Medical debt during second wave of Covid-19 pandemic forces Indian families into poverty

As third wave rapidly approaches, 80 pc of Indians still lack health insurance coverage


July 23, 2021

/ By / New Delhi

Medical debt during second wave of Covid-19 pandemic forces Indian families into poverty

NGO Khalsa Aid provides free-of-cost healthcare to Covid-19 patients (MIG Photos)

As the disastrous second wave of the Covid-19 pandemic abates in India, experts have begun warning of an even more perilous third wave. Besides killing hundreds of thousands, the second wave also pushed many into high level of indebtedness as 80 pc of Indians lack even a basic health insurance & unexpected hospitalisation has long been the principal cause of personal debt in the country.

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Delhi-based N. P. Banerjee completed his mother’s last rites in April. She had passed away at the age of 74 from Covid-19 complications.

“She had diabetes, so the doctors were immediately concerned from the very start. But my wife is only 45 and she doesn’t have any pre-existing conditions, so when things took a turn for the worse, it was very sudden and something we had never expected,” Banerjeee tells Media India Group.

Banerjee, who has been working with a consulting firm for the last 10 years, had always felt secure with his company’s health insurance plan, never imagining that he would suddenly have to scramble for finances when his mother and wife were hospitalised for Covid-19. His company had provided an insurance coverage of INR 300,000, but when two of his family members had to be admitted to a private hospital in Delhi, the bills racked up to almost INR 1.1 million.

“A week after my wife was discharged, we thought it was finally over, but she was admitted yet again for Covid-related complications like lung failure and kidney dialysis,” says Banerjee.

After two successful surgeries, the bill had shot up by INR 340,000. Although grateful his wife is now recovering well, the unexpected expenses forced him to borrow from his close friends and also take out a large loan against his own assets.

Medical debt cripples Indians

Banerjee is hardly the sole Indian pushed into debt due to health expenses. The World Bank has reported a steep increase in debt due to Covid-19, especially in developing countries, and has pledged to lend more than USD 2.6 billion to India for supporting its health sector. With statistics for 2021 yet to be compiled, a 2019 study by the Public Health Foundation of India revealed that about 55 million Indians were pushed into poverty as a result of medical debt, even before the pandemic.

India has suffered a death toll of 419,000 so far, the third-highest in the world, but estimates suggest excess fatalities of up to 4.9 million. Even more alarming, a recent report showed that until June 22, only 14 pc of those who died in the pandemic had insurance cover, a major reason why medical debt in India is a harsh reality for many.

“Some of the worst cases we have seen is when people were not getting a bed in the hospital so they were forced to start treatment at home, spending large amounts of money not payable in the standard insurance policy. In one case, we saw the entire family fall sick, and one got worse with multiple organs impacted from the infection. The cost of treatment was going up to around INR 1-1.5 million, while the sum insured was only INR 500,000. This is a very high out-of-pocket expense for a middle-class person and creates huge liability. Unfortunately, they also eventually lost two of their loved ones in the hospital,” Sudip Indani, President of Howden Insurance Broker India, a large insurance brokerage, tells Media India Group.

Ill-equipped insurers unable to meet sudden consumer demand

Insurance firms have also faced a large burden due to the increase in Covid-19 related hospitalisation. Despite facing the same situation in 2020, the government’s unpreparedness for a second wave saw India’s already creaking healthcare infrastructure crumble, with millions struggling to avail of an appropriate treatment.

“In the midst of all the panic and shortage of beds, people did not have the option to select a hospital based on insurance coverage, so they used whatever facility they found. Now, slowly when things are getting back to normal, they are filing the reimbursement claims for the money they have already spent, which is creating a huge burden on us as well as TPAs (third party administrators),” says Indani.

Insurance firms and rates of health policies are driven by loss ratios, but the unprecedented situation and lack of reliable statistics forced insurers to use predictions based on earlier data during epidemics. But as the Covid-19 pandemic hit a much larger population, the insurers as well as the users have come up short.

As a result, not only have premiums gone up for certain plans, but many firms have even stopped selling them or have introduced new barriers for policies like life insurance (especially for patients who have recovered from Covid-19) such as additional medical tests and a prolonged wait to assess risk.

But while the insurers may be able to access bank loans or capital infusion from their shareholders, an overwhelming proportion of the people had no such choices. The 2020 National Sample Survey (NSSO) revealed that over 80 pc of Indians are not covered under health insurance. According to the survey, 85.9 pc rural Indians do not have any health expenditure coverage and the figure among urban Indians is only marginally better at 80.9 pc.

Indani reveals that it is actually the middle class population of India who have suffered some of the worst financial losses due to the pandemic.

“The penetration of health insurance is still much below standard in our country, and even lower in rural areas and the middle class population. For some of the poorer citizens, there are many government facilities and government insurance schemes such as Pradhan Mantri Jan Arogya Yojana, which were there. But many Indians who are middle-class or wealthier and can afford health insurance think it’s a waste of money and would rather spend on luxuries like a new smartphone every year,” says Indani.

Although such government schemes look impressive on paper, they often fall short of inspiring any real change. The government’s universal health insurance scheme, Ayushman Bharat Yojana (PM JAY), has been allocated INR 64 billion for 2021-2022, which would amount to a pittance if divided amongst even half of India’s population.

The tendency to avoid taking health insurance may have worked as a money-saving strategy earlier, but during the pandemic, it caused thousands of Covid-19 ravaged families to dig into their life savings and take out unaffordable loans that plunged them into huge debts.

“Even if the patient had adequate insurance, people had to procure many medicines or oxygen supplies individually, paying the extra high cost to get them at priority for which they did not have proper, legal bills or receipts. None of this is payable by insurance,” explains Indani.

Left to fend for themselves, this rush to procure last minute oxygen tanks or medicines like Remdesivir from black market suppliers worsened family debts, with prices ranging from INR 30,000 up to 100,000 just for one ambulance ride.

Despite such hardships that almost every family in India has faced over the past year, the government has refused to even acknowledge the issue, let alone taking appropriate action. Repeatedly, the Centre has refused to accept any responsibility and blamed individual states for mismanagement of resources, even denying reports on the lack of oxygen supplies which have led to such a high number of fatalities.

Indani believes there is hope for the future, as insurance companies are in the process of designing several products that aim to help people get more adequate health insurance coverage. These include base policies, which give them no-room rent capping, hospital cash to take care of out-of pocket expenses, critical illness benefits, and sum-insured reinstatement benefits. “Super-top up” plans will also become available to cater to the elevated demands, affording a higher level of cover up to a sum insured of INR 10 million.

“There are general insurers who have come up with death plans due to infectious disease or other illnesses, which complement the struggling life insurance market. Companies also have aligned their plans to a large extent by increasing removing capping on ICU, limiting consumable deduction to a limit, and offering great options of top-up and modular top-up to employees,” says Indani.

He expects more innovation in the market and feels that long term health insurance plans (like life insurance) are crucial to preventing a repeat of the disastrous second wave pandemic in India.

“I hope we learn from this, and start prioritising health insurance, and as more and more people buy health insurance, it will start becoming more affordable,” he says.

However, with more than 10 million job losses during the second wave alone, in addition to the massive medical debt incurred, Indians will now have even less disposable income, meaning health insurance may remain an unaffordable goal for many.



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