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.

Ayushman Bharat

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 impanelled 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 as well as tertiary care. For the beneficiaries, this is a free scheme.

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 the price affordable or by financing the paying capacity of people. The first idea hasn’t worked as more than 70% of the health care 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.

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.

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 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.