premiums currently being charged by plans, which often rely on additional subsidies, such as grants, to make ends meet. [Link]

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p>Interestingly, this approach doesn’t replace public health systems, it complements them:

The programs employ a variety of means to keep costs low. Some require patients to seek care at government hospitals, which are already highly subsidized. Others curb their administrative costs by asking volunteers from the community to handle duties such as processing claims. They buy generic drugs, or grow a garden full of herbal medicines. Even small measures, such as creating identity cards that cost half a rupee (1 cent) to produce, are taken seriously. [Link]

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p>And they’re hardly a panacea:

The insurance plans are also designed, with varying strictness, to reduce costs. Most exclude preexisting and chronic illnesses, such as AIDS and diabetes. The more limited plans cover only hospitalization expenses, while broader plans offer outpatient and drug benefits. [Link]

While I’m not automatically enthusiastic about all things “micro” or “grassroots”, despite all their limitations of scope and scalability, this sounds like a welcome step indeed.

33 thoughts on “The cost of illness

  1. Something > Nothing.

    That said, this “something” still leaves a lot of people without a safety net.

    I’m particularly interested in this:

    Fewer than 10 percent of IndiaÂ’s 1.1 billion people have any sort of health insurance, much of which covers only government employees.

    If that’s the case, where are the economic gains of the new giant middle class going? How much are all of those industrial and information-age jobs worth if they can’t even insure access to healthcare? I can understand why it would be unprofitable to insure the poorest Indians, but the private sector Indian middle class would still give you a risk pool larger than many countries. How can that not be profitable?

  2. I think the reason for high morbidity rates in India is due to the negligence of quacks.

    There are so many quacks running clinics every few steps in India and ultimately many people who go to them for non-fatal illnesses die as a result of their negligence and ignorance.

    What is sad is that many get away and arenÂ’t held accountable.

  3. she told me that this had to do with relatively high rates of innoculation

    See the Universal Immunization Program in India, and it’s benefits - it’s better than what a LOT of other developing countries have in place (or lack, for that matter.) I love the surveillance system that allows for some modicum of quality control.

    In practice, even free services become privatized, as access is restricted to those who will pay.

    Cue the upsurge in medical tourism to the region, although I find it highly distasteful that a mother country cannot afford its citizens the same access it does to its visitors.

    The insurance plans are also designed, with varying strictness, to reduce costs. Most exclude preexisting and chronic illnesses, such as AIDS and diabetes.

    A possible reason why this micro-insurance scheme won’t work in the long run: a globally increasing trend in chronic conditions and non-communicable diseases that require lifetime management, as opposed to acute alleviation.

    I do agree though, it’s a step in the right direction.

  4. The problems that the poor face in India when a health crisis occurs is very painful to even watch, let alone bear it personally. I’ve seen parents fall at doctors feet pleading for kids’ operation etc. The reasons for this are too many to mention, and there are no simple solutions. What could be/should be done has been debated for the last few decades by experts of all kind (with no resolution), so I won’t go there. What I do want to emphasise is on what should not be done. See the below two statements…

    Fewer than 10 percent of IndiaÂ’s 1.1 billion people have any sort of health insurance 50 percent of all bankruptcy filings in the US were partly the result of medical expensesÂ…

    Any system, where someone gets something for nothing, is a ponzi scheme. It won’t last long. It will end in pain for all participants.

    What is insurance after all? It’s not too different from gambling, where bunch of people pay a small amount into a pot, and there are timely drawings from the pot. Those who are lucky get a load of money (the house always wins). The others lose and move on. The winner gets something for nothing. He/she has added no value to the system, except for being at the right place at the right time. All it does is to move money from the average Joe (who gambles the most) to the rich (casino owners, State lotteries). In insurance, the principle is similiar. A bunch of people pay premiums. Those who are unlucky (heart attack/accident) get a load of money (which gets passed on the hospitals). The house (State Farm/AllState) always wins. The rest of us keep paying premiums. The winner(the patient) has added no value to the system, except for being at the wrong place at the wrong time. All it does is move money from the average Joe to the rich (Insurance companies, Hospitals, Doctors).

    Sick people, or relatives of sick people, should have to declare bankruptcy. That’s how it’s been since the begining of civilisation. It is natural for sick people to suffer. It sounds cruel, but in a society where sick have to tend to themselves people are more careful about their health, weight, fitness and don’t take needless risks. And they save like ants for emergencies.

    Things like insurance, managed healthcare, HMO etc are around for only about 50 years, less than 0.0001% of civilised man’s existence. Already, it’s faltering in the West. The boomers aging, the high rates of obesity and risky behaviour will bring the system down to its knees. And no, Hillary will not be able to save the system (I doubt if she will be able to save herself)

    If we have to solve India’s health issues, let’s not take the worst idea from the West. Both Ancient India and early America followed the principle that no person shall get something for nothing (India went one step ahead and extended the principle to the spiritual realm as well). Any successful solution has to adhere to this in order to take root.

    M. Nam

  5. Sick people, or relatives of sick people, should have to declare bankruptcy.

    Easier said than done. My problem with this proposition is that the burden of cost gets shifted from a large pool of people (the general population) to a smaller, more socially/economically disadvantaged group which will weigh down the entire system, leading to a shaky infrastructure. By declaring bankrupcy these “sick people” are not simply eliminated from our society, but will be forced to seek healthcare services elsewhere, either through illegal or nefarious means, or government funded ventures (Medicare, Medicaid, etc.) in which case we still will end up paying for them.

    It sounds cruel, but in a society where sick have to tend to themselves people are more careful about their health, weight, fitness and don’t take needless risks.

    So we carefully monitor our health – but how can we control our genetic tendencies that unintentionally put us at certain increased risks? The whole purpose behind developing a comprehensive health care system is so that a safety net exists for all; whether you will ever need it is a separate question.

  6. Thanks for this, Ennis, it is a super timely issue. As someone who had to return to the U.S. for medical reasons (albeit from Africa), I was seriously grateful that I had access to the American health care system. I could hardly afford to pay for medical services abroad, and it made me keenly aware of the fact that there is no way local communities can even dream of accessing health care services. I think the same holds true for many desi communities.

    As chi_diva said, some of the biggest health dangers to poor communities in India are “Bengali doctors” [read: unlicensed/untrained - no offense to my Bengali brothers and sisters], but another huge impediment is that oftentimes government-hired health workers fail to show up. [source here]. It’s interesting because as celebrities highlight the inequities and drawbacks of health care in sub-Saharan Africa, oftentimes India and the Indian subcontinent are on par, if not in a worse place. I feel like we hear about the “rise of India” much more often than we hear about the vast majority of people on the subcontinent who are not tangibly benefitting or finding themselves in a better place.

    Sick people, or relatives of sick people, should have to declare bankruptcy. That’s how it’s been since the begining of civilisation. It is natural for sick people to suffer. It sounds cruel, but in a society where sick have to tend to themselves people are more careful about their health, weight, fitness and don’t take needless risks.

    I have to take issue with this, firstly because this hasn’t been the case since the beginning of civilization, but also because people suffer because of our neglect. Also, I don’t think that suffering encourages people to be more careful, I think it encourages them to avoid seeking treatment or choosing to use preventative measures to avoid getting more and more sick. Further, human beings and societies have the option and opportunity to change the status quo. This is like saying poor people suffer because poverty is natural and that’s just the way the world is. Maybe I am playing Pollyanna, but I like to think we have more agency in our lives and that we make choices and that we should be responsible for those choices.

  7. Also, I forgot to mention this, but there is a new organization that works in Palestine that is starting global microclinics. They are specifically designed for areas with limited to no infrastructure, whether it is because of warfare or poverty. It utilizes locally-available resources and supplies and operates within community spaces. I don’t think it’s perfect, but it’s an interesting low cost alternative to mainstream health care.

  8. Any system, where someone gets something for nothing, is a ponzi scheme. It won’t last long. It will end in pain for all participants.

    agree with you on the first sentence. no comment on the rest. however… the rest of your commentary was a logical stretch.

    What is insurance after all? It’s not too different from gambling, where bunch of people pay a small amount into a pot, and there are timely drawings from the pot.

    Not so. On a purely technical front, insurance companies hire actuaries whose function it is

    to employ their specialized knowledge of the mathematics of finance, statistics and risk theory on problems faced by: insurance companies (both Life and Property/Casualty) pension plans government regulators social programs individuals

    insurance businesses underwrite the risk of damage/hurt/injury/death of the applicant. actuarial models are used to quantify the amount of underwriting risk. the underwriting margin is a proxy for the company’s profitability and is the sum of the expense and the loss ratio. in general, most companies operate in the black – but occasionally they dont – and sometimes they collapse as a result – especially when there is catastrophic loss beyond the risk models prepared by the actuaries.

    those were some opening thoughts … my counterpoint to your commentary was that this is not gambling. far from it. the fact of the matter is, it could be a valuable business opportunity. this is what most entrepreneurs do – find a sufficiently lucrative target market and tailor an offering to it that would yield enough to make it worth my while. as a minor tangent – this is why the rest of the world is salivating after india. there are enough pockets of wallet in india for a lot of people ot make good money very fast… so far the consumer economy is focusing on the easy offerings. once that market is saturated, the target offerings will be tailored more to the niche pockets further down the food-scale – but still profitable. Here’s where things become a little dicey…

    In 1971, A. Omran postulated a theory called epidemiologic transition – stating that most populations undergo three stages – of pestilence and famine, of receding pandemics and of degenerative and man-made diseases. I dont think it is a broad assumption on my part to assume that india is working through all three stages. This makes insurance offerings very difficult – especially when the populations living the three stages are co-mingled and there is not enough incentive to tailor coverage across the board.

    but just you wait – there is tons of money to be made – it’s just a matter of time – like i said – india is droolworthy – in all its warts, boils and scars.

  9. I wonder what the statistics are between the various regions of India. Sort of like the population crisis. You know the stuff that was on Nova with the more educated south having a western european like birth rate and the north having crazy high birthrate etc. Is there a similar correlation with healthcare? I know that there are good clinics to be found in India if you have money but that still requires a plane ride to a big city. What about access in rural areas and poor states? It seems like a given that it would be worse but what is the actual distribution? I’m sure that there could be a better application of resources at some point in the chain to bring the morbidity rates down. I guess simplifying the issue to a supply chain issue takes away the chance for profit in the insurance market.

  10. MNam :Your logic is contrarian but provides food for thought.

    Most of the new middle class in India has medical insurance via the employer. Also, relatively fewer Indians (as a % of popln) seem to go to hospitals. Dont know why it is so. Any ideas?

    Are there statistics on % of claims paid out by insurance companies around the world. I remember reading a few years ago that Life Insurance of Corporation has the highest insurance claims payout percentage in the world.

  11. The way I see it, the long term solution is an increase in per capita income across the board. How to get there? Well, I got the easy part.

  12. The way I see it, the long term solution is an increase in per capita income across the board. How to get there? Well, I got the easy part.

    Chicken and egg? It’s hard for the poor to rise out of poverty if they can’t accumulate savings because they keep getting wiped out every time somebody gets sick. And with increased life expectancy, there’s more of that than there used to be.

  13. hairy_D explained the “non-randomness” of insurance better than I could, so I just want to offer some other thoughts on MoorNam’s post.

    First of all, the contention that ANYONE is getting “something for nothing” in American-style insurance is ridiculous. The insurance companies are a way for people to pool resources so that they can afford an essential service that is fundamentally unaffordable at the individual level. Some people will draw more from that pool than others. But the fact of the matter is that nearly everyone who pays into insurance will withdraw from it at some point. Even the healthiest person on the planet will die at some point, and end-of-life is where the vast majority of medical costs occur (in the West). The fact that insurers profit is not necessarily wrong either (as long as those profits aren’t exorbitant and don’t drive diminished patient care) — it’s what keeps them in business.

    Sick people, or relatives of sick people, should have to declare bankruptcy. That’s how it’s been since the begining of civilisation. It is natural for sick people to suffer. It sounds cruel, but in a society where sick have to tend to themselves people are more careful about their health, weight, fitness and don’t take needless risks. And they save like ants for emergencies. Things like insurance, managed healthcare, HMO etc are around for only about 50 years, less than 0.0001% of civilised man’s existence. Already, it’s faltering in the West. The boomers aging, the high rates of obesity and risky behaviour will bring the system down to its knees. And no, Hillary will not be able to save the system (I doubt if she will be able to save herself)

    Amazingly enough, this < 0.0001% of civilized man’s history happens to coincide with the ONLY period in human history where medicine has actually accomplished anything (beyond a placebo effect and limited pain management). That same period saw a rise in healthcare costs to the point that regular people could not really hope to afford it on their own. Funny how that works. If you want “cheap healthcare”, there are still tons of local faith healers who will give you non-efficacious herbal teas and the like for a fraction of the cost of a doctor, but I wouldn’t recommend them.

    I don’t know if you or someone you know has ever been diagnosed with a serious illness. But nearly ALL major illnesses in the West are much more complicated than a single, expensive event. Since the West has essentially completed the epidemiological transition, the major illnesses here are chronic (eg: heart disease, cancer, diabetes). India, of course, still has a lot of infectious disease floating around, but life expectancy is still about 60 years — more than enough time to be diagnosed with a chronic condition. Most people don’t even know they’re sick until they encounter a major sentinel event — a heart attack, a noticeable tumor, terrible pain, or the like. But that’s just the beginning. Chronic conditions require lifetime management afterwards, with expensive medication and clinical visits the norm. If you’ve already mortgaged off your farm, how are you going to afford all of that? In the glorious market economy you’re suggesting, the poor simply don’t manage their illness, and they die early instead of contributing to the economy for decades.

    Of course, this ignores the fact that treatment for the “first events”, like a heart attack or initial chemotherapy to send cancer into remission, is horrendously expensive on its own. Have you ever seen an uninsured person’s healthcare bill? The joke goes “self-pay means no-pay”, particularly if you’re dealing with poor people (and we’re talking poor by American standards). This isn’t just a question of greedy hospitals (in the US, most hospitals lose money and require major government subsidies to stay in business). Lots of things pump up costs — you need specialized supplies, incredibly safe and reliable logistics, and highly trained personnel, none of which comes cheap. The bottom line is that very few people reading this blog could afford to get sick without insurance, even if they’d been saving up for it.

    I feel funny arguing in favor of private insurance, since I am very critical of the system we currently have in the States. But in India’s case, there’s no way the government could realistically handle the cost of a truly effective program. As hairy_D said, there is a huge potential for lots of money to be made insuring Indians (particularly middle and working class Indians). In fact, I’m pretty amazed that someone isn’t already doing this — I wonder what the barriers are. If the facts in this article are accurate, then < 10% of Indians have any insurance, and that’s primarily government employees. That’s only like 100 million people, but most estimates of the middle class put it at 250-300 million people. So at most, only 1/3 to 1/2 of the middle class is insured? Does that sound right?

  14. Aw man, I guess I left an open tag in there somewhere >:(

    Where I said this:

    Amazingly enough, this

    I mean:

    Amazingly enough, this is the same period that medicine has been able to do much of ANYTHING. That’s part of what’s made it so expensive — the herbs and things used in traditional medicine are cheap, but they don’t do a lot. Medication costs money. Equipment costs money. Doctors, nurses, and physician assistants cost money. That’s why healthcare is so incredibly expensive. In fact, it’s so expensive that the idea that individuals could realistically “save up” for an illness is just absurd.

  15. is this really a step in the right direction? insurance distorts incentives and shields consumers from the true price of medical costs… the (obvious) classic argument is that it can result in over consumption. by choosing to go the route of insurance vs. some kind of universal care, india risks going in the direction the US as compared to almost every other industrialized nation. the US system is so screwed up, and health insurance wastes money. while it’s hard to argue against the fact that people need some kind of financial help paying for their health, i’m not necessarily sure that buying into the idea of insurance is the right way. i’m not convinced that micro-insurance complements public health systems. once people start financing their own care through insurance and other means, it’s easy to lower funding to public health systems. seeing how messed up the US health care system is, i’d advise anyone even considering starting a system based on insurance and personal coverage to run as fast as they can in the other direction.

  16. Medication costs money. Equipment costs money. Doctors, nurses, and physician assistants cost money. That’s why healthcare is so incredibly expensive.

    All those things do cost money, but in the US, administrative costs are one of the biggest drivers of increasing costs. that’s your nothing for something!

  17. there is a huge potential for lots of money to be made insuring Indians (particularly middle and working class Indians). In fact, I’m pretty amazed that someone isn’t already doing this — I wonder what the barriers are.

    thanks for picking up on this neal. as you may have gauged, this is something i’ve worked on. even in the canadian context, there are hidden pockets in the population to whom a company can make better offers (less premium) for insurance coverage – but the government regulations are the biggest barrier. nothing insurmountable – but one needs deep pockets to go through the lawyers and politicians and i dont have that much seed capital right now. :-) indian companies are catching on – i’ve noticed tata aig is one company that seems to have come up big in recent times – but they’re going after the lower hanging fruit first – i’ve seen them go after the corporate segment recently.

  18. sohwhat,

    Well, again I’m not usually one to defend the American healthcare funding system. So I agree that a universal, single-payer safety net would be great. And it would be a hell of a lot cheaper. And I really want one in the US.

    But could India afford anything approaching high-quality free coverage? The European systems were only able to be created at the tail end of nearly 300 years of growth. And even now they’re hitting some uncomfortable cost issues, despite Europe’s fairly aggressive public health policies.

    And then you get into issues of corruption and politics. The way things are, I have very little doubt that some politician or other would try to start using a state healthcare system as a club to either reward his own supporters or attack his opponents. In a country like India, that’s still trying to figure out some way to define a national identity independent of religion, ethnicity, and the like, I wonder how well government control over life and death choices would go over.

    Finally, I don’t see for-profit insurance as a necessarily bad thing. I think if people WANT to pay premiums for faster, better care, they should be able to. But that’s only fair as long as people who can’t pay those higher prices can still get care.

  19. insurance distorts incentives and shields consumers from the true price of medical costs… the (obvious) classic argument is that it can result in over consumption. by choosing to go the route of insurance vs. some kind of universal care, india risks going in the direction the US as compared to almost every other industrialized nation. the US system is so screwed up, and health insurance wastes money.

    I think this is a misreading of the economic theories at play here. Insurance is a safety net, it is meant (as was previously mentioned) to render an unaffordable service affordable. Insurance is there for when you get really really sick. It’s supposed to help protect (financially) against emergencies. Most of the distortion in health costs and the U.S. system being wasteful/screwed up is because of the regulatory problems and mini-monopolies that insurance companies create, and the other part centers around the pharmaceutical market and prescription drug costs. I am all for universal care if you can guarantee people services and resources, and I don’t know that the U.S. is willing to take on that financial burden, and I don’t know that the governments of developing countries can afford to take on that burden.

    I think the narrow focus on profits and benefits (from the insurance co. perspective) keeps people from seeing the bigger picture. From a public health perspective, it is better for people to seek preventative care and avoid a major epidemic than to come in when they’re losing a lung or so far along on a disease trajectory that they can’t come in. Also, some people in the U.S. “overuse” health resources, not all. If you’re going to look at market distortion, you have to take into account the positive externalities of not having a rampant epidemic tear through the health care system. These fears of a rampant epidemic are much greater in India and other developing countries where people can’t even get their children innoculated or get clean water. To date, the top three killers of people – particularly children – in developing countries include respiratory disease (TB included), malaria, and infectious diarrhea. Nevermind the comorbidity between the three.

  20. From a public health perspective, I wonder if India should even be thinking about the Western model of doctor/hospital centered care yet. While this model of care is undoubtedly the most efficacious, it’s also way too expensive for most people in country to access.

    And it’s unnecessary for most conditions. I mean granted, you want a specialist to look at you if you have some major disease, but a lot of the really important urban and rural health issues in India are really simple to treat. You don’t really need a doctor (or a nurse) around to give inoculations, set broken bones, treat diarrhea (which is the leading cause of childhood mortality), or do any of the million other little things that keep people healthy. If you give training to some of these “under-the-table” providers that poor people go to, you could probably cut down mortality rates a lot.

    The example that comes to mind is China’s pre-Cultural Revolution “barefoot doctors”, who were basically just poor villagers with a little bit of medical training. They performed a service and made money, but didn’t need the exorbitant amount of money that a classically trained doc would need.

  21. Neal:

    But could India afford anything approaching high-quality free coverage?

    oh i definately agree with you there. i’m not an expert on the indian health care system or the government, but i highly doubt that the country could afford high-quality (free) coverage. I do want to make a point here, though — not all universal coverage schemes involve free coverage — many of them rely on subsidized coverage with co-pays, etc. However, i do agree that a high quality publically run system in India is probably very far away. I was more trying to make the point that people should be very careful and wary of schemes that rely on insurance. Countries chosing insurance over publically financed systems are suffering for that choice now. As an interim fix, it may work, but it’s not really a solution.

    Camille:

    Insurance is there for when you get really really sick.

    I think alot of the problem in the US system is the focus on acute care. Our system started with insurance for acute care, but now people expect insurance to pay for everything; and so there are no good public systems to guarantee good primary care. I would disagree that most of the distortion the US healthcare system is from regulatory problems — I’m not really sure what regulatory problems you are suggesting. 31% of US spending on healthcare goes to administrative costs, and those are largely because of redundancies in billing and medical oversight. A single payer system would drastically reduce those redundancies. However I still believe there are serious efficiency losses from distorted incentives. 20% of the Medicare population accounts for 70% of spending — these are largely folks at the end of their lives who are insisting on drastic ‘heroic’ measures to save their lives. The misguided focus on acute care is really a problem in the US, and this can be traced back to the sheltering that many Americans have traditionally had from acute care costs, largely as a result of insurance.

    insurance isn’t always about pooling resources and protecting against financial risk — another theory of risk and insurance is that it is a way of using healthy people to subsidize the care of the sick. as long as your risk pool is large enough, you are betting that there are enough ‘healthy’ people who won’t get sick to pay for the costs of those who do get sick. with the US system of employer based or community based risk-pooling (what we have in NY state), it’s largely a subsidy for the sick, rather than a resource pooling measure.

    If you’re going to look at market distortion, you have to take into account the positive externalities of not having a rampant epidemic tear through the health care system.

    this is really even more of an argument against a fragmented system of private payers and insurers. A strong public healh system is much better equipt to handle such a disaster. When west nile hit nyc, the department of health, rather than individual insurers or providers were really responsible for keeping it from becoming a larger disaster.

  22. Hi Neal,

    From a public health perspective, I wonder if India should even be thinking about the Western model of doctor/hospital centered care yet. While this model of care is undoubtedly the most efficacious, it’s also way too expensive for most people in country to access.

    I’m telling you, micro-clinics :) I think the difficulty is ensuring that people show up. In many developing countries, absenteeism among medical staff plays a significant role in lack of access to health care, particularly in rural areas. I think there’s a study somewhere (I will have to check) that looked at government-paid doctors and performance and found that there’s a small percentage of doctors – something like 10% – who regardless of whether they are publicly or privately employed will always show up to work, regardless of pay scales, etc. I think the ultimately explanation was that some people are actually invested in the task of healing and were devoted to their patients, and so long as they could afford to do what they were doing and live modestly, they made it happen. That is probably irrelevant, but interesting, I think, especially when we talk about corruption, government health care, etc.

    Hi sowhat,

    31% of US spending on healthcare goes to administrative costs, and those are largely because of redundancies in billing and medical oversight. A single payer system would drastically reduce those redundancies.

    As someone who has done medical billing, I agree – the system is notoriously complicated and redundant and overall ridiculous. That said, how do you figure that a single payer system would reduce those problems? (I’m just curious and have been out of the country for a while, so I’m interested to hear what kind of health care conversations are still bubbling)

    insurance isn’t always about pooling resources and protecting against financial risk — another theory of risk and insurance is that it is a way of using healthy people to subsidize the care of the sick.

    And what’s wrong with that? Also, with respect to acute care, I feel like Medicare is a whole other beast of “what not to do” in health care policy.

  23. with the US system of employer based or community based risk-pooling (what we have in NY state), it’s largely a subsidy for the sick, rather than a resource pooling measure.

    I would say it’s both a subsidy for the sick and resource pooling measure. Every person on this planet is going to get sick at some point.

    I’m also a little confused by your point about acute care. By the time you’re racking up those big end-of-life costs, and doctors are performing “heroic measures” to keep you alive, you’re not really calling the shots anymore. America has a bigger focus on acute care than other countries, but that’s a function of our medical culture than any sort of patient-choice issue.

  24. As hairy_D said, there is a huge potential for lots of money to be made insuring Indians (particularly middle and working class Indians). In fact, I’m pretty amazed that someone isn’t already doing this — I wonder what the barriers are. If the facts in this article are accurate, then at most, only 1/3 to 1/2 of the middle class is insured? Does that sound right?

    By estimating the middle class to comprise about 23% of India’s total population, (~250,000,000 people) and only 70 million of those are insured, that’s not even one third. Furthermore, (by the same prior article in FA,) if “1 percent of the country’s poor have crossed the poverty line every year” yet

    About one-fourth of hospitalized Indians fall below the poverty line as a direct result of their hospital expenses

    then we really aren’t making any progress whatsoever in terms of solving this enormous problem. This sucks.

    I don’t see for-profit insurance as a necessarily bad thing

    The problem arises when you open the door to privatization before establishing some sort of system that can encapsulate those that can’t afford this type of privileged care. As India has done.

    not all universal coverage schemes involve free coverage — many of them rely on subsidized coverage with co-pays, etc.

    i.e. Canada, which will cover almost the entire cost of the physician and hospital visit, however only offers to subsidize drug coverage and dentistry. However, as Camille so delightfully pointed out:

    the system is notoriously complicated and redundant and overall ridiculous

    Having now enjoyed the perks/pitfalls of both systems I can speak for both in that neither effectively addresses the health care concerns for those in low income brackets. At this point I’m not sure which would provide a better option for India, because of its interesting dichotomy in terms of a large poverty base (heck, even the middle class) that the government cannot afford to provide health insurance for. Perhaps we can look to a mixture of both private/public sometime in the future, as some of you have suggested (like in Europe.)

    I still believe micro insurance is a step in the right direction.

  25. Camille:

    And what’s wrong with that? Also, with respect to acute care, I feel like Medicare is a whole other beast of “what not to do” in health care policy.

    I don’t think there is anything wrong at all with the h/ins system being a subsidy for the sick, in fact i’m all for it… i was just trying to make the point that health insurance isn’t just about pooling resources and hedging against risk.

    That said, how do you figure that a single payer system would reduce those problems? (I’m just curious and have been out of the country for a while, so I’m interested to hear what kind of health care conversations are still bubbling)

    I want to make sure to be clear here — a single payer system is NOT the answer to ALL of the US’ problems. however in terms of the efficiency losses from administrative overhead, it could go a long way. what i don’t understand is why municipal/public provision of other public goods (such as water, electricity) is taken as a given, but health care is not? it makes just as much sense to have a “choice” of 15 sewer systems as it does to have a “choice” of 15 healthcare payers. Some nerds up in cambridge published a study recently comparing Administrative costs in the US to (everyone’s favorite comparative whipping boy) Canada, and health admin costs in the US are about 3x as high ($1,000 per capita vs. $300). When 30% of total spending goes to administrative overhead, a 2/3 reduction in costs would have a large overall impact. [see Woolhandler S, Campbell T, Himmelstein D, “Costs of Health Care Administration in the United States and Canada,” N Engl J Med 2003;349:768-75).

    Politcally, the single payer system in the US is a dead idea, but that doesn’t mean other countries can’t learn from our mistakes and choose not to go there (and that i can’t still keep hoping and wishing).

    btw, i’d be interested to hear what you think is so terrible about Medicare?

    Neal:

    By the time you’re racking up those big end-of-life costs, and doctors are performing “heroic measures” to keep you alive, you’re not really calling the shots anymore. America has a bigger focus on acute care than other countries, but that’s a function of our medical culture than any sort of patient-choice issue.

    I disagree. While the focus on acute care is a function of our medical culture, that stems from patient choice. Alot of that culture arose because insurance was there to shelter patients from the true cost of their healthcare consumption, so patients learned to demand more and more acute care. I spent the last 2 years doing research on case management interventions of chronically ill Medicare beneficiaries. This is the population that are among the biggest ‘consumers’ of heatlhcare in the US. Case management is relatively cheap, and everyone knows how to keep a diabetic or someone with CHF or COPD out of the hospital. For $100/mo, you can provide intensive case management and primary care that keeps chronic diseases in check. However, most of the programs failed because patient attitudes were focused on acute care — instead of following a $100 protocol, patients repeatedly ended up in the hospital, with an average cost of more than $5,000/mo. We’re not talking about heroic measures when someone is on their deathbed (although i do think people should go to hospice and prepare for transition rather than throwing the ICD-9 book at patients), we’re talking about near-end of life measures where patients are hospitalized up to 10 times a year. For most of these patients, they do have the power to stay relatively healthy, control their symptoms, and stay out of the hospital. unfortuantely, most of them have been systemically trained for 65+ years to rely on acute care rather than primary.

    you make a very good point that perhaps India shouldn’t be thinking of the Western hospital/doctor health paradigm. i couldn’t agree more. The US focused on acute care, resulting in a patented lack of focus on primary care. so when it really counts, patients just don’t understand how beneficial primary care can be. i blame the evil insurance companies for this. :P

  26. Hmm, that is a good point regarding people not taking advantage of primary and preventive care.

    But shafting primary care doesn’t HAVE to be a function of insurance. One would think that a truly savvy insurance company would actually incentivize it (keeps cost down over the long run).

  27. Neal writes:

    the contention that ANYONE is getting “something for nothing” in American-style insurance is ridiculous

    American-style insurance? I’m not aware of American-style gambling or British-style cheating or Indian-style pregnancies.

    Regarding something for nothing…

    Person A buys insurance @5K/Yr(rest provided by employer). After ten years, she loses her job and hence, her insurance. During the course of those 10 years, she’s spent a total of about 5K on well visits, pap-smears, fevers etc etc. Person B, meanwhile buys insurance at year two of A at the same cost, and goes skiing, breaks his back, and needs acute care support @30K/yr for five years.

    I’d like you to do some math to see who pays more into the system, who takes more out, and who is subsidizing whom. This is a very simple case. Sowhat made a very good point when he/she said that insurance companies have to hide costs of insurance in order to stay in business. That’s how the scam works.

    .The insurance companies are a way for people to pool resources so that they can afford an essential service that is fundamentally unaffordable at the individual level.

    Then the focus should be on addressing why those services are unaffordable. Tort lawyers? Restricted admissions by AMA? Excessive paperwork? Lack of transperancy?

    Some people will draw more from that pool than others.

    So you agree – somebody gets something for nothing (or more for little).

    The fact that insurers profit is not necessarily wrong either Of course not. Nobody’s forcing you to insure yourself.

    >>(as long as those profits aren’t exorbitant >

    What exactly is exhorbitant? How/Who would determine this?

    ALL major illnesses in the West are much more complicated than a single, expensive event. heart attack or initial chemotherapy to send cancer into remission, is horrendously expensive on its own.US system is the focus on acute care

    Have you ever considered that those people who need expensive care but cannot afford it should, you know, die? For the better part of civilisation, that’s how it’s been. Somewhere in the last few decades arose this notion that every life is equally precious, even though some others have to contribute (unwillingly) to save them. This notion is against nature and will die out in the recent future. Empathy is reserved for people whom you know and love – not for strangers whose face you don’t even see.

    agree that a universal, single-payer safety net would be great. And it would be a hell of a lot cheaper. And I really want one in the US

    Sorry – I don’t want one. Universal health care works well in Germany, even better in Canada, better than that in Singapore and even better in Macau. Did you get the drift? Probably not. As countries get smaller and smaller, universal healthcare keeps getting better, because the overheads keep getting lower and transparency keeps increasing. For a country as big as the US, it will be crippling. For India, it will be a death sentence.

    Camille:

    Most of the distortion in health costs and the U.S. system being wasteful/screwed up is because of the regulatory problems and mini-monopolies that insurance companies create..medical billing, I agree – the system is notoriously complicated and redundant and overall ridiculous.

    Any system where someone gets more for less (better expression than something for nothing) will have to create large enough smoke-screens to confuse those participants who get less for more.

    drrty_punjabi asked me if I have health insurance. Why would I refuse something that the employer provides? Moreover…

    Which of you belong to a gang? Probably none. But should you ever go to prison, you have to join a gang to survive. That’s because the system is rigged against the loners – however physically fit they are.

    I never had insurance in India. Most of my relatives/friends still don’t. They all “pay as they go”. But when I came to the US, I realised that not having insurance was not an option. Even simple procedures were financially crippling – primarily because insurance companies have rigged the system (along with hospitals etc) so that you cannot do without them. So I joined the State Farm gang.

    But this post is not about the US. This post was to emphasise that the insurance system is inherently flawed, and it’s a good thing India has not caught on to it. For the sake of India’s poor, it’s best to stay away from this method of healthcare.

    M. Nam

  28. But shafting primary care doesn’t HAVE to be a function of insurance. One would think that a truly savvy insurance company would actually incentivize it (keeps cost down over the long run).

    yeah, that was the point of HMOs when they were first introduced, and BOY did that go over well… ;P but seriously, even if insurance companies did manage to really incentivize primary care, it still wouldn’t help those 40 million americans who don’t have health insurance and use the ER as their primary point of contact with the healthcare system. although they should still learn how to use and appreciate it, most people covered by private insurance are the ones who need the primary care the least; by and large those people are of higher income and education, whose general health is better than those w/o insurance, lack education, and are closer to (or below) the poverty line.

  29. my two cents,

    first cent goes poor sanitation and general squalor, especially tainted drinking water and prevalence of fecal matter, leading people to fall sick.

    second cent goes to a fatalistic mindset and culture in which the sick are sick, by fate, or karma, or whatever; no need to find out why, what they’re sick with, whether it is contagious, whether they should be quarantined, or how to prevent a repeat of the incident. No finger-pointing, no blame-game. On the plus-side, no lawsuits, on the negative side, no correction.

  30. I read recently that less than 1% of India’s population contributes honestly to income tax collection. This — combined with rising population and the stresses ICT has brought to the environment — probably all contribute to the rising levels of disease in India.

    I think the microinsurance is better than nothing, but at the same time it is important to remember that so many people still go to ayurvedic/homeopathic doctors for their ailments. That type of care may be overlooked in published accounts of healthcare.

  31. Chicken and egg? It’s hard for the poor to rise out of poverty if they can’t accumulate savings because they keep getting wiped out every time somebody gets sick. And with increased life expectancy, there’s more of that than there used to be.

    Yeah, Ennis, but not quite that last part about life expectancy in the impoverished (it’s kinda like the low life expectancy in African American males living in the ghettos of the US; impoverished people don’t eat as well, live as well (i.e.–violence), and encounter death earlier than the privileged). But you are right that impoverished communities do not have much mobility and access to medical care despite recent social movements in their favor (one being the intriguing controversy of seat reservation for Untouchables in medical college as a state effort to offset severe underrepresentation of this demographic in the medical profession–could theoretically improve the disconnect between health care and those in poverty if India was a Utopian society…:P).

    Anyway, 10% in India are insured, that does not mean the other 90% are not getting medical services. The concern being addressed by the implementation of a health insurance system is in eliminating the disparate qualities of care received by those individuals capable of affording it. This still inevitably is targeting the middle and maybe (though I highly doubt it would) the working class. While one can argue that Indian society is increasingly getting gentrified, what with the new middle class, etc., most of the population is still in deep, debilitating poverty. Health insurance will only insure health to those who can afford it, and there the concern is more fundamentally in getting medical services to those who need it.

    Now, there are privately owned clinics run by somewhat noble physicians who target the impoverished demographic in India. So the impoverished don’t actually need health insurance to gain treatment. And as far as (impoverished) community participation goes in these health projects, the so-called “slum dwelling” residents learn by “word of mouth” of certain clinics which accept patients with little or no money. However, when an entire demographic is marginalized from the health care system by their socioeconomic status and by racialization (i.e.–as untouchables), no health project to eliminate health inequity can maneuver around an historic exclusion (over 2.5 millenia, shout out to M. Nam’s mention of that being “0.0001% of civilized existence”) of a huge chunk of society from the health care system. The problem for the impoverished is not for them to find doctors to treat them, but in their finding doctors to treat them in time, like Camille mentions about neglect (it probably goes both ways).

    From my work in a privately run clinic in Bangalore, I saw hundreds of patients walk in with terminal stomach cancer, a common disease in this community which usually goes into remission with chemotherapy and early detection, because they just didn’t feel entitled to accessing health care until, sadly, the end. This was when family members, mainly women, could not stay home, rather than trying to scrape up a few more cents “working” somewhere during the day, to care for the ill. When impoverished patients are not empowered to obtain medical services, no superficial standardized insurance plan will help them, and I agree on sowhat’s stance on it being not so great a solution.

    While I’m not automatically enthusiastic about all things “micro” or “grassroots”, despite all their limitations of scope and scalability, this sounds like a welcome step indeed.

    As for your point on ‘scalability,’ Ennis, what can the so-called “slum-dwellers” do to ‘jump scale’ (in Neil Smith’s words) when there is no physician (conceivably) that lives in the slums, thereby making health care spatially inaccessible to the ill, confined both by their poor health and social status in these neighborhoods? These are the ghettos of India and the ghettos of health we are talking about here. Residential segregation itself plays a huge role, along with so much more, in how not-so-easy a solution it would be to bring medical care, that too equal medical care, to the slum, rural and poor areas of India. Nice point there.

  32. The medical bankruptcy numbers for the US are a bit complicated.

    See this post: http://www.janegalt.net/blog/archives/005205.html

    Her academic work has the same sort of sizeable omissions that bias the results. She’s the author of the recently famous study showing that 50% of all bankruptcies were caused by medical bills. You should read the Zywicki post I linked above, but to summarise here, this “finding” was generated by attributing any bankruptcy in which the filer had more than $1,000 in out-of-pocket expenses in the last 12 months to medical bills. That’s ridiculously lax, and indeed, only 28% of the respondants attributed their trouble to medical problems. Given that medical bills are by far the most attractive reason to claim for your bankruptcy (compared to other major causes like divorce, compulsive gambling, and total financial irresponsibility), it seems unlikely that there’s a special “hidden” kind of medical bankruptcy so subtle that the people filing don’t realise that medical woes were the source of their problems. Furthermore, the study seems to have implied that medical bills were the main problem, when loss of income due to illness plays at least as great a role.