BY AKHIL UPNEJA

1.22 billion.  That is the number of people around the world living off less than two dollars a day (World Bank).  These people live in severe poverty and work simply to provide sustenance and shelter for their families.  In India, the harsh poverty conditions are particularly pronounced with 217.2 million people in rural villages living below the poverty line (World Bank).  As a result of their low incomes and the remoteness of their villages, the rural poor in India cannot access medical facilities, let alone an expensive, unaffordable luxury like health care.  As a consequence of the hefty price of health care and the subsequent widespread lack of coverage in poor areas, devastating statistics abound, such as the fact that nearly 43 out of every 1000 babies in rural areas of India die before they reach their first birthday (Backliwal et al. 4).  In light of these startling statistics and the apparent, often unnecessary, pain and suffering in the world, developing countries are constantly investigating different healthcare systems to extend accessibility to the poorest of the poor.  One such system was implemented in India in 2008.  To attempt to provide the rural poor with access to health care, the Indian government has created a program titled Rasthriya Swasthya Bima Yojna, or RSBY for short. The purpose of the RSBY program is twofold.  The first purpose is to provide quality medical access to rural families living below the poverty line. The second purpose is to financially protect rural families from falling even further into poverty.  Although RSBY is well intentioned, I argue that in both of these purposes, the RSBY program has failed so far.  In providing quality medical access to the rural poor, the RSBY program has been inadequate due to a significant lack of health infrastructure.  In financially protecting families living below the poverty line, the RSBY program has not focused on the real costs that cause financial catastrophe for the rural poor.  By first providing massive funding for the creation of RSBY-level hospitals and then expanding the RSBY program to cover both inpatient and outpatient procedures, the RSBY program can achieve maximum good in India.  Moreover, it can serve as a model for other countries facing the significant problem of providing health services to the impoverished.   

Women in rural India heading to get water for their families. Source: Ramnath Bhat/Wikimedia Foundation
Women in rural India heading to get water for their families. Source: Ramnath Bhat/Wikimedia Foundation

In summary of RSBY’s function, initially, insurance companies submit bids to the government to become insurance providers for the program.  Through this competitive process, the companies with the cheapest financial bids and highest quality ratings are selected. The bids are paid yearly to the selected insurance companies by the federal and state governments such that the federal government pays 75 percent of the cost and the state government pays for 25 percent.  After the insurance companies have been selected, public and private hospitals are approached to become RSBY providers.  In order to be empanelled, they must meet certain requirements, such as having a sufficient number beds for inpatient procedures and having the ability to make electronic modifications to accept patients with the RSBY card.  Finally, the process reaches the rural poor.  An enrollment station is set up in each village, whereby each rural family living below the poverty line can sign up to receive a card containing each family member’s fingerprints, photographs, and the equivalent of 600 US dollars.  For the next year, cardholders can enter any empanelled hospital and use their card strictly for inpatient costs, such as hospitalizations for disease recovery or surgeries. Cardholders can renew their cards every year to get a new $600 budget for medical usage.  

A lack of adequate health infrastructure nullifies any benefits RSBY could have generated for the rural population living below the poverty line.  My definition of health infrastructure has two components: the first, facilities such as hospitals, and the second, doctors to keep them running.  First, there are simply not enough facilities close to villages to make the RSBY program effective.  As outlined above, hospitals have to meet certain requirements to become empanelled under the RSBY system, and further, the rural poor can only access subsidized care through these empanelled hospitals.  Currently, the empanelled hospitals are too far away from villages for the system to be effective.  In fact, even if every single inpatient hospital near villages in India was empanelled, 63 percent of India’s rural population would have to travel farther than five kilometers to find any type of inpatient healthcare facility (Backliwal et al. 14).  The types of illnesses covered under RSBY that affect the rural Indian population oftentimes require immediate inpatient care and surgery. As such, the fact that almost two thirds of rural villagers in India must travel more than three miles to reach any inpatient hospital has profound implications for the health of the rural poor.  Dheera Sujan and Searada Lahangir provide an example that accurately highlights the crux of the problem.  A villager in the Indian district of Orissa was in her third trimester when she suddenly went into labor.  In order to get to the nearest inpatient hospital, she had to be carried by her relatives in a bamboo basket to a location ten kilometers away, from which it was a thirty-six kilometer bus ride to the nearest hospital.  By the time she got to her final destination, she had developed severe complications and died while giving birth (Sujan and Lahangir).  The impact of having to travel so far to receive care, as tragically represented in the previous example, is appropriately reflected in the gradient of utilization rates of RSBY when compared to the distance to empanelled hospitals.  A prime example of this is illustrated in the district of Deoghar, shown in Figure 1, where all of the empanelled hospitals are located in one city called Deoghar City.  Xiaohui Hou and Robert Palacios from the World Bank show that utilization is dramatically higher in the blocks closest to the hospitals and significantly lower in the blocks farthest from them (10).  In sum, the vast distances that villagers must travel to get to any hospital nearby for immediate inpatient procedures jeopardize the well being of the rural poor and inhibit the success of the RSBY program.

Along with a lack of quality medical facilities near rural areas of India, there is a dearth of doctors willing to tend to the rural poor.  Before RSBY went into effect, most Indians living in poverty would only go to the hospital when diseases were so far advanced and injuries were so complex that they could not be fixed at home.  Such complicated cases would generally go unpaid, as the poor did not have enough money to front costly procedures.  A vicious cycle ensued where the poor would undergo costly surgeries, be unable to pay, and leave doctors undercompensated for their hard work.  As a result, many physicians chose not to venture into rural villages and vacant positions abounded.  A news article by Radio Netherlands Worldwide nicely summed up the logic behind doctors’s unwillingness to work in rural villages:

In a country where every middle class parent harbours ambitions for their child to get into medical school, there are simply too few people willing to sacrifice the prospect of lucrative careers abroad or in the urban centres for a life of deprivation in the country areas. (Sujan and Lahangir)

Paddy rice workers in rural India. Source: Ramnath Bhat/Wikimedia Foundation
Paddy rice workers in rural India. Source: Ramnath Bhat/Wikimedia Foundation

The majority of middle-class Indian parents encourage their children to become doctors for two reasons: job security and financial stability.  In rural hospitals, before the RSBY system was implemented, there was only job security and a significant lack of monetary gain to be had.  However, both job security and financial stability are fulfilled when doctors practice abroad in developed countries or in the hearts of urban cities, causing physicians to stay away from poor, rural hospitals.  Therefore, a lack of financial security for doctors proves detrimental to the success of the RSBY program.  It does not matter whether the poor have cards or not if there is a lack of physicians to attend to their needs.  

Now that we have thoroughly examined the RSBY’s progress toward achieving its first goal of providing quality medical care to those living below the poverty line, we can move on to its second stated purpose of providing financial risk protection for the rural poor.  An analysis of the efficacy of RSBY in achieving its second stated purpose of providing financial risk protection for the rural poor reveals that coverage under RSBY is focused on covering the wrong costs.  Recall that the $600 subsidy solely covers inpatient hospitalizations and surgeries rather than outpatient medicines and diagnoses.  The theory behind this is that the large costs of surgeries and hospitalizations quickly encumber families.  This theory is unfounded.  It is not these one-time costs that cripple families financially, but rather the incremental, outpatient costs for medicines that build up over time.  This is confirmed in a robust study conducted by Peter Berman, Rajeev Ahuja, and Laveesh Bhandari analyzing the millions of Indians each year that fall below the poverty line due to out-of-pocket medical costs.  The study concluded that almost four fifths (79.3%) of impoverishment due to health spending is a result of “outpatient care which involves relatively small but frequent payments,” while only one fifth (20.7%) of impoverishment is due to health spending through inpatient procedures (Berman, Ahuja, and Bhandari 66).  This study explains that poverty due to medical care occurs as a result of the slow and steady buildup of medicinal debt rather than one major operation or surgical procedure.  Another study conducted by Renu Shahrawat and Krishna Rao confirmed this conclusion by analyzing the effects of eliminating out-of-pocket costs for the inpatient and outpatient cares of Indians above the poverty line.  This study concluded that if the out-of-pocket costs associated with inpatient care are removed, there is “a negligible fall in the poverty headcount ratio and poverty gap”.  In great contrast, if the costs associated with outpatient care are removed, “only 0.5-1.5% of people fall into poverty due to spending on health,” effectively eliminating the number of people becoming impoverished due to health care spending (Shahrawat and Rao 213).  Even with the complete elimination of out-of-pocket costs for inpatient care, Indians above the poverty line still fall below the poverty line at the same rate, implying that inpatient care is not at the center of financial bankruptcy.  On the other hand, removing out-of-pocket costs for outpatient care and medicines protects the rural poor from falling further below the poverty line.

There is a slight problem with applying the aforementioned statistics on inpatient and outpatient costs to the population the RSBY program serves.  The sample from which the statistics are derived comes from individuals that live above the poverty line and then fall below the poverty line as a result of health spending.  However, the RSBY program only administers cards to those already living below the poverty line.  There is a way to reconcile the statistics with the target population: by analyzing the proportions of health expenditure that those living above the poverty line and those living below the poverty line pay for inpatient procedures versus outpatient procedures.  If it is the case that the impoverished living below the poverty line are paying the same or a greater proportion of their health expenditure on outpatient costs as compared to Indians living above the poverty line, then the results of our statistics can be extrapolated to those living below the poverty line.  Remarkably, the poor actually spend the most on outpatient costs as a proportion of their health expenditure (88%) when compared with every other income quintile (Shahrawat and Rao 216).  Looking specifically at the proportion of health expenditure that the rural poor spend on outpatient costs associated with medicinal drugs, “the share of drugs in out-of-pocket (OOP) payments was highest for those below the poverty line (88%) and this progressively declined with rising economic status, with those in the top 20% of the APL quintile spending 62% of OOP payments on drugs” (Shahrawat and Rao 216).  Therefore, the impact of RSBY in reducing inpatient costs is, theoretically, even less for the rural poor than it would be for any other income quintile.  

Brothers using their father’s old-fashioned bicycle in rural India. Source: Joshua Singh

A way to ground these conclusions is to examine the change in catastrophic headcount ratios in rural India over the years that the RSBY system was utilized.  The catastrophic headcount ratio or rather “the percentage of households making out-of-pocket (OOP) expenditure greater than 10 percent of their total household expenditure” (Selvaraj and Karan 62).  A study done by Sakthivel Selvaraj and Anup Karan in Economic and Political Weekly analyzed catastrophic headcount ratios in districts where the RSBY system was implemented, called “intervention districts”, in the years before and after the initiation of the program.  They compared these ratios to the same numbers in districts where the RSBY system was not implemented, called control “non-intervention” districts (65).  The results, tabulated in Figure 2, are clear: in the poorest income quintiles, there was in fact a rise in catastrophic headcount in districts where RSBY was implemented, versus stability or a decrease in “non-intervention” districts (Selvaraj and Karan 65).  

Therefore, even for patients that needed help to pay for inpatient procedures, an increasing percentage of the rural poor needed to pay more than 10 percent of their household expenditure on medical care.  Why is this true, when the RSBY card gives 600 dollars every year for inpatient procedures?  Examination reveals that patients still had to pay massive amounts out-of-pocket after the inpatient procedures were complete.  In the Patan District of Gujarat for example, almost half of patients (44%) had to pay money after their procedures, with the median payment totaling 80 dollars (Devadasan et al. 1).  What were the costs?  “The [patients] were asked to purchase medicines and diagnostics” (Devadasan et al. 1).  80 dollars for a family living on two dollars a day is an insurmountable burden and consequently explains why families continue to face financial catastrophe even after inpatient procedures are “covered”.  Therefore, the efficacy of RSBY was severely hindered by its lack of regard for the real causes of financial catastrophe, namely outpatient medicines and diagnoses.  This lack of regard increased financial catastrophe in districts where the RSBY system was implemented.  

How do we change the RSBY program for the better?  I believe it is a two-step process.  The first step is to make the RSBY cards cover both outpatient and inpatient care.  By not changing the amount of money provided but allowing Indians to use that money on medicines and diagnoses, financial risk protection will be maximized and catastrophic investments will be minimized.  It is clear through the numbers that both inpatient and outpatient out-of-pocket costs are the reasons why families living below the poverty line are struggling.  By giving the rural poor flexibility, the inalienable right of good health is achieved.  Secondly, the Indian government should invest heavily in creating rural hospitals, such that there should be a hospital within five kilometers of every village in India.  This process will add two major benefits.  The first is to provide quality medical facilities to everyone in India, in turn increasing utilization and creating a healthier, more productive workforce.  The second major benefit is that more new hospitals will attract doctors to stay in India rather than leave for more lucrative jobs in the West.  It seems that the major reason physicians leave India is for monetary reasons, and in the past, rural doctors did not get a lot of pay because patients did not have money.  With the endless job opportunities that the new hospitals will create, as well as the monetary gain that results from an efficient use of the RSBY program, rural doctors will start to earn enough money to secure financial stability.

With the changes suggested above, I think the RSBY system is one that should be strongly considered for any other country having problems extending adequate health care access to citizens below the poverty line.  A modified RSBY system truly benefits all parties involved.  For the government, there are large short-term economic costs in preparing infrastructure.  However, these costs are more than compensated for in the long-term by a more productive workforce, financially secure job opportunities for the medical field, and an overall healthier populace.  For insurance companies, the system is beneficial because they expand their businesses to a segment of the population that previously did not have access to insurance.  Hospitals also benefit from renovations to fit RSBY standards and an influx of doctors.  Finally, for the rural poor, the benefits are unparalleled: close hospitals, adequate access, a jumpstart to pay for medicines and surgeries, and a healthier standard of living.  

oh dear.. save water!
A water pump in Kanchipuram, Tamil Nadu, India. Source: Vinoth Chandar

The Rasthriya Swasthya Bima Yojna is a commendable program in its objectives of providing medical care access and preventing financial catastrophe for the rural population living below the poverty.  Currently, the program meets neither of these stated objectives.  There is a significant lack of adequate health infrastructure for the program to be utilized efficiently.  This lack of health infrastructure presents itself in the form of a lack of actual medical facilities, as well as a lack of medical doctors willing to leave lucrative careers abroad to tend to the rural poor, where money used to be scarce.  The RSBY also fails because it restricts usage of the biometric card to only inpatient procedures, while financial catastrophe generally occurs due to outpatient medicines and diagnoses.  Further, even for those inpatient costs that it attempts to cover, the RSBY misses certain out-of-pocket costs that are financially crippling for families living below the poverty line.  To maximize utilization and efficiency of the system, I suggest that the Indian government focus on building infrastructure to increase utilization of the system.  In addition, I suggest that the Indian government make the funds on the RSBY card more flexible.  To that effect, the money should cover outpatient costs such as medicinal drugs that have been proven to be the real cause of financial catastrophe in the lower quintiles.  Although the Indian government and other governments that adopt the system will have to invest significantly in the short term, by making these improvements, the long-term impacts far outweigh the short-term costs by creating a healthy, wealthy, and happy populace.

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Backliwal, Amit, Mark Chang, Neeraj Vashisht, Amardeep Udeshi, Jasdeep Singh, Kushesh Gupta, Sarang Bhide, Amiee Adasczik, Ranga Iyer, Tapan Ray, Ranjit Shahani, and Manish Doshi. Understanding Healthcare Access in India. Rep. IMS Institute for Healthcare Informatics, June 2013. Web. 28 Mar. 2014.

Berman, Peter, Laveesh Bhandari, and Rajeev Ahuja. “The Impoverishing Effect of Healthcare Payments in India: New Methodology and Findings.” Economic and Political Weekly XLV.16 (2010). Web.

Devadasan, Narayanan, Tanya Seshadri, Mayur Trivedi, and Bart Criel. “Promoting Universal Financial Protection: Evidence from the Rashtriya Swasthya Bima Yojana (RSBY) in Gujarat, India.” Health Research Policy and Systems 11.29 (2013). Web.

Hao, Xiaohui, and Robert Palacios. Hospitalization Patterns in RSBY: Preliminary Evidence from the MIS. Working paper no. 6. World Bank, 2010. Print.

International Institute for Population Sciences (IIPS) and Macro International. 2007.

National Family Health Survey (NFHS-3), 2005-06, India: Key Findings. Mumbai: IIPS.

“Poverty Overview.” The World Bank. The World Bank Group, Web. 30 Mar. 2014.

“Rural Population.” The World Bank. The World Bank Group, Web. 30 Mar. 2014.

Selvaraj, Sakthivel, and Anup K. Karan. “Why Publicly-Financed Health Insurance Schemes Are Ineffective in Providing Financial Risk Protection.” Economic and Political Weekly XLVII.11 (2012): 60-68. Web.

Shahrawat, Renu, and Krishna D. Rao. “Insured Yet Vulnerable: Out-of-pocket Payments and India’s Poor.” Health Policy and Planning (2011). Web.

Sujan, Dheera, and Searada Lahangir. “Indian Doctors Everywhere except India’s Villages.” Radio Netherlands Worldwide, 9 Nov. 2011. Web.

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