Published in Mint on 13 May 2015, Written by Kapil Mehta
Earlier this year Vijay (who wanted to be identified only by his first name), a blue-collar worker who has a medical insurance, suffered chest pains and was rushed to a prominent hospital in New Delhi. Vijay’s insurance was verified and was immediately admitted. Vijay was informed 30 hours later that he needs to remain in the hospital for a week. Unsure if insurance would pay his claim, Vijay asked to be discharged. Piqued, the hospital issued a discharge summary indicating 22 hours of hospitalization, two hours short of the minimum to claim insurance. What a shame: the worker had little confidence in insurance and the hospital was vindictive in its response.
I have often written about issues with insurance. This time my focus is on hospitals, particularly the problems that relate to insurance. I do have a vantage view because I am an insurance professional, but my wife and many close friends are doctors. There are three issues: over-treatment, flawed billing practices and lack of public data on medical outcomes. Put together, these result in higher health insurance prices; caveats in insurance and a great deal of animosity between hospitals, insurers and patients.
Over-treatment is endemic and there is considerable pressure on doctors to meet “sales-like targets”. This is just wrong. An eye surgeon I know was aghast to find that a hospital had asked for expensive, heart-related ECHO (echocardiography) tests for her young cataract patient with a normal ECG. Another hospital routinely made patients undergo a battery of blood tests, many of which were not required. I miss the family physician we used to visit. He combined home remedies, holistic exercise and diet and was conservative in prescribing serious medication. My parents and many of their friends have made a list of hospitals not to go to if they fall ill. To be fair this issue is not specific to India. Surgeon and writer, Dr Atul Gawande, in his column, Overkill, refers to research that between 25% and 42% of Medicare patients in the US received at least one completely useless treatment. For example, MRI scans for low-back pain in patients with no signs of a neurological problem or putting a coronary artery stent in patients with stable cardiac disease. Though it helps to know we are not alone, the fact is that unlike the US, in India medical expenses are paid by the patients.
To address this issue, doctors must be substantially freed from commercial considerations and measured on their healing skills. This is not a utopian idea. There are institutions in our own cities where doctors earn a handsome salary not linked to patients they have dispatched for surgery.
Billing practices in hospitals are flawed. To start with, initial deposits are taken from patients even if they are fully insured. Billing for doctor’s fees and diagnostics vary by the room in which one is hospitalized. Patients in single rooms can pay twice as much for tests as those in wards. This is illogical because costs do not vary by room type. Quality of a doctor’s medical advice does not depend on the patient’s wealth. The fact that billing is based on the number of days a patient is hospitalized creates strong incentive to keep patients longer than necessary. Hospital bills can include charges over and above customary costs for items such as toothpaste, weighing scales, bandages, linen and admission cards. Health insurance guidelines explicitly list 199 such items that are excluded from health insurance, unless specifically approved.
The issue with such billing is that insurers are building in sub-limits and exclusions into their products. For example, insurers cap claims based on room rent. Stay in a room twice as expensive as allowed by insurance and you will get paid half the total medical bill. A solution for this is to set many more pre-determined package costs for specific ailments. This removes the incentive for wasteful medical care, in just one sweep.
Two months ago the chief executive officer of a health insurer discussed the Mint Mediclaim Ratings with me. These ratings compare and score individual health insurance products and provide a guide to buyers. Why do we not rate hospitals, he asked? The reason is we don’t have public information on a hospital’s success rates in treatment. In the US, this is routinely published and mandatory in many states. Hospitals compete to improve their performance or explain why their results may sometimes look inferior. I often get calls to find out who the best doctors or hospitals in a specialty are. My response is superficial, because it is based on anecdotes, biased by the doctor’s bedside manners and without any real fact base.
Insurers find this kind of information invaluable. An insurer would pay more to a hospital if its success rates are higher. For example, if one knows that a joint replacement in a particular hospital lasts five years longer than average, the insurer would pay that hospital much more. On the contrary, hospitals with poor success rates will get pulled out of the network. This creates a marketplace and patients are the ultimate beneficiaries.
Insurers also need to improve their equation with hospitals. The founder of a large north India-based hospital chain asked to buy credit insurance because insurers, company panels and government health schemes took months to pay up. In many cases, government health schemes and insurers use their market position to pay unviable rates to hospitals. Government schemes can pay as low as Rs.50 for a doctor’s consultation. Last month, the insurance regulator issued a penalty order on a third-party administrator (TPA). I was astonished to read that the contract between the insurer and TPA had an incentive clause for reduction in incurred claim ratio. This creates an incentive for the TPA to deny legitimate claims. Hapless claimants will spend months trying to get dues paid. The TPA had not actually earned an incentive from this clause. This is one of those moments when I am thankful for poor performance.
In December last year, Dr Gawande spoke on the future of medicine at the BBC Reith Lecture in Delhi. He criticized the healthcare system in the US and cited many fundamental issues. What struck me, though, was that here was a person who clearly loved his profession deeply enough to question its very fundamentals. Our own hospitals should do similar soul-searching.
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