Mukesh Gupta's Blog

A couple of weeks back, I was attending my cousin’s marriage ceremony in Chennai and my father got fever. He was also complaining of cough and difficulty in breathing. We took him to a clinic where a doctor gave some medication.

We came back to our hometown (Bangalore) the next day and took him to a hospital to do continue the treatment as the breathlessness did  not go away. The doctor who attended my father immediately asked him to get admitted in the hospital to enable better care. He was kept in the Intensive care unit for some time under observation and then moved to a private room, once the doctors felt that he had stabilized. Then started the series of tests and more tests. He was being given oxygen using a mask and some antibiotic medicine via IV apart from his regular medicines that he has been taking for a while now.

A day passed in the room and my father felt better. However, he still experienced some pain in the ribs when he coughed. This resulted in the doctor asking us to stay in the hospital for another day to do more tests and to keep him under observation.

I am no doctor and maybe do not understand if this hospitalization (of 3 days) was really necessary. But then, we did not complain, as there was no financial burden on us, as the cost of hospitalization would be covered by our health insurance policy.

In my opinion, a big reason for the  escalating healthcare costs in India is the fact that “Health Insurance companies are willing to reimburse the cost of treatment only if the patient gets admitted in the hospital. ”

No hospitalization = no reimbursement.

This creates a strong incentive for both the hospital (for obvious reasons) and the patient (to get the expense reimbursed) to go in for hospitalization even if it was not absolutely necessary.

Add to that, the hospitals can now do more tests, build bigger hospitals with more rooms and even more expensive equipment’s to do more tests. Though, this might help in building up infrastructure for better healthcare, all of these end up in escalating costs for insurance companies, which is then passed on to the consumers as an increase cost of insurance.

Now, imagine my plight if I did not have an insurance policy to cover my health. The treatment in good hospitals with good infrastructure would be prohibitively expensive, which in turn makes buying health insurance attractive.

So, everyone in the ecosystem of health care has a financial incentive to continue to drive the healthcare costs up, which ends up becoming a beast out of control.

So, how can we address this problem?

There are 2 kinds of solutions here..

• Short term, quick wins: 
  • If insurance companies do not insist on hospitalization to cover the cost of healthcare, patients would not be so willing to get hospitalized. They would prefer hospitalization only if absolutely necessary.
  • If Insurance companies can find a way to incentivise hospitals for non-hospitalization, this coupled with the above will result in a quick win in reducing the overall cost for the insurance provider, which they can either pass on to their customers as lower cost of insurance or keep the savings as increased profitability.
• Long term solutions:
  • Insurance companies to start and run a channel of clinics where insured can get good medical advice for free or very low cost. They will reimburse medical claims only if the hospitalization was recommended by one of the doctors from their clinics.
  • IF possible, they should also operate a chain of hospitals which can then be used to provide high quality treatment, and since the cost of treatment is a direct cost for them, they have strong financial incentives to reduce the cost per patient so that they can improve their profitability.
  • If we get most of the insurance companies to do this, then competitive pressures will ensure that this cycle is positively reinforced and the costs never escalate again.

These are exactly the measures that are not being taken but can go a long way in bringing healthcare costs down significantly& continue to do so in the long haul.

What do you think about this? Let me know by commenting below or by tweeting your thoughts to me at @rmukeshgupta.