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Finance Minister Arun Jaitley announced the National Health Protection Scheme (NHPS) and Ayushman Bharat in the fiscal budget 2018. The scheme aims at providing Rupees 5 lakhs per family for 100 million families for secondary and tertiary care. Covering nearly 40% of the population (almost 500 million people), it is touted as the world’s largest government funded healthcare program. At present, the Rashtriya Swasthya Bima Yojana or the RSBY is already in implementation which gives Rupees 30000 to the families for short-term hospital visits and this new scheme is expected to be an extension of the RSBY. Although the RSBY has been successful in a number of areas, there are still a lot of lessons to be learned and considered while implementing the new scheme. For instance, a CAG audit in Kerela in 2015, found problems arising between insurers and hospitals.[1] Thus, coordination among institutions, enrollment of beneficiaries, lack of awareness, incentives for health facilities and maintaining a supply of doctors are some of the areas where the new scheme, famously called ‘Modicare’ needs to do better than its predecessors.

Over the years, the Indian health sector has riddled a number of problems. According to World Bank estimates, India’s healthcare spending has gone up from 1.1% in 1995 to just 1.4% in 2014, which is dismally low for a developing economy and dwarfs in comparison to other economies like China (3.1%), UK (7.6%) and the USA (8.3%).[2] At the same time, the Out of Pocket Expenses (POE) is also one of the highest in India, this coupled with a majority stake of the private sector in the market makes affordable healthcare a myth. Hence, the medical expenses have been rising rapidly and leading to the impoverishment of families especially given the lack of medical insurance.[3] In such circumstances, the unique problems of India like the double threat of traditional diseases as well as the lifestyle diseases should not come as a surprise.

For NHPS, a major concern is financing. Where will the money come from?

Niti Aayog is currently in talks with various state governments about the right way to implement it. According to experts, NHPS will require an expenditure of Rs.1 lakh crores (by estimating a premium of 1100-1200 per family) while the current budget set only Rs. 2000 crore aside for the scheme per family. The feasibility of the scheme is thus a question specially given the fact that a similar scheme from the 2016 central budget which was supposed to cover health expenses up to Rs.1 lakh per family hasn’t been implemented.[4] Through Ayushman Bharat, the government also plans to set up 1.5 lakh Health and Wellness Centers and to manage the revenue for all of this will be a hard task for the government and an additional burden on the tax payers. The states, on the other hand, are expected to contribute 40% but a number of states have their health insurance schemes which lead to the question of their integration with the NHPS and portability of insurance when people migrate between states. Horizontal and vertical fragmentation in financing is also a problematic feature with health being a state issue in the constitution but funding is mixed and the center collecting most of the tax. This gives rise to large disparities across states especially between the northern and southern states (the stark contrast between Kerela and Bihar regarding medical facilities and health outcomes is not a secret) and large fiscal deficits in poor states make it even more difficult to assign more money for health.

Previous schemes like the National Rural Health Mission have suffered due to the mechanism of fiscal transfers that led to the states neglecting their responsibility of arranging the recurring funds requirement. Some steps have been taken in the direction of better fund transfer like direct and flexible cash transfers but the largest ever healthcare scheme requires more improvement in this area as well.

A common opinion among experts is that just raising the public spending won’t solve everything; it needs to be accompanied by changes in governance, better implementation of schemes, addressing the urban-rural disparities, addressing the literacy levels and awareness, better infrastructure and more people employed in the health sector. For example, the lack of facilities like medical equipment and basic facilities like hospital beds are commonly known. In fact, a WHO report on Indian medical workforce claimed that there are just 79.7 doctors per one lakh people in India and the urban density of doctors is four times the rural density while the comparable figures for China were 130 doctors per lakh people and two times higher urban density.[5] Such constraints could seriously affect the implementation of a scheme like the NHPS irrespective of how huge the budget.

In conclusion, the idea of providing affordable healthcare for 500 million people of India is indeed the need of the hour and for a significant scheme like this, it is necessary for everyone to make informed decisions and keep everything stated above and a lot more in mind.


[1] Dipti Jain, ‘Implementation may be the biggest challenge for Modicare’, February 2018, accessed on March 27th, 2018. https://www.livemint.com/Politics/nEgJJ5qve0ycCJbIxHqzaK/Implementation-may-be-the-biggest-challenge-for-Modicare.html

[2] The World Bank, Health expenditure, public (% of GDP), accessed on March 29th, 2018. https://data.worldbank.org/indicator/SH.XPD.PUBL.ZS

[3] A K Shiva Kumar, Lincoln C Chen, Mita Choudhury, Shiban Ganju, Vijay Mahajan, Amarjeet Sinha, Abhijit Sen, ‘Financing healthcare for all: challenges and opportunities’, January 2011, accessed on March 27th, 2018. https://pdfs.semanticscholar.org/8ca8/75c0054fc31c26dd77f3d353b95c0f60f8ff.pdf

[4] Rohan Abraham, ‘What is Modicare and How will it affect you?’, February 2018, accessed on March 27th, 2018. http://www.thehindu.com/business/budget/what-is-modicare-and-how-will-it-affect-you/article22635372.ece

[5] Sudhir Anand and Victoria Fan, ‘The health workforce in India’, 2016, accessed on March 28th, 2018. http://www.who.int/hrh/resources/16058health_workforce_India.pdf

Image source-  Amar Ujala

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Written By Pragya Mishra

Economics Graduate

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