Explained: Why India's Public Health Insurance Doesn't Work As Well As It Should

The "world's largest government funded healthcare program" was a step towards Universal Health Coverage (UHC), the government said, and would provide quality health services to eligible patients and protect them from financial hardship.

However, as a study from Chhattisgarh has found, PM-JAY has failed to plug the shortcomings of previous publicly funded health insurance (PFHI) schemes--it has not decreased families' out-of-pocket expenditure on health or increased use of hospital care substantially. In addition, it does not offer outpatient consultation, and the programme is underfunded to support its beneficiaries, we found from studies and speaking to experts.

An explainer of what's wrong, and how it can be fixed.

What is PM-JAY?

Ayushman Bharat aims to provide 110 million "poor, deprived rural families" and specific occupational categories of urban workers' families, such as those of beggars, rag pickers, domestic workers and street vendors, with an annual family health insurance cover of up to Rs 5 lakh for the treatment of diseases that cannot be cured at a primary healthcare center. The beneficiaries were selected based on the 2011 Socio Economic and Caste Census.

PM-JAY subsumed two other centrally sponsored schemes--the Rashtriya Swasthya Bima Yojana (RSBY), which was launched in 2008 and insured families of informal sector workers below the poverty line (BPL) for up to Rs 30,000 per family, and the Senior Citizen Health Insurance Scheme (SCHIS), which was launched in 2016, and provides an additional Rs 30,000 for every senior citizen in families eligible for RSBY.

PM-JAY is India's largest public-private partnership, wrote Sulakshana Nandi, the national joint convenor of the People's Health Movement (PHM), a grassroots network of health activists and organisations. The government enters into a contractual agreement with private and public hospitals--called Empanelled Health Care Providers (EHCP)--which undertake to provide services and treatments at fixed rates. The government forbids these hospitals from charging any additional payment to cover any part of the medical expenses, called 'co-payment'.

The central scheme is implemented at the state level by State Health Agencies (SHA), as health is a state subject in India. As on May 18, 2021, 33 states and union territories have implemented this scheme. While Delhi and Odisha stayed out of the scheme, West Bengal had reportedly joined the scheme but withdrawn on January 10, 2019.

Excessive out-of-pocket expenditure (OOPE)

There is no national evaluation of the impact of PM-JAY on OOPE, but one year after the launch of the programme insured patients in Chhattisgarh spent similar amounts out-of-pocket as uninsured patients, found a study by authors from the Raipur-based State Health Resource Centre, which works with Chhattisgarh's health ministry. Those insured spent more in public facilities than those not insured, the study found.

In India, nearly 63% of healthcare expenditure was out-of-pocket in 2018--the fifteenth highest in the world and fourth highest after Afghanistan, Myanmar and Bangladesh among neighbouring countries, show data from the World Bank. OOPE is one of the main causes of financial burden on poor families, as per a study on the impact of OOPE on patients at a public hospital in Kerala. About 18% of Indians spent more than 10%, and 4% of Indians more than a quarter of their income on healthcare, IndiaSpend reported in December 2019.

Catastrophic health expenditure (CHE), when paid for out-of-pocket, often impoverishes already poor families. Health expenditure is considered catastrophic when CHE turns out to be more than 40% of a household's remaining income after meeting basic needs, according to a technical brief by the World Health Organization.

CHE for PM-JAY beneficiaries in Chhattisgarh was also found to be larger, at 51.2%, compared to 47.4% for non-beneficiaries, the study found.

Beneficiaries enrolled in PM-JAY were charged for diagnostics, medicines and pre-hospitalisation costs, found a 2020 Economic and Political Weekly (EPW) study of the programme in Jharkhand between September 2018 and March 2019. As many as 93% of respondents in this study reported that they were charged for these services, and that they received no reimbursement for it.

"Continuing Out-of-Pocket Expenditure (OOPE) due to fraudulent practices by private hospitals is one of the reasons the scheme hasn't been able to provide financial protection for healthcare which is the main objective of the scheme," Nandi of People's Health Movement (PHM) told IndiaSpend, adding, "Health care is no longer viewed as a right, but a commodity."

To ensure the quality of healthcare services, the National Health Agency (NHA) has partnered with the Quality Council of India (QCI), as per the 2020 PM-JAY annual report. The NHA conducts monthly quality audits of services provided by empanelled hospitals but information on the results are not publicly available.

No outpatient consultation

Daily wagers, the targeted beneficiaries of PM-JAY or the precursor RSBY, avoid hospitalisation so as not to lose their daily income. So, it is important that insurance cover expenditure on OPD facilities, diagnostic tests and medicines for non-hospitalised care, according to a 2020 study on previously run pilot projects on the incorporation of OPD into RSBY in Odisha, Gujarat, Punjab, Andhra Pradesh, Mizoram, and Uttarakhand.

The National Statistical Office's (NSO) Health Survey does not collect data on people availing OPD facilities. However, people who do not need hospitalisation outnumber those who do by 135 times in rural areas and by 122 times in urban India, show data from the 75th NSO health survey.

Unlike PM-JAY, the Central Government Health Scheme (CGHS) for employees of the central government provides OPD consultation at the rate of Rs 150.

Overall, the Chhattisgarh study found that public health insurance resulted in only a small increase in access to healthcare facilities: 6% of those enrolled in PM-JAY and the state's Mukhyamantri Swasthya Bima Yojana (MSBY) utilised healthcare facilities compared to 5.7% of those who were not enrolled in the programme.

Inadequate funding for PM-JAY

The budget for PM-JAY is split between the centre and state in the ratio of 60:40 for all states, other than the northeastern and hilly states where the break-up is 90:10.

The central government had allocated Rs 6,400 crore (~$860 million) in 2021-22 to PM-JAY, but revised estimates of the budget reduced it to Rs 3200 crore (~$430 million). In 2020-21, 31 states and UTs were allocated a total of Rs 2,544.09 crore (~$342 million) lower than the Rs 2992.93 crore (~$402.5 million) in 2019-20, as per a Lok Sabha response in August 2021.

"Healthcare is chronically underfunded in India and in many states and rural areas there is a shortage of hospitals," Nachiket Mor, visiting scientist to the Banyan Academy of Leadership in Mental Health, told IndiaSpend.

"State government allocations towards health care are close to 1.25% of their Gross State Domestic Product (GSDP)--of which about 0.25% comes from the central government. 1.25% is a very limited amount of money as the required sums for comprehensive healthcare are close to 4 to 6% of GSDP for each state," Mor explained. Programmes like PM-JAY run the risk of further fragmenting the provision of healthcare; not only can they not address hospital supply gaps but by reducing the money available to the state health departments they may even delay the creation of such critical infrastructure, Mor added.

Correction: An earlier version of the story incorrectly said that the Senior Citizen Health Insurance Scheme was launched in 2006. It was launched in 2016.

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