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Harvard Case Study
Karnataka
Yashaswini Health Insurance Scheme

1. Background
Approximately less than one sixth of India's billion people have access to affordable healthcare. For the rest, medical help is often inaccessible and beyond their means. Too often, the cost of staying alive pushes one quarter of Indians below the poverty line[i] and hospitalization can result in years of debt repayment, so that rural indebtedness caused by illness is frequently far greater than that caused by crop failure.

The southern state of Karnataka has a significant rural population, where approximately 56% of the labor workforce is engaged in agricultural and related activities. Despite the many hospitals and medical colleges found throughout the state, the bed occupancy rate in the last few decades has been as low as 35% and a large number of people who require hospital treatment have been dying, simply because they cannot afford to seek treatment.

The overarching challenge for the government of Karnataka has been to provide these disenfranchised segments of the population access to affordable healthcare in a sustainable manner. Proposals for viable solutions have focused on insurance models capable of supporting millions across India's rural areas through large networks of hospitals and clinics. Although a variety of low cost health insurance models have been initiated over the past decade, many have failed due to lack of commitment, sustainability and coverage. One such model, however – the Yashaswini Health Insurance scheme has met with success and is providing a blueprint for future successes in health coverage for the poor.

2. Key Players
a) Government of Karnataka, Department of Cooperation
b) The Yashaswini Health Trust
c) The Narayana Hrudayala Foundation

3. Choice of regulation/regulatory program
The Yashaswini Health Insurance scheme, launched in 2003 by the Government of Karnataka was a landmark initiative addressing the major health concerns of rural people who typically had no health insurance. [ii] A form of community based health insurance, the Yashaswini scheme is based on voluntary membership that requires prepayment for health care by community members.

The Yashaswini scheme was first proposed by the Hrudalaya hospital founder, Dr. Devi Shetty, while addressing the Karnataka Milk Federation (KMF). [iii] Shetty, a British educated cardiologist who became Mother Teresa’s personal cardiac surgeon and subsequently an advocate for providing modern health care to the poor, asked his hosts at the KMF to support his novel insurance idea. The resulting Yashaswini (meaning Victor) health program was then proposed to the government of Karnataka, with members of the milk cooperative as its first beneficiaries. Various philanthropists raised an initial two billion Indian rupees for deposit into a revolving fund, and later the Karnataka government added a significant contribution. Starting operations were then conducted from the interest accruing on this revolving fund, and the scheme was soon extended to other cooperatives, in particular to the farmers cooperative in Karnataka.

Yashaswini is based on the idea of an independent administrator receiving competitive bids from hospitals in exchange for the hospitals offering to set low rates for certain major operations. Many hospitals had been running at very low occupancy rates (ten percent or lower) because of the high costs of care at their facilities. The scheme also relies on the fact that it covers only surgeries and only a small fraction of farmers go in for operations. The scheme is self-funded and does not have insurance coverage from any insurance company.

The Yashaswini Health Insurance Scheme covers free consultations, diagnostics at discounted rates, and covers over 1700 types of operations on the stomach, brain, gall bladder, spine, bones, kidneys and heart[iv]. However it is limited to a pre-set list of illnesses, and does not cover other...
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