Results and Cross-Cutting Issues
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and normal delivery. For the former, CGHS and ESIS pay significantly above market rates for all cities while the other schemes pay above market rates for Tier 2 and Tier 3 cities, but below rates for Tier 1 cities.52 A different pattern emerges for appendectomy; Rajiv Aarogyasri (AP) is the only scheme that approaches market rates for Tier 1 cities but is significantly above market prices for Tier 2 and 3 cities (perhaps because it covers only the laparoscopic modality of appendectomy which is often priced higher than the conventional open surgery).53 RSBY pays well below market rates for all types of cities. CGHS and ESIS are below market rates for Tier 2 cities but above for Tier 3 cities. In case of normal delivery, RSBY continues to pay below the level for Tier 3 cities, but the CGHS and ESIS rate is pitched between Tier 1 and Tier 2 prices. The other schemes do not cover maternity. Some providers, especially large hospitals in metro cities, already refuse to accept certain groups of GSHIS beneficiaries because of allegedly “below cost” rates. Interviews with managers of hospitals empaneled under RSBY complained of the low package rates (Grover and Palacios 2011). Although RSBY rates may be lower than the facilities’ usual charges as well as rates offered by other schemes, there is no way to determine with available data whether RSBY rates are below facility costs, as claimed by hospital managers.54 If rates are indeed below provider costs, providers will have an incentive to balance bill (by charging the patients in an unauthorized manner), or to make up their margins by inducing additional uncovered services and charging fees. To summarize, there is a lack of clarity on how the rates were formulated. Most seem to be borrowed from earlier schemes with few questions asked about their robustness and relation to market prices or costs. Based on a comparison of rates and market prices for three procedures, the one-size-fits-all approach to rates may result in schemes’ overpaying in some locations while underpaying in others. In general, if most care is provided in facilities located in Tier 1 cities, the package rates probably exert downward pressure on market prices. But the opposite may be the case for Tier 2 and 3 cities where most schemes (except RSBY) pay significantly above market prices. Given the nature of the rates, providers have incentives to oversupply, provide additional and unnecessary care, and use treatments that maximize the coverage cap as a means to garner additional revenues from GSHISs. There is clearly a need to review rates and cost the packages in different markets, applying standardized protocols.