By Sowmini G Prasad, Dvara Research
This note was first published as part of Session 4 of the four-part webinar series hosted by Dvara Research and IndiaSpend on “Reform Pathways for Healthcare financing in India”. Our first post on “Status of Health Systems in India at National and Subnational Levels” argued that while India looks at increasing the total health expenditure to improve health outcomes, it could benefit from an increase in the share of pooling and improving the performance of existing pools such as those managed by the state-level departments of health, State Health Authorities, the Employees’ State Insurance Corporation (ESIC), and commercial health insurance. In this note, we look at Ayushman Bharat Pradhan Mantri Jan Arogya Yojana (PM-JAY), a health insurance scheme which was launched by the Government of India in September 2018.
PM-JAY is a fully funded health insurance programme and aims to provide a health cover of Rs. 5 lakh per family per year for secondary and tertiary care hospitalization. It is specifically targeted at 10.74 crore poor and vulnerable families (approximately 50 crore beneficiaries). Healthcare is delivered through empanelled hospitals, both private and public, which are paid based on pre-agreed health benefits package (HBP) rates. The responsibility of implementing the scheme has been entrusted with the National Health Authority (NHA) at the centre and the State Health Authorities (SHA) at the state level. In this note, we briefly review the design of PM-JAY and explore three key questions – 1) Is PM-JAY designed to meet its stated objectives? 2) How can we tweak the scheme in a manner that allows it to punch above its fiscal weight? 3) What role can PM-JAY play in reforming India’s healthcare system?
The financial resources required to implement the scheme fully have raised questions around whether it will be able to provide health coverage to all the intended beneficiaries and its consequential impact on the availability of funding for other important healthcare programmes. While we look at increased overall spending on healthcare, we propose certain changes to the design of the scheme through which universal thin tertiary care is offered to all sections of the population and not just the targeted beneficiaries. This can result in a larger pool of contributions, partly funded by tax revenues and partly by those who can afford to pay the premiums. Additionally, we propose that less expensive secondary healthcare be offered through public hospitals rather than through the insurance route. In both these models, strategic purchasing is envisaged to play a key role in improving the delivery of these specific healthcare services where resource allocation would be demand-driven and outcome-oriented.
Key to bringing into effect strategic purchasing is purchaser-provider split, which is currently absent in the case of government run provider network which includes primary healthcare centres and hospitals. Under this system, resource allocation is supply-driven and based on line-item budgeting and lacks accountability. The creation of NHA at the centre and SHAs at the state level under PM-JAY has opened up an opportunity to address these issues through the use of strategic purchasing. These two agencies can take on the role of purchaser of primary and secondary healthcare services and thereby create an internal market of public providers where government funds will follow patients to those public providers, which demonstrate improvements in health outcomes for its beneficiaries. This can help bring about much needed accountability to the quality and efficiency of healthcare services delivered through government run provider network. This, along with other capabilities which are being built through PM-JAY, such as National Digital Health Mission, can be leveraged to reform how India’s healthcare system delivers services to its population.
The full note is available here.