JOIN USThe government has announced a new scheme named National Health Protection Scheme (NHPS) in the Budget FY19 as a part of 'Ayushman Bharat' programme to address health holistically, in primary, secondary and tertiary care system covering both prevention and health promotion. The scheme is aimed to cover over 10 crore poor and vulnerable families (approximately 50 crore beneficiaries) providing coverage up to Rs 5 lakh per family per year for secondary and tertiary care hospitalisation. This will be the world's largest government-funded healthcare programme, and adequate funds will be provided for smooth implementation of this programme.
A lot of debate and discussion is going on in the public domain regarding its fiscal burden, feasibility, coverage and successes. Some experts are arguing that the cost will be as high that it will increase the fiscal deficit by 10-15 bps. We believe, the new initiative taken by the government was the need of the hour as many developed and developing countries have already started the Universal Healthcare in early 40s of twentieth century (e.g., Japan 1938, Germany 1941, Belgium 1945, etc).
Cross country experience
Out of the 33 developed countries, 32 have universal health care. They adopt one of the following three models. In a single-payer system, the government taxes its citizens to pay for health care. Twelve of the 32 countries have this system. The United Kingdom is an example of single-payer socialised medicine. Other countries use a combination of government and private service providers. Six countries enforce an insurance mandate. It requires everyone to buy insurance, either through their employer or the government. Germany is the best example of this system. The nine remaining countries use a two-tier approach. The government taxes its citizens to pay for basic government health services. Citizens can also opt for better services with supplemental private insurance. France is the best example.
State-wise experience
At present, India has the Rashtriya Swasthya Bima Yojana (RSBY) that was envisaged to provide health insurance coverage to families of Below Poverty Line families. It provides cover for hospitalisation expenses up to Rs 30,000/- for a family of five on a floater basis. The beneficiary families under RSBY scheme in 2017 were close to 3.65 crore covering only 61% of the total eligible households. Both amount and its coverage wise, the present scheme was inadequate.
Not all states participate in RSBY. Andhra Pradesh did not adopt RSBY as it already provides a generous health insurance scheme (Rajiv Aarogyasri Scheme). The states of Jammu & Kashmir and Madhya Pradesh are officially participating in the scheme, but as of September 2016, none of their districts had enrolled households into RSBY. In two other states (Karnataka and Tamil Nadu), RSBY has been rolled-out in only a few districts, with other districts being covered by their respective state financed health insurance schemes. These state-specific schemes provide a more generous benefit package and cover a broader population group than RSBY.
States, which have to provide for 40% of Modicare's costs may not run both schemes together and there could be a chance of duplicity of beneficiaries. Apart from this, States may not favour merging their own schemes with Modicare, as the latter is restricted to a limited section of poor population. For instance, the Centre's new scheme is only meant for the poor identified under the Socio-economic Caste Census, 2011. But Gujarat provides benefit to all with an annual income below Rs 2,50,000, under its Mukhya Mantri Amrutam Yojana.
Some unanswered questions
Regarding the choice of ownership and service delivery mechanism, whether government will set up a trust who will carry out the role of insurance company or government floats a tender and select insurance company based on the bidding process or it will leave to respective states is still a matter of discussion.
Regarding pricing, we believe it depends on several factors. If maternity, pre-existing diseases and waiting period are waived off to avoid anti selection, the pricing may further go up.
Regarding State-wise premium amount, we believe, if there will be one premium for all states, then there could be problem of free rider where some states have to overpay than other. This will lead to cross-subsidisation. For example, states like Maharashtra and Tamil Nadu, who have larger share amongst all states in total premium under RSBY may benefit from one premium for all state approach.
In May 2015, the government launched two low-cost insurance schemes under the name of Jan Suraksha. Both the policies were term insurance and renewable every year, through auto debit facility in the bank accounts. The demand for Jan Suraksha polices got a huge response by all the strata's of the society, which may be due to the low premium and government backed. As on date, there are around 19 crore policies enrolled under Jan Suraksha scheme while 18 crore new policies have been issued by all the insurance companies in the country. This shows the success of any government backed insurance scheme!!!
In fact, our estimates suggest the initial cost under Modicare will be less than the market estimate of Rs 12,000 crore (The government has already provided Rs 2,000 crore in budget and Rs 11,000 crore is proposed to be mobilised through cess) because the claim ratio in the first few years will be low as it generally takes time for awareness to increase. For example, Net incurred Claim ratio in RSBY, was low in the initial years. From 87% incurred claims ratio in 2012-13, it has now gone up to 122% in 2016-17. "We constructed three scenarios, and the calculated cost on centre we found even if we take the average of the premium across states then the cost comes to Rs 12,000 crore per year."
(The article has been sourced from SBI Research)