On 25 April 2017, during my interview for prestigious German Chancellor Fellowship, one of the panellists asked me – What are the best social business models in Germany that I would be looking at? I said “insurance cooperatives besides agri-business and consumer cooperatives”. He quickly asked me another question “insurance cooperatives are not very successful worldwide, so why do you want to study that?”. Honestly, I had no answers and I was cursing myself, why did I just say that. After a pause, a German representative in the interview panel came to my rescue and responded – “it’s very successful in Germany”.
It ended there and I took a long breath and tried to answer other questions more carefully. After the interview, I made a pact with myself that if I am selected, I would start my research with that unanswered question.
So, here I am, with my report on findings and lessons for India.
The social security system in Germany is very old and started in 1883 by the then chancellor Otto von Bismarck. Today, according to "Health at a Glance 2017" report published by Organisation for Economic Cooperation and Development (Source: OECD 2017, Health at a Glance 2017: OECD Indicators, OECD Publishing, Paris), everyone in Germany has a health insurance and nearly 90 percent people have public health insurance. The German healthcare system is unique in many ways and it works mainly on five principles.
First is compulsory insurance – everyone must have a health insurance.
Second is solidarity. It guarantees that each insured person receives the benefits which are medically necessary, regardless of their income or of the amount of premiums which they have paid and of their morbidity risks. This also means that rich people pay for poor and young pay for old.
Third is funding by fees. It means the insurance is funded through contributions by insurers directly or divided between employee and employer in case of regular employment. The contribution towards health insurance is approximately 15 percent of the income, and it also covers the family members of the individual. The flat rate of approximately 15 percent means higher income people pays for the lower income people and both get same healthcare services. The insurance premium may vary in case of more funds required for treatment. According to the website of Die Techniker (TK), a leading insurance provider in Germany, out of 10.1 million private clients insured (corporate clients excluded, total 0.8 million) 7.6 million members are paying the contribution.
Fourth is self-administration. It means individuals are free to choose from any of the existing health insurance providers and also to go to the doctor/hospital of their choice.
Fifth is cashless. It means if you have public insurance or even a few private insurance plans you don’t need to pay during treatment or struggle for getting reimbursement later. The doctors/hospitals keep a record of how many patients they have treated and within those how many of them are covered by different insurance companies. Further, there is an association of doctors which claims the money from insurance companies on behalf of all the doctors and distribute directly to the specific doctors according to their bill. This cashless system works amazingly well and it takes off a lot of financial pressure from people.
According to the data published on World Bank website, India spends below 5 percent of its gross domestic product (GDP) on healthcare, whereas countries like the US and Germany are spending in double digits – 17.1 percent and 11.3 percent for the same year. India is behind all the BRICS countries in healthcare expenditure. The increase in expenditure on health as a percentage of GDP is nearly 2 percent for Germany, China, Brazil and the Russian Federation and 4 percent for the US. For India, it only increased about 0.7 percent for the period from 1995 to 2014.
‘Health at a Glance 2017’ report published by OECD also states that 10 percent increase in health spending per capita (in real terms) is associated with a gain of 3.5 months of life expectancy. The same rate of improvement in healthier lifestyles (10 percent) is associated with a gain of 2.6 months of life expectancy (fewer smokers with 1.6 months, decreased alcohol use with one month). Wider social determinants also matter. A 10 percent increase in income per capita (in real terms) is associated with a gain of 2.2 months of life expectancy and a 10 percent increase in primary education coverage with 3.2 months.
Another important aspect of German healthcare system is, it has kept its medical expenditure from growing faster than the economy as a whole with some regulations like limiting profits of pharmaceutical companies and containing fees charged by hospitals and doctors. It has also mandated the insurance companies to pay only the generic cost of drugs to pharmaceutical companies which has decreased the cost considerably.
Coming back to Indian scenario, where according to National Sample Survey Office's (NSSO) 71st round of data on ‘social consumption on health’, only 14.1 percent people in rural areas and 18 percent people in urban areas are covered under any type of health insurance. This means health expenditure is mostly covered through out of pocket expenses and that could be from someone’s earnings or savings. Government in India is aggressively campaigning to bring people under Rashtriya Swasthya Bima Yojana but results indicate that people are not interested. There might be several reasons for not taking up an insurance plan, but most apparent would be infrastructure of government hospitals, also long queues for check-ups.
We need to learn from the German universal healthcare system and customize it to cater to our needs so that irrespective of one's income, one will have access to best healthcare services. We also need to eliminate out of pocket expenses through cashless system because one of the biggest nightmares of lower and middle income group people is, if somebody in the family is diagnosed with any illness, it will cost them their life’s savings and sometimes it may go outside their capacity to afford. Access to good healthcare is every human being's basic right and it is the responsibility of the state to ensure this. Healthy citizens will make India healthy and a more productive country. Bibhu Mishra - swarajyamag