Managing Out-of-Pocket Healthcare Costs: Naya Jeevan
The financial burden of healthcare is a global challenge. According to 2011 World Bank data, the average global out-of-pocket expenditure on healthcare is 69.1%.
To put this figure into perspective, though, the 2011 average for the U.S. was 20.9%, compared to 86% for India and 86.3% for Pakistan.
Out-of-pocket spending places basic healthcare out of the reach for many and has especially devastating effects in developing countries. In India alone, it is estimated that annually, 39 million people plunge into poverty due solely to healthcare costs. These dire straits make way for generational poverty, forcing poor families to enter a crippling debt cycle that is near impossible to clear.
And this is not just the experience in India: on the subject of health financing policy, the World Health Organization cites that up to 5% of global households, or 350 million people, are pushed into poverty because of “catastrophic payments.” In the case of Pakistan, forty million low-income households depend on private healthcare, and therefore also confront the real possibility of abject poverty.
“Labs, diagnostic tests, medications, et cetera all have to be paid out-of-pocket [in Pakistan],” says Dr. Asher Hasan, founder and CEO of Naya Jeevan, a social enterprise providing micro insurance to Pakistan’s urban poor. The average Pakistani household spends PKR3,000, or USD30, per day on healthcare. “The public health system is fairly dysfunctional: it is vast in concept, but in reality, few have access to quality care. And there is great difficulty in financing that care.”
There is a serious behavioral consequence to this healthcare conundrum. Faced with the dual threat of high debt and deep poverty, people cease to seek medical attention even when they need it most. Easily treatable or preventable conditions then escalate into health crises and require more complex – and expensive – interventions.
The high price tag of healthcare has inadvertently created a tradeoff between health and poverty, particularly for the urban poor. Though high healthcare costs are a challenge to the entire Pakistani population, they are an acute challenge for city dwellers.
Approximately 25% of Pakistan’s total population resides in cities, and this number is rapidly rising. For example, the coastal city of Karachi, the one-time capital of Pakistan, has been declared one of the world’s fastest growing megacities with some estimates putting its current population at greater than 20 million.
Pakistan is seeing its city populations balloon as villagers migrate to cities for stronger livelihood opportunities. However, Pakistan’s rapid urbanization has serious implications on poverty and public health. Informal settlements and slum communities have cropped up in and around major metropolitan areas since new city migrants cannot afford the cost of living in the city. Hundreds, and in some cases thousands, of people are forced to live on a small area of land without potable water or proper sanitation, thereby highly susceptible to communicable diseases. It is in these severe conditions that the urban poor are forced to live.
As Hasan explains it, Naya Jeevan’s focus on the urban poor was the natural evolution of its business model. A majority of the urban poor community work as domestic help (e.g. maids, cooks, drivers, childcare providers) in Pakistan’s middle and upper class households. In investigating the country’s healthcare landscape, Hasan learned an interesting – and ultimately inspiring – fact: for every corporate employee, there are 19.2 uninsured people (domestic workers and their families) affiliated with that employee. There is then this significant potential to grant up to 20 people access to the Pakistani healthcare system.
How does this work? Corporate employees are privy to health insurance plans via their employers. Hasan’s idea was to collaborate with corporations to partner and “cascade” health insurance plans up and down their value chains. By effectively casting a wider net to include more beneficiaries, the insurance costs of executives and employees go down.
Naya Jeevan’s micro insurance plan is a co-financing model. The corporate employee enters into an agreement with his domestic help to provide them with insurance. The corporate employer then deducts an amount from each paycheck that is equivalent to the contribution towards insurance for the employee’s domestic workers. To ensure that domestic workers are as invested and “own” this idea of insurance for themselves and their families, they make a monthly 10% contribution, equivalent to USD1.50-USD2.50.
From the corporation’s and its employees’ perspectives, benefits go beyond decreased insurance costs. Employee productivity increases: since domestic workers have access to insurance, they can seek medical care as needed, and employees do not need to take additional days off to compensate for lack of help at home. Arguably more importantly, by investing in bottom of the pyramid communities, the corporation is expanding its footprint and gaining access to a new consumer segment, which can have positive economic effects in the future.
From the domestic worker’s point-of-view, he is gaining access to healthcare, as well as getting an opportunity to invest in it. Since domestic workers are part of the informal economy, they do not have access to low-cost, high-quality insurance programs. To promote social inclusion for newly insured domestic workers, Naya Jeevan sponsors awareness and education sessions, group training and, most recently, integration with mobile banking platforms.
To date, Naya Jeevan has directly reached 43,000 beneficiaries. There is a large ripple effect, and the enterprise has reached its tipping point. Its success in Pakistan has given Hasan – and other interested stakeholders – confidence that Naya Jeevan can work in other countries as well.
There are two clear opportunities for expansion. Hasan notes that Naya Jeevan is engaging not only with the Pakistani diaspora, but also with Indian and Bangladeshi communities abroad to see the possibilities of providing a similar micro insurance scheme to uninsured, working people, such as New York City taxi drivers.
Another opportunity has arisen due to interest by the American Business Council Foundation in replicating Naya Jeevan’s model in Latin America. The team at Naya Jeevan is due to make a site visit this month to see how that can happen.
“[The] model is designed to be sustainable and scalable,” says Hasan. “We chose a difficult country to launch the model, but more stable ecosystems will make replication easier.”
(Note: In June, Naya Jeevan became a winner of the Rockefeller Foundation’s 2013 Centennial Innovation Challenge.)
Photos Courtesy of Subject