India’s new healthcare scheme brings hope – but also concerns

Modicare offers low-income families better coverage but analysts say a number of challenges may hinder its success

Patients waiting at the Babu Mohan Singh district hospital in Deoria, India. More than 80 per cent of the population does not have health insurance, according to a report by PwC and the Confederation Show more

Labourer Amar Singh has built up a sizeable debt paying for his father's tuberculosis treatment.
Mr Singh, from Nandurbar in the state of Maharashtra in western India, earns just 300 rupees (Dh15.25) a day but he has borrowed 40,000 rupees on loans from a private lender.
"Government hospitals are free but we end up going to private clinics to get injections and treatment quickly," he says.

With more than 80 per cent of the population without health insurance, according to a report by PwC and the Confederation of Indian Industry, many low-income workers choose to spend on private healthcare instead of using the often inadequate and overcrowded free public facilities.
The Indian government now wants Indians like Mr Singh and his family to have better access to healthcare with the launch on Sunday of a free health insurance scheme. The scheme being launched in Asia's third-largest economy will extend cover to about 500 million of the country's low-income population and is believed to be the world's biggest healthcare programme.
Estimated to cost more than $1.5 billion (Dh5.5bn), the National Health Protection Mission, popularly known as Modicare, will provide up to 500,000 rupees of coverage to poor families each year.

While the scheme could ultimately have a positive economic impact on India, there are concerns about the implementation of the ambitious plan and the effect on the profits of private healthcare companies.
"It will have challenges," says Varun Gera, the founder and chief executive of HealthAssure, an Indian healthcare services company. "The administration, registering citizens, having enough doctors, the rates. Who's going to manage this entire ecosystem? That's very complex."

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Those eligible for cover under Modicare - which covers secondary and tertiary treatment - will be identified by the socio-economic caste census from 2011. It is a digital-driven and cashless scheme.

But some private healthcare providers are wary about being involved over worries of how long it may take to receive payments from the government for procedures carried out under the scheme. There are also concerns that rates for major treatments, such as surgeries, may not cover their costs.

The scheme's rate for a caesarean delivery, for example, is 9,000 rupees, but private hospitals charge anywhere between 20,000 and 100,000 rupees for the procedure, according to Crisil Research.

Max Healthcare, a New Delhi based hospital chain, said in a statement it was “evaluating the option of empanelling some of its hospitals under the scheme”.

But there are obstacles.

“We have also raised a few concerns on the logistics and the operational details of the scheme,” the hospital chain said. “A final decision in this matter will be taken once these are clarified.’’

Potential fraud is another area of concern.

“Stricter due diligence in both government as well as empanelled private hospital will help reduce such cases,” analysts at Crisil wrote in a research note.

There are also expectations, however, that the scheme could boost business for some private healthcare companies - particularly those offering budget treatments – by driving more customers to their centres, generating new business for such firms.

“For instance, while major hospital players have been focusing on quality of care through a team of expert doctors and augmenting infrastructure, a set of hospital chains have emerged in tier two and tier three cities, which focus on affordable treatment by focusing on patients covered under various healthcare schemes of the centre or states,” Crisil says. “This is a volume-driven approach supported by increasing focus of government on universal health coverage.”

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HealthAssure's Mr Gera says the scheme could introduce certain benefits such as helping to propel the development of medical infrastructure in India.

“It's going to be a journey that happens over a period of time,” he says. “The question is how soon can we get on track and come out with a health model which works not only for today but after 10 years.”

Although insurance companies could be involved in the scheme, Mr Gera says states are generally looking at setting up trusts through which to manage the payments themselves.

Providing better healthcare will also boost India's economic productivity, he adds. That is critical given that India is likely to have the world's largest workforce by 2027, according to an analysis of United Nations by Bloomberg News.

India has one of the lowest public expenditures globally on healthcare, at less than 1 per cent of GDP, according to KPMG. It says that India is predicted to lose $4.8 trillion between 2012 and 2030 because of non-communicable medical disorders.

“A robust healthcare system drives GDP growth in the presence of adequate investments and a conducive environment by not only acting as a productivity and employment generator, but also as a magnet to attract foreign exchange earnings and provide opportunities for innovation and entrepreneurship,” according to KPMG.

But Modicare is not a standalone solution, analysts say. There are more fundamental issues with India's healthcare system which also needs addressing.

“Better provision of healthcare can bring several benefits, from both an economic and wider perspective,” says Shilan Shah, the senior India economist at Capital Economics. “But we doubt that Modicare will have much of an impact.”

He says the funds allocated to the programme are “prohibitively small”, at just 0.2 per cent of GDP.

The lack of healthcare facilities will also hold back how effective the scheme will be, says Mr Shah.

according to the Organisation for Economic Cooperation and Development, statistically India has under one doctor per 1,000 people in India and less than one hospital per 1,000 people.

A shortage of medical equipment and medical staff in rural areas in particular makes Mr Shah sceptical that Modicare “will be able to deliver even basic healthcare” to all those who need it.

Others believe the government may end up having to inject additional funds.

“The costs to the national exchequer could be 10 to 20 times greater than the initial government estimates,” says Piyush Jain, the chief executive and co-founder of ImpactGuru, a fintech crowdfunding platform, including for medical expenses, based in Mumbai. “We know that the costs at which healthcare keeps rising is far greater than inflation.”

He is concerned by “very significant implementation challenges”, including the worry that many private hospitals simply would not be able to recover their operating costs and so would not offer services under the scheme.

With the amount capped at 500,000 rupees per family each year, this may see many low-income Indians will still struggle to afford treatment for severe illnesses, including cancer cases where costs can easily run far higher.

“Even though you'll have a national insurance scheme, people will still be under-insured for really significant cases,” says Mr Jain.

The consensus, however, is that better access to healthcare is much-needed in India with the government programme considered a step in the right direction to creating a healthier economy and preventing individuals like Amar Singh from being burdened with chronic debt.