In yet another demonstration of his commitment to take care of majority of the poor, in the last budget [2018-19] of its term before the next general elections in 2019, Modi government has announced a National Health Protection Scheme [NHPS].
Touted as the world’s largest public health care program [bigger than even Obamacare in USA], it seeks to provide health insurance cover of up to Rs 500,000/- to 100 million poor and vulnerable families. Taking an average family size of 5 persons, the benefits are expected to reach 500 million individuals or 40% of India’s population.
In his budget speech, the finance minister, Arun Jaitley quipped “It is taking health care to a new aspirational level as it is going to be the world’s largest government-funded program”. Instinctively, this would prompt one to believe that the budget allocation for such a scheme would be commensurate with the aspiration level. That is where one meets with disappointment.
While, there is no allocation for NHPS as such, one comes across an outlay of Rs 2,000 crore for existing Rashtriya Swasthya Bima Yojana [RSBY] – up from Rs 1,000 crore provided for it in 2017-18 budget. Under that scheme, poor families get insurance cover of up to Rs 30,000 per year. RSBY has been rechristened as NHPS which promises 17 times higher cover with gigantic reach.
The details of the scheme will be finalized by NITI Aayog in consultation with the ministry of health and other concerned ministries/departments. It is expected be launched on October 2, 2018 – the birth anniversary of Mahatma Gandhi.
How much will it actually cost the exchequer? The precise estimate will be known only after the architecture is finalized. Meanwhile, an estimate floating around is Rs 11,000 – 12,000 crore annually based on premium of Rs 1100-1200/- per family for a cover of Rs 500,000/- for a total of 100 million families. Taking the commencement date of the scheme to be October 2, the requirement during the current year would be Rs 6000 crore which can be easily met with a top up of Rs 4000 crore by way of supplementary authorization from parliament.
With this, the finance ministry may be sitting comfortable. But, the assumed premium is woefully low bordering on un-realism. When, a person goes to buy an insurance policy, he/she pays a premium @ 2%-4% of the sum assured. At this rate, for cover of Rs 500,000/-, the premium per family would be Rs 10,000 – 20,000/-. For 100 million families, the payout would be Rs 100,000 – 200,000 crore annually!
During a post-budget interview, Jaitely noted that for a scheme contemplated on such gigantic scale and crores of families involved, the economies of scale enable substantial drop in the premium amount. But, the big question is: could it go down as steep as 1/10th – 1/20th of the rate that would normally be charged?
Even if one goes by the benchmark set under RSBY [the number of families covered under it are also huge about 40 million], the premium under it is Rs 300-400/- per family for cover of Rs 30,000/-. On this basis, for a cover of Rs 500,000/-, the premium would be Rs 5100 – 6800/-. In this scenario, the burden on the exchequer would be Rs 51,000 – 68,000 crore.
Under Pradhan Mantri Fasal Bima Yojna [PMFBY], union government spends Rs 15,000 crore annually to provide cover to 50 million farmers against loss of crop due to natural disasters such as drought or floods. This translates to premium of Rs 3000/- per farmer for cover that won’t exceed Rs 100,000/- at the outer limit [though, it varies depending on size of holding, crop type etc]. On this benchmark too, the premium for Rs 500,000/- cover under NHPC would be Rs 15,000/- per family or Rs 150,000 crore for 10 crore families.
Irrespective of the benchmark one may take, the cost of running such a mammoth scheme to the exchequer would be several times more than the current allocation of Rs 2000 crore. Even if the provision is increased to Rs 10,000 crore, that would still be substantially lower than the requirement computed in a reasonable manner.
The burden on the center could be reduced if its funding is shared with states as is the case in many centrally sponsored schemes. But, this will lead to other complications as normally, the states are unable to arrange their respective contributions. The failure of RSBY is to a large extent due to this reason [instead of low assured sum of Rs 30,000/- as alleged by finance minister].
A plausible argument in favor of miniscule budget supporting a mammoth scheme covering 100 million families could be taking care of medi-claim needs in health centers/medical institutions located in rural/semi-urban areas where the treatment cost is less. This is self-defeating as in that case, the sum assured would be low and not Rs 500,000/- as claimed.
The commitment of Modi – government to shield 40% of India’s population [which includes all of its poor] against serious diseases/ailments is indeed laudable. This is a commendable initiative especially when seen in the backdrop of the poor family plunging it into a financial crisis if only a member suffers from a serious ailment. The scheme can be a great help in preventing it at no cost.
But, here the problem is one of huge mismatch between the level of ambition [in terms of both coverage and sum assured] and available resources. Apart from inadequacy of resources, the government needs to ponder over the availability of infrastructure – both in regard to the level of insurance penetration as well as health-care facilities – which too is woefully inadequate. Without these, mere making arrangement for funding will be of little help.
In an interview given on New Year eve, Modi opined that he does not formulate policies with an eye on elections. In the instant case however, given the underlying facts, it is difficult to surmise whether he really meant what he said!