“Modicare”: India’s Path to Universal Healthcare Coverage
March 28, 2019
This is Part 2 of a two article series on healthcare reform in India. Part 1 explored the unique factors that drive healthcare policies in India. This piece analyzes India’s flagship healthcare reform, Ayushman Bharat, which is also known as “Modicare.”
India has the world’s largest rural population, and around 300 million citizens live in poverty. As such, comprehensive healthcare reform in India must address these demographic challenges. Previous national healthcare initiatives in India, however, were unsuccessful in combating the impact of high out-of-pocket (OOP) costs and the rural-urban divide in access to care. On September 23, 2018, India’s Prime Minister Narendra Modi launched a nationwide health reform called Ayushman Bharat (which means “bless India with long and healthy life”). Commonly dubbed “Modicare,” Ayushman Bharat has two pillars: a health insurance program for the poor known as Pradhan Mantri Jan Arogya Yojana (PMJAY) and the establishment of a national network of Health and Wellness Centers. The Health and Wellness Centers focus on primary care (routine care delivered by one’s primary physician), whereas PMJAY focuses on the coverage of secondary and tertiary care (increasing levels of specialized care beyond that offered by one’s primary physician). Though Ayushman Bharat expands access to healthcare for nearly half of the population, India may not achieve comprehensive healthcare due to limited financing and an underemphasis on primary care.
Ayushman Bharat: An Overview
PMJAY is a government-sponsored health insurance scheme that provides “poor and vulnerable” families with financial coverage for hospital expenses for secondary and tertiary care. Families in the poorest 40% of India’s population – an estimated 110 million families or equivalently 500 million individuals – will be automatically enrolled in this program. The program will cover up to 500,000 rupees in hospital expenses without any OOP costs for beneficiaries. Beneficiaries can receive care at any private or public hospital that has joined the scheme. PMJAY will cost the central government and state governments approximately $1.54 billion annually. Moreover, PMJAY builds upon the government’s previous national insurance program, Rashtriya Swasthya Bima Yojana (RSBY), which provided up to 30,000 rupees in financial coverage for inpatient expenses to families below the poverty line. PMJAY fully replaced RSBY, increasing RSBY’s coverage amount six-fold and covering the poorest 500 million people, as opposed to just the 300 million who live below the poverty line.
In addition to PMJAY, Ayushman Bharat will establish 150,000 Health and Wellness Centers by December 2022 in order to increase access to primary care in rural and urban areas. Initially proposed in the 2017 National Health Policy, these Health and Wellness Centers will provide free medicines, diagnostic services, maternal and child health services, and treatment for non-communicable diseases. To launch this program, existing sub-centers, local hospitals in rural areas that serve three to five thousand people each, will be converted to Health and Wellness Centers, increasing access to primary healthcare for rural populations.
The Challenges Ahead
Ayushman Bharat focuses on the specific demographic challenges that India’s healthcare system faces – namely, the nation’s large impoverished and rural populations. Previous reform efforts like RSBY did not reduce the chance of inpatient OOP expenses, which are largely unaffordable for poor families. PMJAY eliminates these OOP costs associated with hospitalizations by providing eligible families with 500,000 rupees of coverage. Moreover, Health and Wellness Centers serve as Ayushman Bharat’s predominant means of delivering primary care to rural areas.
Although Ayushman Bharat addresses the rural-urban divide and access to healthcare for impoverished families, its emphasis on secondary and tertiary care as well as limited funding prevent this policy from achieving comprehensive health coverage. According to the World Health Organization, the key to attaining universal healthcare is access to primary healthcare. In fact, the greatest health returns come from comprehensive access to primary healthcare – not secondary or tertiary care. In addition, it is through primary care that India will tackle its main health concerns and priorities such as infectious diseases and immunizations. Ayushman Bharat boosts primary care access through the Health and Wellness Centers; PMJAY, however, covers the costs of treatment and hospitalization exclusively for secondary and tertiary care. In addition, the insurance provided by PMJAY may increase demand for expensive inpatient secondary care, which could disincentivize the use of more cost-effective primary care. As the Government of India aims to spend two-thirds of national public healthcare spending on primary care, Ayushman Bharat risks disincentivizing and underemphasizing the role of primary care. Another barrier to achieving universal healthcare coverage in India is the limited funding allocated towards the implementation of PMJAY. The Government of India has currently budgeted $300M to subsidize care for impoverished families through PMJAY for its first year. The coverage provided by PMJAY, however, may lead to insurance-induced demand and overutilization of secondary and tertiary services. The $300M budget may not be sufficient for this increase in demand. In fact, if only one in ten families eligible for this health insurance scheme were to utilize the entire 500,000 rupees of coverage, the Indian government would owe hospitals approximately $25B – more than 80 times the amount allocated for the first year.
Ayushman Bharat has made great strides to address the specific demographic challenges that afflict India’s health system and influence access to healthcare. Through the two pillars of the scheme, PMJAY and the Health and Wellness Centers, Ayushman Bharat provides better access to care for the impoverished as well as rural populations in India. The program, however, has an overemphasis on secondary and tertiary care and limited funding, which stifles India’s progress toward universal healthcare.
PMJAY is the boldest national health insurance plan in India’s history, providing more people with greater coverage than any previous program. Ayushman Bharat, as a whole, however, underemphasizes primary care services provided by the Health and Wellness Centers. Instead, Ayushman Bharat promotes PMJAY, which only covers secondary and tertiary care, as the main aspect of the reform. As primary care is a more cost-effective means to address the most pressing health concerns of developing countries, future efforts at healthcare reform in India must place greater focus on access to primary care.
Student Blog Disclaimer
The views expressed on the Student Blog are the author’s opinions and don’t necessarily represent the Wharton Public Policy Initiative’s strategies, recommendations, or opinions.