When Ayushman Bharat, the national health protection scheme, was launched last September sceptics said it wouldn’t work. Nearly five months later, they might have to eat their words.

Providing universal healthcare in a poor country like India is fiendishly difficult. Even the United States, with a per capita income many multiples of India’s, has wrestled with the problem for decades. Obamacare is close to collapse and President Donald Trump’s alternative health insurance proposals face mounting criticism.

Microsoft founder Bill Gates knows India’s healthcare challenges first-hand. The Melinda and Bill Gates Foundation has done pathbreaking work in improving rural healthcare. His tweet commending Modicare therefore deserves attention. Gates posted this on January 17, 2019: “Congratulations to the Indian government on the first 100 days of @Ayushman NHA. It’s great to see how many people have been reached by the programe so far.”

With an estimated one million poor Indians likely to benefit from free hospital care in the first five months of the scheme, Ayushman Bharat has exceeded most expectations. Over Rs. 1,200 crore has so far been pre-authorised for a multitude of specialised medical procedures, including angioplasty, valve replacements, cancer surgery and orthopaedic treatment. The scheme covers 100.70 million poor households and, at an average of five members per household, over 500 million Indians.

The number of patients being admitted to hospitals under Modicare, as the scheme has come to be known, quadrupled from around 3,000 per day in October 2018 to over 12,000 per day in January 2019. The growth rate in hospital admissions is currently trending at nearly 50 per cent per month. More than 16,000 hospitals have been empanelled under Ayushman Bharat. Of these nearly 70 per cent are multi-specialty hospitals.

If the scheme continues to gather momentum, it might turn out to be one of the most important legacies of the Modi government. Dinesh Arora is the deputy chief executive of Ayushman Bharat. In an interview with The Times of India, he pointed to the increasing awareness of the scheme by quiet but intensive marketing: “The change in trend is triggered by awareness about the scheme. More than 75 million letters from the prime minister have been distributed to beneficiaries through ASHA (Accredited Social Health Activist) and the postal department. This has effectively reached around 300 million beneficiaries. As people are getting more aware, the scheme is making them empowered.”

Critics of Modicare say not enough has been done to build tertiary healthcare centres in rural areas. Building an entire health ecosystem – primary healthcare centres in small towns and village clusters, resident doctors, qualified nurses and new equipment – is the key to the long-term success of Ayushman Bharat.

When hospital admissions rise from 12,000 a day to around 50,000 a day as current trends suggest they soon will, each of the 16,000 empanelled hospitals will on average be admitting three patients a day or 90 patients a month. Clearly, larger and more medical centres will be needed to meet this demand along with more doctors, trained medical staff, compounders, nurses and diagnostic equipment.

Most state governments have opted for a hybrid trust and insurance model to be shared in the ratio 60:40 by the Centre and states, keeping premiums down to below an average of Rs. 1,200 per patient. That is well within the annual budget of Rs. 10,000 crore for the scheme. Ayushman Bharat will cover Indians who currently have little or no healthcare insurance. But will insurers be able to bear the cost?

The scheme works on the pooling of risk model as this analysis in Mint describes: “Under the trust model, the premium will not be paid to an insurance company, but will be pooled into a trust. It is this trust that will manage and administer the health scheme and also pay the claims. Under the insurance model, the state will pay premiums to an insurance company just like you do to your health insurer. The onus will be on the insurer to administer and pay the claims. Both insurance and trust models depend on two basic principles: pooling of risk and law of large number.”

How does this work in practice? The article explains: “What are the chances of a theft occurring in the entire neighbourhood at once? Close to zero, but the chances that one house gets robbed are much higher. Now imagine the entire neighbourhood gets together and pools money to insure themselves against the common threat of theft. So if one house gets burgled, the pool can compensate for that burglary. This is called pooling of risk. Here, the risk of an event is spread out among all the people facing the risk who are prepared to pay a small sum or premium to get protection from that risk. But pooling of risk is just one part, it’s important for this pool to be large to avoid adverse selection and improve the predictability of a risky event actually taking place to be able to price the product right. This predictability increases as more people join the pool. This is called the law of large numbers. According to this law, the average of the results obtained from a large number of trials will be closer to the expected result. Insurers can predict risk more accurately through this law. So the larger the sample size, the greater is the predictability for insurance – this also leads to pricing the risk right. This is what the Ayushman Bharat model depends on, given that it’s meant for 500 million people.”

If it works according to plan, Ayushman Bharat has the potential to transform medical care in a country where the poor have had few options for free modern healthcare. The rise in productivity of a healthier workforce in India can deliver economic gains as well. That is why building a robust rural healthcare ecosystem is critical to the success of Ayushman Bharat which, as it grows in scale and ambition, has been renamed PM Jan Arogya Yojana (PMJAY).

Many observers, including Bill Gates, will be watching closely as India provides free universal healthcare to its most medically under-served citizens.