Modi’s Health Insurance Plan Will Be Bigger Than Planned

State insurance schemes will be merged with Modi’s national scheme.

Doctors talk to patients as they look at their medical records at the Acharya Tulsi Regional Cancer Treatment & Research Institute in Bikaner  (Photographer: Prashanth Vishwanathan/Bloomberg)
Doctors talk to patients as they look at their medical records at the Acharya Tulsi Regional Cancer Treatment & Research Institute in Bikaner (Photographer: Prashanth Vishwanathan/Bloomberg)

Prime Minister Narendra Modi’s national health scheme will end up covering 15 crore families—5 crore more than originally planned—as it will subsume the existing health benefits offered by states, a senior government official aware of the matter told BloombergQuint requesting anonymity.

The central scheme will provide a Rs 5 lakh annual cover for every family below the poverty line. The beneficiaries will be selected based on the 2011 socio-economic census. Most states already provide a cover of up to Rs 2 lakh to families who aren’t necessarily below the poverty line. Their schemes will be merged into the national programme, increasing the number of beneficiaries.

“It is not that the math that has gone wrong, but the basis on which the scheme was planned,” said Sakthivel Selvaraj, senior health economist at Public Health Foundation of India, a research institution.  “The problem is not just that the socio-economic census data is outdated, but the parameters used by states to assess poverty are also widely different.”

Gujarat, for example, covers families earning an annual income of up to Rs 1.2 lakh per annum. Tamil Nadu and Jharkhand have set the income cap lower at Rs 72,000 a year. Andhra Pradesh, Maharashtra, Kerala, Arunachal Pradesh and West Bengal also cover above-poverty line families, state and central government employees and pensioners. Meghalaya and Assam, on the other hand, cover all citizens.

The national scheme, which Modi is expected to unveil on Independence day on Aug. 15, is part of the plan to push India’s public health expenditure from 1 percent to 2.5 percent of the GDP by 2025. It will provide health coverage to about 40 percent of the population in a nation where about 62 percent of healthcare expenses are borne out-of-pocket, according to the World Bank report.

Emailed queries to the Union Health Minister and National Health Protection Mission remained unanswered.

Will Costs Rise?

BloombergQuint reported earlier that the government planned to spend Rs 16,717 crore over the first two years to run its free health insurance programme—split in 60:40 ratio between the centre and states. Will additional beneficiaries increase costs?

The government is likely to go with a mixed approach to finance premium for those who do not fall under the 2011 census database, the official quoted earlier said. States will transfer the existing funds they had set aside for their insurance schemes to a separate trust, he said. The rest will be contributed by the Centre to bring the sum insured to Rs 5 lakh, the official said.

If the number of families covered is increased to 15 crore, that will increase the initial premium outgo for both the centre and states, by nearly Rs 8,000 crore,” said Selvaraj. Assuming a premium of Rs 1,000 a family, the total expenditure is expected to rise roughly to Rs 24,000 crore for two years, he said.

Joydeep Roy, insurance leader at PwC India, said it may result in just a 15 percent higher cost for the government considering administrative costs will remain roughly the same and utilisation may not go up proportionately.

A 50 percent increase in the number of families will not translate into a 50 percent rise in claims, he said. “The population cohort added would include above-poverty line families with better health conditions and access to medical infrastructure compared to those below the poverty line.”

Rs 3: Here’s What The Government Spends Every Day On Each Indian’s Health

Can the ambitious scheme work? Watch this interview with Vinod KUmar Paul, full-time member of NITI Aayog, Indu Bhushan, CEO of the Ayushman Bharat National Health Protection Mission and Vinod Kumar Monga, honorary finance secretary of the Indian Medical Association.