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Mentor Comment: Health insurance, now central to India’s UHC policy, is being enhanced by digital advancements, enabling reforms akin to the U.S. but with cost-effective local adaptations. A South Indian healthcare chain recently integrated insurance and care provision, forming an Indian-style MCO. This prompts reflection on MCOs’ potential to extend universal health care in India significantly.

Let’s learn_ _ 

Why in the news?

Universal healthcare poses a multifaceted challenge, yet managed care organizations may offer a piece of the solution that Indian healthcare requires.

What is a Managed Care Organization?

• A Managed Care Organization (MCO) is a health care company or a health plan that is focused on managed care as a model to limit costs, while keeping quality of care high.

The background of Managed Care Organizations (MCOs) in the United States and India:

Evolution of MCOs in the United States:

•  MCOs have their origins in rudimentary prepaid healthcare practices in the 20th century.
• The mainstreaming of MCOs gained momentum in the 1970s due to concerns over healthcare costs.The economic slowdown post-1970s made high insurance premiums less attractive to purchasers.
• A shift occurred towards integrating insurance and healthcare provisioning functions. Focus areas included prevention, early management, and cost control, all under a fixed premium paid by enrollees.
• MCOs have evolved through multiple generations and forms, deeply penetrating the health insurance market. While evidence of their effectiveness in improving health outcomes and prioritizing preventive care is mixed, they have been effective in reducing costly hospitalizations and associated costs.

Evolution of MCOs in India:

• The first public commercial health insurance emerged in the 1980s.The focus has primarily been on indemnity insurance and covering hospitalization costs.
• There is a significant market for outpatient consultations, valued at nearly $26 billion.
• Health insurance in India has traditionally lagged behind life and general insurance. The sector faces issues such as lack of innovation and high, often unsustainable, operational costs.
• As per Thomas (2011), Health insurance has played a secondary role to other forms of insurance. The industry’s operational inefficiencies and high costs have been persistent issues.

Challenges in India:

• Lack of Natural Incentives for Cost Control: The evolutionary trajectory of Indian health insurance has not incentivized consumer-driven cost control.
• Target Demographic: Health insurance has mainly targeted a thin, urban, well-off segment, neglecting broader demographics.
• Informality in Outpatient Practices: There is widespread informality among outpatient practices, complicating efforts to standardize and regulate care.
• Lack of Clinical Protocols: The absence of widely accepted clinical protocols hampers the quality and consistency of care.
• Economic Viability: Unprofitable operations and unaffordable premiums pose significant economic challenges, preventing sustainable growth and systemic improvement.
• Limited Impact on UHC: Private initiatives, despite their potential, are unlikely to significantly contribute to Universal Health Coverage (UHC) without public support.
• Insufficient Control Over Patient Journeys: Health insurers have little control over the patient’s journey before hospitalization, limiting their ability to manage early interventions and reduce costs through comprehensive outpatient care.

Prospective Solutions and Remaining Issues:

• Potential for Big Healthcare Brands: Large healthcare brands with loyal urban patient bases and substantial resources may initiate successful managed care projects.
• Need for Public Patronage: Exploring managed care with cautious and incremental public patronage could be promising, indicating a need for government involvement to achieve broader impacts.
• Underutilization of Outpatient Insurance: Given the low share of insurance in outpatient care spending and the average of three consultations per year per person, there is significant potential to reduce healthcare costs through early interventions and comprehensive outpatient care coverage.

 NITI Aayog Report:

• Outpatient care insurance scheme: In 2021, NITI Aayog released a report advocating for an outpatient care insurance scheme based on a subscription model to enhance savings through improved care integration.
• Yield significant benefits: A well-functioning managed care system can yield significant benefits, including consolidating practices, streamlining management protocols, and emphasizing preventive care in the private sector.
• Catering for the beneficiaries of PMJAY: The report highlights the potential of incentives under the Ayushman Bharat Mission to encourage the establishment of hospitals in underserved areas catering to beneficiaries of the Pradhan Mantri Jan Arogya Yojana (PMJAY).

Conclusion: While Managed Care Organizations are not a perfect solution, they can play a role in addressing the complexities of achieving Universal Health Coverage (UHC) in India by being part of a broader strategy.