Despite, better health outcomes on certain indicators, the much-proclaimed Kerala model of health has been showing a number of disturbing trends. Although mortality is low, the morbidity (those suffering from chronic/non-communicable diseases) levels in urban and rural Kerala is high in Kerala compared to other Indian States. Thus the paradox is that on the one side Kerala stands as the State with all indicators of better health care development in terms of IMR, MMR, birth rate, death rate etc. on the other it outstrips all other Indian States in terms of morbidity especially the chronic illness. Kerala may have the best health indicators but necessarily not have the best public health care institutions. The success of Kerala health indicators is more due to the investment in the social capital rather than only in the public health care, resulting in a more accountable and integrated primary health care system

Increasingly, the public sector is unable to meet the demands for health care and people have responded to these inadequacies by increasing using the emerging private sector. This has led to the impetus growth of the private medical care set up in the State and the dependence on private health care is quite high even among the lower expenditure classes and rural areas. The unregulated private sector raises household health care expenditures, making health a commodity purchased by 'ability to pay.' Many public facilities remain underutilized especially in the institution at the level of CHC and below. In the changing scenario, the private sector reigns supremacy in the infrastructure and health manpower development than public sector in the State. The public health centers are currently being utilized mostly for maternal and child health care programmes especially for immunization schemes.

It is in this context, the government of Kerala has taken up the Rashtriya Swasthya Bima Yojana scheme of Government of India announced by Prime Minister, along with Comprehensive Health Insurance Scheme for (CHIS) in October 2008. The objective of RSBY/CHIS is to protect below poverty line (BPL) households from major health shocks that involve hospitalization. Specifically, BPL families are entitled to more than 700 in-patient procedures with a cost of up to 30,000 rupees per annum for a nominal registration fee of 30 rupees. The Scheme is jointly implemented by departments of Labour & Rehabilitation, Health & Family Welfare, Rural Development, and Local Self Govt.  The Labour Department is the Nodal dept. for implementation of CHIS. A separate agency “Comprehensive Health Insurance Agency of Kerala” (CHIAK) is created for implementation of the scheme. “United India Insurance Company Limited” is the insurance provider for all 14 districts. 140 government hospitals and 165 private hospitals have been empanelled towards implementing the scheme.

Initially, the Public Health System was a bit apprehensive of whether it was necessary to adopt the RSBY as a comprehensive Health Insurance scheme and whether it would be a success as it had to compete with the private sector where the facilities were better equipped than the government sector. However, after one and a half year of implementation, the apprehensions have been proved wrong. The total revenue earned by the empanelled government hospitals stands testimony to this. Since the implementation of RSBY/CHIS scheme till April 2010 the revenue generated by empanelled government hospitals is more that that of the empanelled private hospitals.Public health institutions contribute more than 60% of the case load as well as 57% of revenue generated for the public health institutions through the scheme. It stands at almost 25 crores out of Rs. 44 crores collection for year 2009-10  and is projected at 30 crores next year.

The facilities and patient friendly health services have been augmented owing to increased revenue generated through RSBY/CHIS and support from Arogyakeralam. It is pertinent to note here that the government hospitals are becoming more competent to manage the services. Backed by a strong Hospital Management Committee the empanelled government hospitals are moving towards a stage of self reliance empowered with the revenue generated through RSBY/CHIS/CHIS. The hospitals are now in a position to compete with the private hospitals in terms of providing patient friendly health services. This is apparent in terms of revenue generated by empanelled government hospitals as compared to empanelled private hospitals since the implementation of RSBY/CHIS.