Making it happen: The alternative model of health financing in Kerala


The good news is that Prime Minister Jan Aarogya Yojana (PMJAY) is happening despite some teething troubles. It is happening on account of a committed team led by the redoubtable Dr Indu Bhushan. PMJAY rides on the positives of Rashtriya Swathya Bima Yojana (RSBY) that was at some point in time dumped by a group of Secretaries that had no understanding of this sector. The efficacy of health insurance in general and RSBY in particular was actually demonstrated in the field by an outstanding civil servant, Dinesh Arora in Kerala.

This was 2008. Dinesh Arora was posted as Joint Secretary of Health Department and State Mission Director (NRHM) in Kerala. The implementation of RSBY during the next couple of years led to a massive increase in health insurance coverage. Today,the ‘Kerala Model for Development’ is often referred to as an example for other countries to follow. However, it all happened only aftermany challenges were overcome. There were so many lessons learnt and innovations done, only because of the spirit to make-it-happen!

Back in 2008, Kerala was showing several disturbing trends despite better health outcomes on specific indicators. Although mortality was low, morbidity levels were very high compared to other States. Thus, the paradox was that on one hand,there were all indicators of better healthcare, on the other,Kerala outstripped all other States in terms of morbidity, especially chronic illness. Increased life expectancy raised additional health issues of the aging population. Moreover, the unregulated private sector raised health care expenditures, making health a commercial commodity purchased by ‘ability to pay’ rather than a “merit good.” Many public facilities remained underutilized, especially at the level of CHC and below. The most disturbing aspect was the large share of out-of-pocket payments for accessing health services.

RSBY, a Government of India Health Insurance Scheme thatprimarily reimbursed the secondary level hospitalization services, was seen as a window of opportunity. This was a demand-side financing scheme for health in which the patient or the ‘client’becomes the king. The patient could choose to take the services either from the private hospital or from the public hospital. Thus,public hospitals compete with the private hospital to provide services free of cost for a particular pre-decided premium paid by the Government. Kerala decided to implement this scheme involving public and private hospitals.

There were apprehensions that most patients would choose private hospitals. These hospitals would have windfall gains as there would be an increase in the number of patients and claims reimbursed. Public hospitals with limited funding and facilities would lose out to private facilities.

To incentivise the government hospitals, it was decided that the revenue generated through reimbursement of RSBY claims would remain with the hospital development society as an untied fund. The untied fund could be used for human resource development, equipment and, up-to 25%, couldalso be used as an incentive to staff. However, there were some initial apprehensions about the scheme and whether it could be considered as a Comprehensive Health Insurance Scheme (CHIS). It had to compete with the private sector where the facilities were better than the government sector.

What followed was no less than a revolution. The revenue generated by empanelled government hospitals became more than that of the empanelled private hospitals. Public health institutions contributed more than 60% of the caseload and 53% of revenue generated for the public health institutions through the scheme. Many taluk hospitals could generate a surplus of Rupees one crore a year. General hospitals could generate a surplus of few crores. Surgeries, deliveries, including caesarean sections, started happening in the late hours in public health facilities. The hospital superintendents could decide how to spend money to improve public health care facilities as per the local needs and demands. This set up a trend that was different from a cumbersome line-item budget with massive bureaucratic and clerical hurdles. There was now ready-to-use untied stream of fund available at the local level.

RSBY scheme ushered a new set of reforms. Public Relation Officers (PRO) to improve patient satisfaction were appointed. A biomedical officer for scientific waste management disposal and servicing of equipment was hired. Hospitals became conscious of their quality and branding. Public hospitals started competing not only with private but also with other public hospitals. In the monthly review, one of the criteria for hospitals’ performance was the number of claims, patients, and patient satisfaction. The staff of these hospitals started taking pride in their efforts.

On its part, the Government, through the National Rural Health Mission, strengthened the supply side provision of public hospitals where patients’ footfalls increased. The hospital development committees became functional, decision making was decentralized, and medical superintendents made accountable. With the total pool generated, public hospitals got a facelift with more inpatient facilities, renovated existing hospitals, clean waiting rooms, token-system for appointments, computers, internet, Hospital Management Information System (HMIS) with GIS Mapping. Accredited Health Social Workers (ASHA) were attached to these hospitals to increase outreach activities.

Five public health hospitals in Kerala got National Board Accreditation (NABH), which was unthinkable a few years back. Many labs were NABL empanelled. Kerala could disburse claims in a timely manner.A system to check fraudulent practices was put in place. Kerala received the award for best implementation of RSBY among all states for three consecutive years.

These initiatives made Kerala a torchbearer in the world’s most significant government health insurance initiative – Ayushman Bharat PM-JAY. The learnings in Kerala were taken forward by Dinesh Arora.As a part of the founding team of PM-JAY (as the Deputy CEO of NHA), he ensured that the concept and thoughtthat worked so very well in Kerala could now be scaled at the national level. This would enable healthcare facilities for all. Kerala continues to be thefrontrunner in implementing PM-JAY as well and the good work is getting replicated in many parts of the country.

Dinesh Arora and his committed team of officers that included P Sukumar, demonstrated that things can be made-to-happen despite challenges and limitations within the government framework. They have also demonstrated that good work can be scaled and sustained by taking stake holders on board.

Anil Swarup has served as the head of the Project Monitoring Group, which is currently under the Prime Minister’s Office. He has also served as Secretary, Ministry of Coal and Secretary, Ministry of School Education.