An evening with Dr. Devi Prasad Shetty
On Friday, April 14, 2023, ICFAI hosted a fascinating webinar by the renowned heart surgeon and healthcare entrepreneur, Dr. Devi Prasad Shetty. This was the 100th webinar in the ICFAI Wise Views series. For two years now, the webinars have been broadcast, week after week, without fail. The Chairman of Narayana Health spoke about how Indian healthcare can be transformed with universal health insurance. The webinar was moderated by Professor R Prasad and Prof Sudhakar Rao of ICFAI.
About Dr. Devi Prasad Shetty
Dr Devi Prasad Shetty is a cardiac surgeon of repute and a successful entrepreneur. Narayana Hrudayalaya Group of Hospitals (now Narayana Health) now has 47 healthcare facilities with close to 7,000 beds.
Dr Shetty is a highly respected luminary for his ingenious ideas for reforms in the healthcare sector. His visionary leadership to make quality healthcare affordable for all has drawn global recognition. Narayana Health has been an interesting case study for the likes of Harvard Business School and The Wall Street Journal. In association with the Government of Karnataka, Dr. Shetty pioneered Yeshaswini, a very inexpensive micro health insurance scheme benefiting more than 3.4 million rural poor.
Dr. Shetty is the current Chairman, Board of Governors, Indian Institute of Management, Bangalore. He is a member of the Health Insurance Consultative Committee constituted by IRDAI. He has also served as a Member, Board of Governors of Medical Council of India, and Representative of President of India in the Board of Governors of Indira Gandhi National Open University.
A strong advocate of technology for efficient healthcare delivery, Dr. Shetty takes deep interest in creating and developing software products and applications to achieve time and cost efficiency while minimizing clinical errors in healthcare delivery. Dr. Shetty also has a US patent registered as inventor Dr. Shetty is the recipient of several prestigious awards including the Padma Bhushan, Padma Shri, The Economist Innovation Award, Financial Times ArcelorMittal ‘Boldness in Business’ Award, Nikkei Asia Prize for Economic and Business Innovation. He has also been awarded honorary doctorates by the University of Minnesota and IIT Madras.
Introduction
Millions of Indians are just one medical bill away from bankruptcy. The country needs some 65 million surgeries every year. But only 25 million are being performed. This puts the lives of many, especially the poor, at risk.
These surgeries, which Dr Shetty referred to, are not complicated. They are mostly bellwether surgeries that fall into three categories: Emergency C section for child delivery, Appendicitis and Compound fractures. If these basic surgeries are available and affordable to the general population, Indian healthcare will be transformed.
How we landed here
The second wave of the pandemic (May 2021) thoroughly exposed the gaps in our healthcare system. We had to run from pillar to post to find a hospital bed to take care of our loved ones. Why is our Healthcare System not able to deliver?
Since independence, we have advocated universal (free) healthcare funded by taxpayers’ money. In hindsight, this was a wrong decision we made. This model has succeeded only in a handful of countries with the following characteristics:
- Small populations, not exceeding 50 million.
- High tax/GDP ratio of 25-45% (India- 11.2%).
- Healthcare spending of about 10-18% of their GDP (India- 1.2%).
The time has come to change the narrative. From universal healthcare, we must move to universal health insurance (UHI).
Why is Dr Shetty so excited about UHI? Dr Shetty has encountered many poor patients approaching him for medical treatment of their children. When they hear that heart surgery may cost Rs 300,000, they start crying. They plead that they do not have money. But finally, after a long discussion, they say that they can afford to pay a smaller amount, say Rs 100,000. This shows that poor people are prepared to pay for medical treatment. What if we give them UHI for an annual premium of about Rs 10,000? If they have savings of Rs 100,000 at their disposal, they can easily pay insurance premium for ten years.
People may be poor individually. But collectively, they wield a lot of economic power, as Dr Shetty explained. Imagine some 100 million people paying an annual premium of Rs 10,000. That amounts to Rs 100,000 crores, more than the annual healthcare budget of the central government.
The current situation of many people having to meet their hospitalization expenses by cash out of their own pocket is not sustainable. Think of motor insurance. It is mandatory and affordable. That is why it has become universally accepted.
About 17 years ago, the government of Karnataka introduced the Yeshasvini micro insurance scheme. The premium was Rs 5 per person per month and covered only surgeries (some 600 types). More than 4.37 million farmers were onboarded through cooperative societies. Some 1.2 million surgeries including 131,000 heart operations were performed. That is the power of a large country (of 1.4 billion) with many people contributing small amounts individually. (The Yeshasvini scheme was terminated because of political interests. When the free Ayushman Bharat scheme was launched, the politicians of the state probably felt that the Yeshasvini scheme had outlived its utility.)
When it comes to healthcare, there are three key stakeholders: hospitals, insurance companies and patients. These stakeholders do not trust each other.
If a doctor recommends surgery, a patient will immediately start thinking: Is the doctor trying to make money? Is the surgery really needed? This is also how the insurance company will think.
Consider a healthcare provider like Narayana Health (NH). Currently, the larger the number of people who need heart surgery, the better for the group. NH accounts for about 14% of the heart surgeries in the country. So, the interests of the patient and the hospital chain are not aligned.
But if NH also provides health insurance, it has an incentive to maintain the health of the patients through preventive steps and by addressing small problems proactively. This way, it can save on the costs of surgery. There will be no conflict of interest.
Would a hospital providing insurance try to cut costs say by not doing a surgery? Dr Shetty felt But if NH also provides health insurance, it has an incentive to maintain the health of the patients through preventive steps and by addressing small problems proactively. This way, it can save on the costs of surgery. There will be no conflict of interest.
this is unlikely. There are prescribed protocols for different health conditions. It would be difficult for hospitals to violate these protocols and go against the interest of patients. In short, healthcare will be transformed if hospital chains also offer health insurance.
Currently, the 300 million “missing middle” (with income of Rs 30,000-70,000 per month) do not have the money to admit their family members to an ICU. But they have the money to buy insurance. Some 60% of the population needs primary care. They are spending about Rs 25,000 per year on primary and secondary care (and probably cannot afford tertiary care) and they get poor service. With an annual premium of Rs 10,000, they can get access to primary, secondary, and tertiary care in good hospitals.
The government can enable this with health savings accounts which are popular in countries like the US and Singapore. People can deposit money in savings accounts and use the money for only healthcare expenditure, in this case to buy health insurance. People may find it difficult to pay Rs 10,000 in one go but over time they can save and accumulate Rs 10,000 through these savings accounts.
We the elites, who enjoy many privileges, have not figured out how to offer UHI to 70% of the population. We take shelter and hide our guilt by putting the responsibility on the government. Instead, we should be utilizing the opportunities created by the government to provide health insurance to the poor. The government, with its bureaucratic structure finds it difficult to innovate but the private sector can. Our insurance regulator, IRDA is showing a lot of dynamism and open mindedness. The private sector can seize the initiative and launch various innovations in healthcare.
The Ayushman Bharat has expanded healthcare in a big way. It covers about 40% of the population. But it covers only BPL (below poverty line) card holders.
Insurance companies do not understand health issues as much as the healthcare providers. If insurance is also provided by the service providers, it would be much easier to understand the health risks involved. A quote can be given by the healthcare provider, even if it is on the higher side.
NH has the lowest realization per bed. The hospital chain tries to keep costs under control by leveraging technology. It does not charge patients for post operative care as a matter of policy. For most other corporate hospital chains, the realization per bed is much higher. They would naturally be apprehensive about their margins coming down if they also provided insurance. But as UHI takes off, there will be no other option for hospitals but to provide insurance. In any case, cash counters in hospitals will be gone very soon.
The implementation must be managed carefully. It may be better to start UHI in the cities where there are already hospitals. After learning how the system works, it can be expanded to the rural areas. NH will initially limit its insurance coverage to the places where it already has a strong presence. That way, it will have control over how healthcare is delivered to patients. The scaling up will be gradual so that no patient with insurance cover will have to wait for treatment.
Earlier attempts by hospitals like Apollo failed because the insurance company was set up as a separate entity which typically tied up with a global insurance company. NH has resisted the temptation of tying up with reputed insurance companies even though many of them expressed interest in partnering. NH’s role model is Kaiser Permanente, an American hospital chain which also provides insurance to millions of customers in California. Doctors understand healthcare better than insurance companies. So, if they directly manage the plan, the outcomes will be better.
We can become the first country in the world to dissociate healthcare from affluence. This feat can be achieved in five years. We have all the pieces in place: the largest number of doctors in the world, a large pool of nurses and many medical technicians. We also have several pharmaceutical companies which supply medicines to the world. Our only problem is that 50% of the population do not have the cash to pay for insurance. We must find a way of making this happen.
Dr Shetty feels optimistic that we can get there soon. The country moved from no radio to colour TV in 25 years. From no phone, we moved to smartphones, in 20 years. So, we are capable of amazing things.
Dr Shetty had a favorite story to narrate. He had returned home one evening, several years back. He saw his little daughter with jigsaw puzzle pieces lying on the ground, all mixed up, in a complete state of confusion. He told his daughter it would be impossible to put them together. But his daughter was optimistic. She replied: All the pieces are there. So it cannot be that difficult.
We, the privileged people should consider ourselves lucky to have won the “uterine lottery”. We were fortunate to be born in the right uterus. We have no business complaining about anything. We should instead see what we can do to help people who are less privileged compared to us.
The power of purpose can enable us to do good things for society. When we have a strong purpose, the cosmic forces will connive to make us successful in our endeavors.
India can become the first country to provide universal health insurance. There may be other problems which we may have to deal with. But within 5 years, we can ensure that every Indian has access to quality healthcare.