Utilisation and financial protection for hospital care under publicly funded health insurance in three states in Southern India

BACKGROUND: Many LMICs have implemented Publicly Funded Health Insurance (PFHI) programmes to improve access and financial protection. The national PFHI scheme implemented in India for a decade has been recently modified and expanded to cover free hospital care for 500 million persons. Since increase in annual cover amount is one of the main design modifications in the new programme, the relevant policy question is whether such design change can improve financial protection for hospital care. An evaluation of state-specific PFHI programmes with vertical cover larger than RSBY can help answer this question. Three states in Southern India - Andhra Pradesh, Karnataka and Tamil Nadu have been pioneers in implementing PFHI with a large insurance cover. METHODS: The current study was meant to evaluate the PFHI in above three states in improving utilisation of hospital services and financial protection against expenses of hospitalization. Two cross-sections from National Sample Survey’s health rounds, the 60th round done in 2004 and the 71st round done in 2014 were analysed. Instrumental Variable method was applied to address endogeneity or the selection problem in insurance. RESULTS: Enrollment under PFHI was not associated with increase in utilisation of hospital care in the three states. Private hospitals dominated the empanelment of facilities under PFHI as well as utilisation. Out of Pocket Expenditure and incidence of Catastrophic Health Expenditure did not decrease with enrollment under PFHI in the three states. The size of Out of Pocket Expenditure was significantly greater for utilisation in private sector, irrespective of insurance enrollment. CONCLUSION: PFHI in the three states used substantially larger vertical cover than national scheme in 2014. The three states are known for their good governance. Yet, the PFHI programmes in all three states failed in fulfilling their fundamental purpose. Increasing vertical cover of PFHI and using either ‘Trusts’ or Insurance-companies as purchasers may not give desired results in absence of adequate regulation. The study raises doubts regarding effectiveness of contracting under PFHIs to influence provider-behavior in the Indian context. Further research is required to find solutions for addressing gaps that contribute to poor financial outcomes for patients under PFHI.