Dissecting Modicare: Benefitting Corporates Rather than the Target Population

Narendra Modi has been good at launching fantasy-filled schemes, most of them being just the renaming or rehash of the existing ones but pedalled as novel, and confidently communicated to the masses as such. There are as many as 23 such legacy schemes of the UPA which have been rebranded by the NDA under him as its own. It may be admitted to his credit that these schemes underwent substantial reconfiguration and scaling. While the government may be complemented for professionally modifying them, their expansion smacks of BJP’s hyperbole and also its zeal to further its neo-liberal agenda to benefit private capital at the expense of public resources. The latest and hopefully the last of Modi’s schemes –the Ayushman Bharat-National Health Protection Scheme (AB-NHPS)– euphemistically called by his minions as Modicare, is one such rebranded scheme.

Modi Care

The existing Rashtriya Swasthya Bima Yojana (RSBY), was launched on 1 April 2008 by Ministry of Labour and Employment (since 2015 being administered and implemented by the Ministry of Health & Family Welfare) to provide health insurance coverage for Below Poverty Line (BPL) families through a decentralized implementation structure at the state level. It provided for total insurance cover of Rs. 30,000 per family per annum, with cashless attendance to all covered ailments and transportation costs within an overall limit of Rs. 1,000. The insurance cost was to be borne by central and state governments in the ratio of 75:25. It had won plaudits from the World Bank, the UN and the ILO as one of the world’s best health insurance schemes. If this modestly formulated scheme failed in implementation[1], the far more ambitious AB-NHPS scheme that targets 100 million families with insurance cover of Rs 5 Lakh each, and higher share of states (60:40) without any commensurate infrastructural support naturally creates skepticism.

India’s Healthcare
The public health expenditure in India (total of center and state governments), despite recent increases in allocations, has been little over 1 % of the GDP. It is abysmally low as compared to the world average of 6% and even with our neighboring countries like Maldives (9.4%), Sri Lanka (1.6%), Bhutan (2.5%) and Thailand (2.9%). The National Health Policy (NPH), 2017 aspires to increase it to 2.5% of GDP by 2025, but the fact remains that India has not even met its 2010 target of 2%. India’s total health expenditure of 3.89% as a percentage of GDP also is among the lowest as seen from the Table 2.

Table 1: Total health expenditure as percentage of GDP for select countries

Russian Federation5.56
South Africa8.20

Source: WHO Global Health Expenditure Database (2015)

Even it is lower than the average for Sub-Saharan (5.35%), low income countries (6.02%) and far below that of high income countries (12.38%). Out of the total expenditure, about one-third (30%) is contributed by the public sector, which also is far lower than that for other developing countries (Brazil- 46%, China-56%, Indonesia- 39%) and developed countries (USA- 48%, and UK- 83%). Out of pocket expenditures– the payments made directly by individuals at the point of services which are not covered under any financial protection scheme– dominate to the extent of 95%, balance 5% being insurance.  Table 2 provides distribution of the out of pocket expenditure.

Table 2: Major heads for out of pocket expenditure

Private hospitals22
Medical and diagnostic labs10
Patient transportation and emergency rescue6
Private clinic5
Govt hospitals3

Source: Household health expenditure in India (2013-14), December 2016, Ministry of Health and Family Welfare.

This out of pocket expenditure is typically financed by household revenues (71%), followed by state government (13%), Union government (5%), Other funds (7%) and local body funds (1%). About 86% of rural population and 82% of urban population are not covered under any scheme of health expenditure support. Due to this high out of pocket healthcare expenditure, about 7% population is pushed below the poverty threshold every year.

Modicare and Poor
It is in this context that Modicare will be implemented. The scheme seeks to provide coverage for hospitalization at the secondary (provided at district hospitals) and tertiary levels of healthcare (provided at specialized hospitals like, AIIMS and Apollo, etc.). The need of the poor, however, is to get cost-free access to basic health services. The High Level Expert Group set up by the Planning Commission (2011) had recommended that the focus of healthcare provision in the country should be towards providing primary health care. It had rightly observed that focus on prevention and early management of health problems can reduce the need for complicated specialist care provided at the tertiary level. As such, the priority of the government should have been to create a robust network of primary health centers (PHCs) with reasonable infrastructure in terms of beds, doctors, nursing staff and medicines, and an effective delivery model. In absence of this, the poor has to go to private doctors and purchase costly medicines as prescribed by them. In the urban areas, the General Practitioners (GP) who provided healthcare at nominal cost in neighborhood are vanishing fast and are being replaced by the specialists (MDs) who charge multiples of what a GPs charged for consultation (which invariably included medicine). In rural areas, even where the PHCs are created (like toilet construction under the Swachch Bharat Mission), there are no doctors to man them. Because of the lack of infrastructure, both at the PHC as well as in the village to professionally and personally engage them, the qualified doctors are not ready to work in rural areas. The skewed distribution of doctors in rural and urban areas–74% of doctors for 30% urban population and 28% of doctors for 70 % of rural population indicates this basic malady.

The private sector consists of 58% of the hospitals in the country, 29% of beds in hospitals, and 81% of doctors.[2]According to National Family Health Survey-3, the private medical sector remains the primary source of health care for 70% of households in urban areas and 63% of households in rural areas.[3] The study conducted by IMS Institute for Healthcare Informatics in 2013, across 12 states in over 14,000 households indicated a stea[4]dy increase in the usage of private healthcare facilities over the last 25 years for both Out-Patient and In-Patient services, across rural and urban areas. Some studies observed that health care providers in the private sector tended to extract more money by making patients stay for longer duration and conduct more diagnostic exams compared to their public counterpart.[5]The thrust of the Modicare on hospitalization does not address the need of the poor whose most out of pocket expenditure (84%) is made up by buying medicines (52%), private hospitals (22%) and diagnostic tests (10%), and not hospitalization. Our own experience with such a scheme revealed that such schemes covered only 4 per cent of illnesses and yet consumed a quarter of the State’s health budget.[6]

Intent versus Actions
The NHP does speak of establishing 1.5 Lakh ‘Health and Wellness Centers’ as the foundation of India’s health system, which is certainly laudable as it will bring healthcare closer to people. They do address real health issues of people. But it got just Rs 1,200 crore in the budget and expected contributions of the private sector through CSR and philanthropic institutions in adopting these centers. This is the fond model of Public Private Partnership that lies behind most of Modi’s public schemes. The NHP may thus be counting on private initiatives as it is not at all reflected in Modi’s budget allocations. The allocation of Rs 52,800 crore for health in 2018-19 was merely 5% higher than the revised estimate of Rs 50,079.6 crore, in 2017-18. It is estimated that to meet the NPH objectives, the governments, both central and state, together should increase their total allocation towards health to Rs 800,000 crore, up from the current Rs 200,000 crore by year 2025, which means the central government health budget alone should increase at least 20 percent year-on-year for the next seven-eight years. There is no evidence of that happening yet.

The same could be said of the AB-NHSP. It is faulted by many public health experts for its underestimation of resources. According to them the actual fund needed might be as high as Rs 2.5-3 lakh crores. Many private hospitals including the Indian Medical Association (IMA) problematizedlow package rates for various procedures and interventions. Even after conceding the volume discounts, the insurance premium estimated by Niti Aayog at Rs 1,000-1,200 per family appears too optimistic when compared to Andhra Pradesh’s existing Rajiv Aarogya Raksha plan, which costs Rs 1,200 per individual for Rs 2 lakh cover for little more than 1,000 diseases. Even taking it valid, the scheme would entail Rs 10-12,000 crore every year as against Rs 3,333 crore provided for. Even factoring in states’ contribution (40%), the allotted fund adds up to only a portion of the required amount. The other imponderable is its assumption that it will subsume existing health schemes of the states. Whether the states will really forsake their political branding of such a pro-people scheme is a vital question that could be answered only by the unfolding politics. 

Like any of Modi schemes, the AB-NHPS may be a good concept but launched without adequate preparation, a la GST. The issues relating to funds may be covered up by the government but how will it create doctors and hospital beds? Modi’s own economic advisor, Bibek Debroy, had sensibly admitted that the scheme would take 20 years to be fully rolled out.[7]There are other issues too– no protection for OPD or medicine expenditure, lack of public health infrastructure, work force, quality, insurance frauds, excessive diagnostics and interventions by private sector, overcharging, etc.—which are hanging without any certain answers.What is certain,however, about the AB-NHPS is that it will channel huge public funds to the private coffers of the insurance companies and private hospital chains, with questionable gains to the target population.

(This article is also being published in the Economic and Political Weekly and is being published here with the permission of the author)


[1] Soumitra Ghosh and Nabanita Datta Gupta, Targeting and effects of RashtriyaSwasthyaBimaYojana on access to care and financial protection, Economic & Political Weekly, Vol. 52, Issue No. 4, 28 Jan, 2017.
[2]JayakrishnanThayyil and MathummalCherumanalilJeeja, “Issues of creating a new cadre of doctors for rural India”, International Journal of Medicine and Public Health, (3) 1, 8-11, January 2013.
[3]National Family Health Survey (NFHS-3), 2005–06. Ministry of Health and Family Welfare, Government of India. pp. 436–440.
[4]Ramya Kannan, “More people opting for private healthcare”. The Hindu, 31 July 2013.
[5]Sanjay Basu et.al., “Comparative Performance of Private and Public Healthcare Systems in Low- and Middle-Income Countries: A Systematic Review”, PLOS Medicine,  9 (6), 2012.
[6]Cited, Amit Sengupta, Modicare: A problem or a panacea?, https://www.thehindubusinessline.com/specials/pulse/modicare-a-problem-or-a-panacea/article23394472.ece.



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