The ESIC, created by an Act of Parliament in 1948, is the most important social health insurance program for the organized sector working classes. It today has an annual budget of over Rs. 10,000 crores and reserve funds of more than Rs. 25,000 crores. With 151 hospitals, 32,349 hospital beds, 20346 medical personnel (7340 doctors) and 18,501 other staff and per insured employee medical spend of Rs.2551 it is a huge medical establishment, somewhat similar to the armed forces (38328 beds and Rs. 5914 crore medical expenditure – Rs.19713 per employee) and Railways (13963 beds and Rs. 1370 crore medical expenditure – Rs.9660 per employee). Table 1 details ESIC expenditures over the last five years.
The ESIS is not an ideally functioning social health insurance program (see the story in Box 1). It looks huge in numbers with a coverage of 6.18 crore beneficiaries with a per capita expenditure of Rs.1253 which is 2.5 times of general government health expenditure for the same year. But it is not universal access even for the organized sector employees; infact it covers only 42% of the organized sector employment and by design it is largely targeted at blue collar workers thus fragmenting social security even in the organized sector. While huge investments have been made in ESIS as evidenced by the infrastructure and human resources for healthcare, all this is poorly structured and managed. Despite having a robust hospital and clinic network the utilization and occupancy rates are very low. One reason could be poor quality of services (vacant positions of doctors and specialists are huge) and the other a growing reliance on out sourcing to private practitioners and private hospitals, especially the latter.
The limited data available in the Annual Reports shows that outpatient care, especially in larger cities where private practitioners called insurance medical practitioners provide services the latter is used more frequently. For instance in Mumbai which is the largest ESIS hub having the largest hospitals in 2009-10, 52,203 outpatients were treated at ESIS facilities in contrast to 129,447 by private panel doctors and similarly for specialist care 48,557 attended ESIS facilities and 63195 attended private clinics. Increasingly hospital care is also being paid for to use over 600 empaneled private hospitals (reimbursed Rs. 180 crore in 2009-10) keeping the occupancy rates of ESIC’s own hospitals below 50% (in the largest ESIS hospital, the 700 bedded MGM hospital in Mumbai the occupancy was as low as 31%).
Anecdotal stories tell us that the ESIC doctors are primarily used to obtain medical certificates so that workers can access the various cash benefits under the scheme. In 2010-11 there were a total of 406000 hospitalizations and 2.34 crores outpatient incidence (4.39 crore contacts). This seems to be a very low utilization rate when compared with the NSSO morbidity surveys for the general population. For outpatient care an annual incidence of 390 per 1000 as against 45 per 1000 for 2 weeks as per NSSO and only 6.8 per 1000 hospitalizations annually compared to 26 per 1000 as per NSSO. Is this low morbidity and utilization because of poor quality services or is it that the ESIS covered population is healthier because it is well looked after? Or is it that even ESIS covered persons are using the private sector and paying out of pocket? We definitely need more evidence on this.
Another issue that emerges when we assess the information from the Annual Report is that in the last few years, while the canvass of ESIS has expanded due to the increase of wage ceiling to Rs.15,000 per month, the attention of ESIC is moving away from the employee who has contributed from his/her wages to a new arena of action – medical education. The ESIC Board has sanctioned 18 medical colleges and 9 dental colleges besides 12 PG institutes. The establishment for these is under full swing as can be seen from the increasing capital expenditures coming from the reserve funds. Should a social health insurance agency be entering the field of medical education? This is likely to further damage the reputation of ESIS as well take it into a direction which will not be in favour of the working class ( or is it that insured persons have been promised a quota of medical seats!).
What is also striking when we look at ESIC budgets is that even when the ESIC has a huge surplus every year the state governments have to continue to subsidize medical care expenses of ESIC from the general health budget. Thus in 2010-11the total medical care expenditure was Rs 2124 crores but more than half of this, that is Rs.1294 crores came from the general health budgets of the state and union governments.
What Needs to be Done
ESIS is not a single isolated program. It is one important part of a compact of the social security system within the country so it needs to be assessed in that context. The few benefits that we have in India today are spread across various Ministries ranging from administrative departments to Ministry of Labour, Social Welfare, Social Justice, Women and Child Development, Ministry of Health etc.. resulting in segmentation and fragmentation.
What must also be noted is that the nature of social security provided varies a lot for different sections of the population. At one end of the spectrum the civil services employees of Central and State governments get a full range of benefits as defined by the ILO. For instance, their retirement benefits alone (pension, PF, gratuity etc.. excluding healthcare) were Rs.166,170 crores in 2010-11 (as much as 2.11% of GDP). At another end are the below poverty line (BPL) population who get adhoc benefits under various welfare and social assistance schemes. For instance in 2010-11 such benefits across the country amounted to Rs.146,248 crores or 1.85% of GDP (social assistance schemes/pensions for BPL, SC, ST, nutrition, housing and labour welfare for unorganized sectors). If we include healthcare and water supply and sanitation this figure increases to Rs. 248,456.22 crores. Thus in the Indian context we need to differentiate these different benefits that range from comprehensive social security (civil service employees) to ad hoc social assistance programs targeted at different poor and vulnerable groups.
It is clear from budgetary allocations/expenditures that social security benefits in India are highly discriminatory. Civil servants and defense services employees as well as a small proportion of private sector employees, who anyway benefit from their secure and well paid employment, have life-long social security of a very high standard. On the other hand, those who struggle for an existence all their life get ad hoc benefits from residual resources of the budget, in most cases if they are below the poverty line, through a variety of social assistance/welfare programs. Let us illustrate this with two contrasting examples:
A person working with the Indian army retires in the rank of Major and gets PF and gratuity totalling Rs. 20 to 25 lakhs as retirement benefits. Then for life he gets half of his last drawn salary as inflation-indexed pension, which today is over Rs.50,000 per month. If he dies, his spouse gets a family pension of half that amount that is Rs.25,000 for her life. Apart from this they have unlimited free healthcare, outpatient, inpatient, dental, ophthalmic etc. In addition they get subsidized groceries and all possible consumer products at subsidized rates through the canteen services. They also get continued access to the mess and clubs so that they remain socially connected to their “community”. This is the best case scenario and about 15% of the households in India have this kind or something similar as social security benefits earned from their “organized” sector employment.
In contrast there is the BPL family of a daily wage worker, whose daily wage depends on the market – if they are lucky they may just manage to earn about Rs. 5000 for the entire household in a month. They have access to education and healthcare services from government facilities but there is no guarantee that they would get what they need and often they have to pay for it. The children may not go to school because they may have to work to sustain the family’s basic needs. They have no savings, PF, gratuity or any other work related benefits. They have to continue working much beyond the retirement age. If they fit the parameters then they may get a small sum of Rs. 200 – 500 per month as an old age or widow pension that is not indexed to inflation. If both husband and wife are qualified to get old age pension then only one of them will get it. If they are lucky they may have been registered for RSBY or a similar health insurance cover so that if there is a catastrophic illness their healthcare bill is atleast partly paid. This is the worst case scenario with two thirds of the households in India experiencing an existence of near about this kind.
The remaining 20% “middle” classes have to struggle to make their own arrangements for social security through their savings, extended family/community support – they did not get the organized sector benefits and they are not eligible for the various social assistance programs of state and central governments.
Given the above political economy of social security in India the challenge is huge. We are committing only about 6% of GDP for social security and over half of this goes to the top 15% of India’s population. In the last decade or so there has been a growing trend in committing more resources to the remaining 85% of the population but this is being done in a very ad hoc manner through targeted schemes where the focus of the target is electoral catchment and not the development of a sustainable mechanism to deliver basic social security. Under the UPA regimes the flagship programs have basically tried to do precisely that and substantial budgetary allocations have been committed but the approach has been very fragmented with the consequence that outcomes in the form of improvements in for example the MDG indicators has been poor. There is enough learning now that targeted and fragmented approaches do not work and that universal access is the only way out.
Reforming ESIS thus has to be viewed in the above context. ESIS, like any other social security program in India is segmented through its design defect. While it was supposed to be a benefit for the workforce, it got limited to only a small part of the workforce because it limits extension of benefits to those earning a specified wage (presently Rs.15000 per month or less) and are part of an organization that employs more than 10 employees. Also its provisioning of services are restricted to areas which have a certain minimum density of eligible insured workers. The consequence of this is that only 3 percent of the workforce (and less than half of the so called organized workers) become eligible for ESIS benefits. Unless this design defect is not removed and the scheme is universalized to cover the entire workforce (450 million) its worthiness and effectiveness will remain questionable. The government is putting huge efforts and resources at extending health benefits to the unorganized sector through targeted and restricted schemes like RSBY and its state clones using the route of private health insurance but all these efforts fail to have the intended impact and end up benefiting the private hospitals and the insurance companies. The ESIS benefit system which is otherwise well formulated and is quite comprehensive can easily become the mechanism to expand social health insurance to almost the entire workforce, and its integration with the general healthcare services of the state can create a synergy wherein the required resources can be pooled from employers and employees contributions and that from tax revenues. Some suggestions on how this could be done are given below:
Coverage: As an immediate step the ESIC must amend the criteria that restricts coverage based on quantum of wages and/or the number of employees of an establishment. The effect of this would be that all employees of currently covered organizations would be compulsorily covered. This would more than double the numbers covered by ESIS but more importantly increase five to six fold the contributions from employers and employees since the higher paid employees are presently exempt from ESIS inclusion. As a next step ESIS should be extended to all employers from the shopkeeper or household artisan who may be employing as less as one or two persons – this would not be easy as registration of small establishments is grossly inadequate. Further all self-employed persons (professionals, farmers, artisans, vendors etc) should also be allowed as members into ESIS. To assure equity employees earning less than Rs.10,000 per month (inflation-indexed) should be exempted from contributions. Similarly, employers and self-employed persons with a turnover of less than Rs.50,000 per month and/or income less than Rs.15,000 per month must also be exempt from contributions.
Provisioning: The general primary healthcare system and ESIS dispensaries (as well as other social insurance scheme dispensaries/clinics, including of railways, defence services, CGHS etc.) must be integrated into a common pool, including the empaneled private practitioners (for whom much more effective regulation would be required). Similarly, the ESIC hospitals need to be integrated with the general hospitals of the public health system. All facilities must be well equipped and resourced as per globally accepted norms (WHO, ILO etc.). The effort in provisioning must be to make the primary healthcare system entirely through public provisioning in the long run. Secondary and tertiary care is severely under-invested in public domain presently and here regulated purchasing from the private sector will be needed to fill in gaps. Further in both ESIS and general health services human resources, especially doctors and nurses, are grossly lacking and for this the creation of an IAS kind of cadre or something similar to the cadre system in the armed forces would be needed. Infact there is a lot ot learn from the armed forces and Railways health services in the matter of provisioning, management and governance.
Financing: General taxation would remain the main source for financing the entire healthcare system, but specific to the ESIS system the pattern of contributions should continue with the caveats mentioned in the paragraph on coverage above. With universal coverage of all workforce there would be a possibility of reducing the proportional contribution of employees since higher salaried employees from the CEO downwards would all be covered – ofcourse the economics of this would have to be worked out as the coverage increases. If even 50 percent of the workforce, including self-employed are covered under ESIS then more than half the resources needed for UAHC could come from social insurance contributions.
Governance: The ESIS is presently an autonomous Corporation under the Ministry of Labour but under a UAHC framework it will have to be merged with the governance mechanism designed for UAHC. As mentioned earlier healthcare services cannot be seen as a standalone service, it needs to be viewed as a compact of the social security benefits. But this is complicated because ESIC and many other social security benefits are under the domain of the federal government. Thus at the state level at best ESIC facilities, which are physically run by the state government, can be integrated for UAHC provisioning with the general health services to optimize the economies of scale as well as integrate the under-used ESIS capacity and over-crowding of many general public hospitals. Also other public sector facilities like defence, CGHS and railways should also be integrated into a common governance mechanism.
 For FY 2013-14 the ESIC estimated income is Rs. 10,140.81 crores, Revenue Expenditure Rs. 7119.18 crores and Capital outlay of Rs 2504 crores (http://esic.nic.in/Publications/StandardNote190813.pdf)
 CAG 2012: Combined Finance and Revenue Accounts 2010-11: Volume 1, Comptroller and Auditor General, GOI, New Delhi (Table 7 page 17)
 CAG 2012: op. cit. compiled from Vol 3