Results and Cross-Cutting Issues
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features may initially contribute to cost containment, they are unlikely to continue to exert downward pressure on costs indefinitely. Package rates are the main form of paying the hospital providers among the schemes analyzed. Although this payment mechanism may be a substantial improvement over the open-ended, fee-for-service regime,74 it is still far from an effective cost-containment system for the long run. Officials from some schemes claim that package rates exert downward pressure on costs and have helped lower market rates for similar services. As discussed earlier in this chapter, the impact of package rates on controlling cost escalation remains to be seen. In principle, competition among providers for beneficiaries may exert pressure on providers to lower costs (or expand volume). However, in rural and semi-urban areas, there may be too few providers to form a competitive market. Further, evidence is emerging that beneficiaries in rural areas are traveling longer distances to access empaneled and more “prestigious” facilities in large cities. This appears to be the case for Bangalore based cardiac hospitals for beneficiaries living in the distant divisions of Karnataka (covered under Vajpayee Arogyashri), and for RSBY beneficiaries in Kerala. Even in larger cities with multiple providers, provider competition may not be contributing to cost containment as evidenced by the high concentration of care provided in a relatively limited number of empaneled facilities. For example, table 3.13 shows high concentration of care provided in the top 20 facilities according to claims data. The use of managerial cost-containment mechanisms is in its infancy in GSHISs as well as in the broader health insurance industry in India. Preauthorization is the main form of utilization control but, with the
Table 3.13 India: Share of Top 20 Network Hospitals in Preauthorized Claims, Selected Schemes Scheme
Percent of all claims serviced by top 20 hospitals
Kalaignar’ (TN)a Yeshasvini (KA)b Vajpayee Arogyashri (KA)c Rajiv Aarogyasri (AP)d Source: Authors’ elaboration based on scheme documentation. a. July 2009–Aug 2010 data. b. 2009–10 data. c. Apr–July 2010 data. d. 2007–2010 data.
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