New Delhi: When Amit Kumar, a daily wage labourer who lives in a small town called Indri in Haryana, welcomed his first-born three years ago, he received a bill of around ₹ 1.5 lakh from the private hospital. His wife Mausami had developed some complications and needed to be operated on. Unable to pay that kind of money, Kumar turned to a money lender. He is repaying that debt to this day. “I pay some ₹ 2,000 every month and I have no idea when this debt will get over. But at that time, it was the only way out," said Kumar.

So imagine Kumar’s surprise when he visited the billing section of the Kalpana Chawla Government Medical College and Hospital after the birth of his second child in August 2018. The bill: a mere ₹ 35 for the birth certificate of his baby girl, who they named Karishma (miracle) because the family was able to access healthcare in time and with no financial burden.

Kumar and Mausami were the beneficiaries of the all-new Ayushman Bharat. The scheme was officially launched this week, but in the month of August, Haryana had pilot tested the scheme. PMJAY promises to insure nearly 40% (about 50 crore people) of India’s population that’s underprivileged. This makes PMJAY one of the largest state sponsored health insurance schemes. And one that is being closely watched—its fate could potentially change the face of healthcare in India.

Ayushman Bharat is an entitlement-based scheme that targets India’s poor as identified by latest SECC data

Ayushman Bharat is an entitlement-based scheme that targets India’s poor as identified by latest Socio-Economic Caste Census (SECC) data. Individuals can walk into any empanelled hospital that can process cashless payments. Once identified by the database, the beneficiary is considered insured. PMJAY offers a sum insured of ₹ 5 lakh per family for secondary care (which doesn’t involve a super specialist) as well as tertiary care (which does). For the beneficiaries, this is a free scheme.

The insurance cost is shared by the centre and the state mostly in the ratio of 60:40. PMJAY is portable, which means the beneficiary can avail treatment in any of the states that has implemented the scheme. Empanelled hospitals agree to the packaged rates under PMJAY—there are about 1,400 packaged rates for various medical procedures under the scheme. These packaged rates also mention the number of average days of hospitalization for a medical procedure and supporting documents that are needed. “These rates are flexible, but once fixed hospitals can’t change it and under no circumstances can they charge the beneficiary," said Indu Bhushan, chief executive of Ayushman Bharat-PMJAY (see interview). The scheme also has prescribed a daily limit for medical management.

State-led health insurance

For the government, Ayushman Bharat is an attempt at creating purchasing capacity among the poor. There are two ways of tackling the problem of affordable healthcare. It’s either by financing services to keep price affordable or by financing the paying capacity of people. The first idea hasn’t worked as more than 70% of the healthcare is concentrated in the private sector. “It’s a known fact that government facilities suffers from acute shortage of human resources so the old school model of government-run clinics hasn’t worked. It was against this backdrop that Rashtriya Swasthya Bima Yojana (RSBY) was designed," said a public policy professor, who didn’t want to be named.

View Full Image For the government, Ayushman Bharat is an attempt at creating purchasing capacity among the poor. Photo: Mint

However, RSBY (which preceded PMJAY) got plagued by a host of issues. “The cover of ₹ 30,000 was found to be low and many states started introducing their own scheme with a higher cover and it covered tertiary care as well," said Malti Jaswal, former chief operating officer of Health Insurance TPA of India Ltd, who now is consulting on Ayushman Bharat.

But what broke the back of RSBY was the huge instances of fraud. “What went wrong was there was immense amount of collusion to generate fake bills. Health insurance companies found this to be a bleeding proposition and some refused to pay," said the professor.

Moreover, healthcare experts have argued that for state sponsored insurance to work, it’s important to place emphasis on public health and create healthcare regulations. Conceptually, it is better to invest in preventive healthcare than on curative insurance.

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However, according to Jaswal, the process can go hand in hand. “This is being done parallel to PMJAY as the government is establishing wellness centres that will focus on primary, preventive and promotive healthcare through public facilities," she said.

Is PMJAY the answer?

In the absence of healthcare regulations, some believe that PMJAY will meet with little success. But for others, the sheer magnitude of the scheme will herald much needed health insurance regulations. Indeed, the architecture of PMJAY inspires hope. “For the first time we have seen the focus on national pricing for health services, standardized protocols and coding. It has led to the creation of an independent body (National Health Agency) that will coordinate and improve the scheme over time, through investments in a robust IT infrastructure," said Nachiket Mor, country director (India) at Bill and Melinda Gates Foundation.

“If successful, this can well be replicated for the remaining 60% of the population on a contribution basis. The scheme also gives incentives to hospitals that get accredited for quality," he added.

The challenges

The immediate challenge is to get the private sector to participate. Ayushman Bharat, at present, has about 8,500 hospitals empanelled, and this includes public hospitals as well. According to experts, there are about 30,000-40,000 eligible hospitals in the country.

The lack of proper hospitals in smaller towns and few empanelled hospitals , can lead to unhappy experiences. For Kumar, for instance, this has already played out. He went back to Kalpana Chawla hospital a month later only to find out that he had a long line of patients to negotiate. “My life depends on daily wages, so I can’t spend an entire day at the hospital only for consultation. Even if the services are free, I lose out on my daily income," he said. While PMJAY creates demand, it will need to provide supply—for that to happen, the private sector will have to rise to the occasion.

This may not happen immediately, but eventually. “There is no dearth of medical infrastructure, but the problem is functionality of this infrastructure and the fact that it’s concentrated in the metropolis. PMJAY is addressing this problem by creating demand," said Dr Sabahat Azim, chief executive officer at Glocal Healthcare. Glocal runs a chain of ten multispecialty hospitals with focus on acute care and 250 digital dispensaries.

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“In fact the packaged rates are reasonable if you look at the scale of PMJAY, so I suspect in about three years you will see expansion of healthcare. But for this to happen it’s important hospitals are paid on time and premiums are sustainable because underbidding means insurers will refuse to pay," he added. Glocal has empanelled two of its hospitals for now.

The potential of reform

The scheme has three important takeaways for the health insurance sector in terms of coverage, pricing and service levels. PMJAY covers all instances of hospitalization, even if it’s on account of a pre-existing ailment. A retail health insurance policy, apart from a list of exclusions, has leakages built-in in the form of what’s not payable. These can constitute up to 8-10% of the hospital bill.

Ayushman Bharat not only provides a comprehensive cover, but its sheer size can pull the pricing down. The incurred claims ratio—ratio of claims paid to premiums received—for retail segment is well below 100% indicating an overcharge by the insurer. “PMJAY has a time barred system of enrolment and approval. In retail, delays mar the cashless system," adds Kapil Mehta, co-founder, SecureNow Insurance Brokers Pvt Ltd.

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Whether Ayushman Bharat will succeed will get clearer once the rubber meets the road. But for now, PMJAY has certainly brought a glimmer of hope.

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