Will Modicare work?

Union Home Minister Rajnath Singh flanked by UP Governor Ram Naik (L) and UP Assembly Speaker Hriday Narayan Dixit at the launch of Ayushman Bharat-National Health Protection Mission (AB-NHPM), in Lucknow. (PTI Photo)

The central government has announced its ambitious initiative to provide a range of healthcare services to the poor. Ayushman Bharat – meaning, Long live India! The phrase is significant, since India’s health outcomes measures currently are among the lowest. Besides, the financial loss associated with illness is more worrisome. Nearly 60 million Indians are impoverished annually because they have to pay from their pockets, and they end up spending a significant share of their income on treatment – catastrophic payments.

Ayushman Bharat, also dubbed ‘Modicare’ by its proponents, intends to accelerate access to care, thereby reducing disease burden and influencing a significant reduction in households’ out-of-pocket (OOP) expenditure. It stands on two pillars. At the lowest level, the primary care component has been designed for transitioning the current 1,50,000 sub-centres into Health and Wellness Centres (HWC). At the middle and top, the recently launched Prime Minister’s Jan Arogya Yojna (PMJAY) is expected to provide free and cashless benefits through secondary and tertiary care hospital services for the poor.

Aimed at addressing preventive, promotive and curative care at the primary level, HWCs are expected to be strengthened with adequate trained workforce, infrastructure and regular supply of drugs and diagnostics. It is also expected to strengthen the referral mechanism, whereby a large section of the population will have access to appropriate high-volume, low-value medical interventions, addressing common ailments. This should ease the load on the overcrowded government hospitals, which can focus on provision of secondary and tertiary care treatment.

The second pillar of Ayushman Bharat, the PMJAY, rests on providing coverage to an ambitious number of 500 million people, about 40% of the population. Both the poor and near-poor, involving the informal workforce, would be provided cover for ailments that require hospitalisation. One of the key features of this scheme is portability for patients. A seamless treatment access is intended whereby the informal workforce, criss-crossing the country for jobs, can avail treatment benefits wherever they are when they fall ill.

A generous benefit package of Rs 5 lakh per year per family is available. The premium will be paid by the government, wherein the central and state governments are expected to share the financial burden in the ratio of 60:40. About 1,300 medical procedures and interventions are covered, whose prices are set by the government on a pan-India basis but implemented by over 10,000 private hospitals across the country in addition to the government hospitals.

Although the PMJAY is billed as the most ambitious in its scope and coverage globally, covering 500 million people, similar goals were set nearly a decade ago with RSBY (Rashtriya Swasthya Bima Yojana). Before PMJAY was launched last week, the number of people covered by government-funded health insurance schemes (including RSBY and state government programmes) and ESIS (Employees’ State Insurance Schemes) together covered over 400 million people already.


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Both PMJAY and RSBY use a targeted approach rather than a universal principle. PMJAY will likely utilise the SECC (Socio-Economic Caste Censes of 2011) to identify beneficiaries. Experience with the targeted approach adopted by RSBY shows that it suffered several challenges and coverage of intended beneficiaries remained far less than the target. Lack of awareness, inability to identify beneficiaries, etc., were largely responsible for RSBY’s relatively mixed performance. On the other hand, some southern states and their schemes, such as that in undivided Andhra Pradesh and Tamil Nadu, were veering towards universality, with 60-70% of their populations covered. It is worth observing that it is not only the poor but even a significant portion of middle-income families, too, suffer financial catastrophe when serious ailments not only drain their finances but also pull them into debt. The southern states’ experiences are worth emulating in providing the much-needed financial risk protection.

One of the key discussions in policy debates is whether or not PMJAY is funded adequately.  The current allocation of Rs 2,000 crore for the scheme is less than what may be required to meet the obligations. Even if the states contribute their 40% share and considering that there are only six more months in this fiscal to make payments for, the allocation may fall short. The premium will be in the range of Rs 450 to Rs. 1,300, varying across states. A relative utilisation of the benefits across the states will reflect the overall financial outgo from the scheme. If utilisation rates were to be high, and claims ratio were to accelerate beyond 100%, premiums would be revised upward, entailing further financial outflows from the state governments.

Will the scheme provide the much needed cover from financial catastrophe? With a Rs 5 lakh cover annually, households’ OOP is likely to decline, albeit moderately. The key factor for high OOP expense in India is on account of outpatient episodes of illness that account for over two-thirds of households’ financial burden. This is especially so for money spent by households in buying medicines from retail outlets. Since PMJAY only provides a defined benefit to hospitalisation episodes, it will not make a dent in that OOP expense.

But the larger question is to do with the apparent focus of PMJAY on secondary and tertiary care, when critical and much-needed primary care in India is at a crossroads today. Moreover, the continuum of care that was envisaged in the National Health Mission is a missing as strengthening HWCs alone is unlikely to be a game-changer. Thus, the success of Ayushman Bharat will depend to a large extent on the capacity of the scheme to provide a seamless delivery of universal services along a continuum of primary to secondary and tertiary care, including provision of free drugs. If India is to reap the advantages of its demographic dividend, an adequately-funded government healthcare service with an accountable governance mechanism is the need of the hour. A healthier population is often found to be a wealthier nation.

 (The authors are with Public Health Foundation of India)

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