How Health Cards Can Prepare Families For Unplanned Expenses

Health cards are an innovative financial instrument that help hospitals manage patient journeys by providing a digital mode of payment that cardholders can use to avail of services at the hospital and earn a certain percentage of each transaction as benefits.

Just as it seemed like the dust was beginning to settle on the pandemic, COVID-19 has thrown a new curveball with the Omicron variant. Early evidence indicates that rates of infection may go up, with the WHO recently stating that “there is now consistent evidence that Omicron is spreading significantly faster than the Delta variant”. Omicron is likely to spread in India sooner or later, and there is still much to learn about this new variant. One thing that is a near certainty is that medical expenses will rise, whether from increased testing or treatments and hospitalisations. This has the potential to force many Indians into debt and poverty. There is a need to innovate new age instruments like health cards that can increase financial inclusion and help these struggling households weather through the pandemic.

COVID-19 has already devastated many low income families, many of whom rely on a single bread-winner. Whether through increased medical expenses or the slowdown of economic activity and a depressed job market, 75 million people fell into poverty last year and millions more are projected to make this drop for 2021 and next year. According to the SBI, household debts are now double of what they were in 2018.

Individuals from low income households are poorly situated to deal with the spread of Omicron. Incomes that were already being stretched thin would likely have reduced as a result of the pandemic. Anyone exhibiting COVID-like symptoms will likely have to pay for investigations and tests to diagnose the underlying cause. If they test positive for COVID-19, they will, at the very least, require medicines and good nutrition to recover. None of this is cheap and will definitely strain their incomes and eat into any savings. These troubles will increase tenfold if the case is severe and requires hospitalisation.

A lack of options

Households in such situations often have little recourse and have few options to weather the storm. One option would be to avail of healthcare lending from a bank or NBFC. But healthcare lenders have taken a massive hit as a result of the pandemic. The number of defaulters and NPAs has skyrocketed, making lenders wary to help out low income families who have little collateral.

Insurance is another option that is typically bandied about, but the numbers show that it is unlikely to be a feasible option for low income households. Firstly, only 6 per cent of Indians have healthcare insurance, largely amongst well educated or high income individuals. Even amongst this elite class, only a tiny fraction have COVID insurance. It is therefore unreasonable to rely on insurance as a recourse for low income households, many of whom are justifiably reluctant to use already stretched budgets to allocate money for a contingency that may or may not happen.

This is why many struggling families turn to the unorganized lending sector. The detriments of these options are well known and while they may provide some temporary relief that enables medical treatment, they come at a great cost. With exorbitant interest rates and unscrupulous business practices, families find it very difficult to escape debt from these sources.

Health cards: a way out

So what then is the solution? Indians tend to prefer liquidity, so one option that could be ideal are health cards (not to be confused with health ID projects like the government’s Ayushman Bharat Digital Mission). Health cards are an innovative financial instrument that help hospitals manage patient journeys by providing a digital mode of payment that cardholders can use to avail of services at the hospital and earn a certain percentage of each transaction as benefits. 

Patients can use health cards to avail of Out Patient services (OPD) they will require at that hospital as a result of Omicron like consultations, lab tests, diagnoses and medicines. Though OPD bills are typically smaller payments they can accumulate over time and account for 62 per cent of healthcare costs. Health cards can also be used for treatments like dental cleaning or fillings, that are typically not covered by insurance schemes. Healthcards can thus not only help families weather through COVID-19 and bouts of increased testing/treatments but be a financial bulwark that can help them pay routine medical expenses.

Healthcards can also significantly help with Omicron cases that require hospitalisation or admission into the In Patient departments (IPDs) of medical facilities. Many families will struggle to meet expenses for this contingency and health cards provide an avenue. The discounts and benefits they enable can be funnelled through prepaid payment instruments (PPIs) or flex-saving plans to facilitate savings for future medical expenses. Cardholders can also directly add to this corpus through the secure payment gateway on the platform. Health cards can also be used to provide an expedited channel for economically disadvantaged to avail of loans or need-based micro-insurance (to cover daily household expenses while a breadwinner is in hospital).

Health cards are a win-win for patients and hospitals alike. Many hospitals struggled with cash flow problems last year as non-COVID, non-emergency cases reduced. Healthcards can help increase the rate of patient retention as they can only be used in the hospital. Though health cards are still in the nascent stages of adoption, they have the potential to help individuals tide the inevitable Omicron wave. They improve the affordability and accessibility of healthcare even in the best of times and are hopefully just the first of a series of financial innovations that will alter India’s healthcare landscape.

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