Public hospitals in Kerala are paying a heavy price for the State government’s administrative inefficiency in running Ayushman Bharat-Karunya Arogya Suraksha Padhathi (KASP), the health insurance scheme covering nearly 42 lakh families.
The scheme that wins Kerala laurels from the Union Health Ministry every year for providing free medical treatment to the maximum number of people is draining the State’s coffers and leaving public hospitals severely short of funds. According to a statement by the government in the Assembly last week, it owes private and public hospitals ₹1,128.69 crore as reimbursement for free treatment given to KASP beneficiaries.
The State’s finances have been in the red for several months now. Public hospitals have been experiencing an acute shortage of drugs, consumables, and implants such as stents, as pending payments running into hundreds of crores have forced pharma companies to stop all supplies to public hospitals. Private hospitals are exiting the scheme in the face of mounting bills that the government is yet to reimburse.
Earlier, public hospitals could tide over such exigencies by utilising a hospital development society’s funds for the local purchase of drugs. But now, due to the fiscal crisis in the State and the overdues from the government under KASP, hospitals have no funds to purchase drugs or for development activities.
Superintendents of hospitals say they are helpless as patients are forced to buy medicines from private outlets. Even the government’s Karunya fair price medical shops do not have adequate stock.
According to the latest edition of National Health Accounts (2019-20), Kerala has the highest per capita out-of-pocket expenditure (OOPE) in the country at ₹7,206 despite being one of the States with the highest per capita government expenditure on health. KASP, a scheme meant to free people from the burden of healthcare expenditure, is now an indirect cause of increased OOPE in Kerala primarily because the government has not paid due diligence to the model of health financing it adopted. It also did little to ensure that the State Health Agency (SHA) had the necessary technical expertise to run KASP, or that there were adequate checks and balances.
The Comptroller and Auditor General’s recent audit report on Ayushman Bharat-Pradhan Mantri Jan Arogya Yojana (AB-PMJAY) pointed out that KASP was being run by SHA without proper medical, death, or claim audits and no financial discipline, resulting in huge cost overruns and a high rate of overdue claims.
Kerala had been efficiently running its own health financing schemes, inclusive of good tertiary care packages too, in the insurance mode since 2008 through its own agency, the Comprehensive Health Insurance Agency of Kerala. AB-PMJAY was launched by the Centre in 2018. When the State chose to re-launch KASP in alignment with AB-PMJAY in 2019, there was concern that given the low share of the Centre, Kerala would end up paying a huge premium, especially because of its high morbidity burden and strong health-seeking behaviour.
Kerala’s troubles with KASP began in 2020 when the government agreed to SHA’s proposal to move the scheme from the insurance mode to the trust/assurance mode, wherein the financial liability of settling claims falls on the government in the absence of an insurance company. The claims expenditure, which used to be contained at around ₹700 crore in the insurance mode, touched ₹1,563 crore in 2021-22 and ₹1,629 crore in 2022-23. The State ends up spending 82% of this total health insurance expenditure because the National Health Agency gives a fixed premium to all States (₹138 crore-₹150 crore to Kerala) without taking into account inter-State differences in health service delivery. Also, while the Centre pays the premium for some 22 lakh BPL families, the State extended health insurance benefits to an additional 20 lakh families.
Public health experts point out that the problem is not with KASP as such, but the unprofessional manner in which SHA is running the scheme. A robust claims monitoring mechanism, a high level of technical expertise, and financial discipline are necessary to run any health insurance scheme in a sustainable manner. The government is ignoring the fact that KASP is unsustainable in its present form and is pushing public hospitals to the brink of financial ruin.
