Ayushman Bharat scheme's expansion not enough. Quality & choice of care also important

In case of a trust-based model, the premium is not paid to an insurance company but pooled into a trust, which administers the health scheme. Under the insurance model, the state pays the premium to an insurance company. The onus is on the insurer to administer and pay the claims. (Representative Image)

Health ministry and general insurance industry officials met in New Delhi the day after the government announced the expansion of the Ayushman Bharat scheme on September 11 to include senior citizens above 70 years of age. Sources informed Moneycontrol that the government told the insurers that they were open to both models — trust-based and insurer-led.

“However, the final decision will have to be taken by the states as health is a state matter,‘’ a senior official with a private insurer told Moneycontrol on condition of anonymity.

Most states have picked the trust model over insurer-led and hybrid models.

In case of a trust-based model, the premium is not paid to an insurance company but pooled into a trust, which administers the health scheme. Under the insurance model, the state pays the premium to an insurance company. The onus is on the insurer to administer and pay the claims.

Clarity is likely to emerge soon as several state government health schemes are coming up for renewal as early as next month, sources told Moneycontrol.

Relaxing price caps

Ayushman Bharat provides a health cover of up to Rs 5 lakh to families below the poverty line, but senior citizens have now been included under the scheme regardless of their income. The allocation for the expanded scheme is Rs 3,500 crore, which is manageable given the price caps the government has imposed on procedures. However, this has triggered reservations among large private hospitals over the scheme.

Prasanna Tantri, Associate Professor of Finance and Executive Director at the Centre for Analytical Finance, Indian school of Business, explained that a private insurer would charge Rs 15,000 to Rs 18,000 for something, for which the government will pay Rs 1,000 per beneficiary family. Tantri added that while private insurance companies charge more, it’s not as if they make abnormal profits.

“The reason charges are so high is because hospital expenses are high. With price caps, most decent hospitals won’t want to take on Ayushman Bharat patients,” he said.

What are price ceilings?

The government has capped how much a hospital can charge for a procedure. For instance, a caesarian has been capped at Rs 9,000, the rate for knee replacement is Rs 9,000 per leg, and a bypass surgery is capped at Rs 1.5 lakh. Typically, these procedures run into several lakhs at private hospitals. While it can be argued that those rates are too high, however, experts have long been pushing for better quality of treatment under Ayushman Bharat, and hospitals and the Indian Medical Association have been complaining of low rates. Accordingly, a committee of 300 doctors has been set up to review the cost of 1,300 medical packages under the scheme.

Tantri’s research shows that of the total procedures happening under the scheme, about 20-30 percent are undertaken at private hospitals, but they are relatively smaller ones.

For Ayushman Bharat to become effective on a larger scale, the government will have to consider reassessing costs and promoting accessibility to good doctors and hospitals. Re-evaluating costs could also encourage competition, giving patients the ability to pick and choose the best healthcare provider, and not being compelled to go with one purely on the basis of costs.

A research paper by Tantri on the impact of a public health insurance programme on the credit market shows that states where Ayushman Bharat has been implemented had better loan repayment and fewer defaults.

According to the paper, “Comparing border regions of states that did not implement the programme with contiguous areas of states that implemented the programme, I find that the scheme’s introduction is associated with significant improvement in loan delinquency.”

Tantri explains that the beneficiaries had lower out-of-pocket health expenses and the funds were used towards paying off loans.

At 1 percent of GDP, India spends among the least on healthcare. The expansion of Ayushman Bharat is well-intentioned, but it needs to evolve to provide people with quality healthcare.

One of the suggestions is also to help beneficiaries with a sickness allowance, Tantri’s research found that often when beneficiaries are diagnosed with a major illness they are wary of taking treatment because it leads to loss of livelihood. A sickness allowance will cover the loss of livelihood during treatment  and encourage people to get treated.