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March 20, 2020

India’s Historic Effort to Expand Health Insurance to Individuals Living Below the Poverty Line

Author Affiliations
  • 1Price School of Public Policy, University of Southern California, Los Angeles
  • 2Schaeffer Center for Health Policy and Economics, University of Southern California, Los Angeles
  • 3RAND, Santa Monica, California
  • 4Pardee RAND Graduate School, Santa Monica, California
JAMA Health Forum. 2020;1(3):e200229. doi:10.1001/jamahealthforum.2020.0229

One of the most ambitious health care reforms in history is rolling out in India. In 2018, Prime Minister Narendra Modi launched Ayushman Bharat (also dubbed Modicare), which is expected to provide health insurance coverage to 100 million families in poverty. The stakes are enormous for a country where two-thirds of all health expenditures are out of pocket, many households experience debilitating expenditures, and the incidence of chronic illnesses that require expensive care is increasing.

Will Modicare provide financial protection and improve health? Evidence from other health insurance reforms, including a regional predecessor to Modicare in India, provide some important clues.

On the one hand, the expansion of subsidized health insurance does not guarantee widespread coverage, access, or better outcomes. For example, when public insurance expanded in Ghana, it reached less than 50% of the eligible population and did not appear to improve health. Mexico’s public health insurance expansion helped with financial protection but had limited health effects. Expansion of health insurance in China in the 1990s was associated with increased rather than decreased risk of high and catastrophic spending.1

On the other hand, proper insurance design and implementation can lead to success, and a good example comes from India itself. In 2010, the Vajpayee Arogyashree scheme (VAS) expanded insurance to residents below the poverty line (BPL) in half of the state of Karnataka in southern India. The other half did not receive the expansion until 2012, creating a natural experiment that allowed us to study the outcomes.2

The VAS primarily covered tertiary care for individuals living in poverty, which fulfilled a glaring unmet need. Although our research shows that primary care has the largest return on investment,3 covering tertiary care is essential for both saving lives and protecting against catastrophic expenditures. As life expectancy continues to improve, more and more individuals in India will live long enough to develop cardiac conditions and cancers that require expensive but very effective tertiary care. Those with low incomes often forgo these services. The VAS, which fully covered tertiary care services, reduced mortality from covered conditions by 64%.4

The VAS also covered services at select private hospitals in addition to public hospitals. Private specialty hospitals in India are often state of the art, good quality, and have unused capacity. Individuals with low incomes would not be able to access these facilities without subsidies. In contrast, public hospitals are often overcrowded, which can decrease quality. As a result, the VAS improved the quality of care received by its beneficiaries. For example, our research showed that respondents eligible for the VAS were 10 percentage points less likely to report any postsurgical infection and approximately 16 percentage points less likely to be rehospitalized.5

Modicare wisely adopted both strategies. However, simply providing free care at public and private facilities is insufficient if people do not use these services. There are 2 important barriers to utilization that the VAS addressed directly: low enrollment and lack of access.

The hassle of enrollment can be a big barrier to the success of social insurance. The best way to maximize enrollment is to automatically enroll the eligible population. The VAS linked enrollment to the BPL card, which was already being used for other public services. Therefore, anyone with a BPL card was enrolled by default. Modicare administrators appear aware of the challenges of enrollment. In addition to large-scale awareness campaigns, enrollment in Modicare is facilitated by sending beneficiaries notification letters that include a family ID card that can be used to access services. While this seems well intentioned, it is unclear what will happen for families who do not receive their card because of an address change or a postal error.

After people are enrolled, ensuring that they can easily access services is also crucial. Much of India’s population is rural, and traveling long distances to health centers only to wait hours to see a doctor can be a big barrier even if care is free. Smartly, Modicare is also focusing on increasing access to comprehensive primary care services by creating 150 000 health and wellness centers. This is a worthwhile and cost-effective investment. However, it does not address access to specialist care for the rural population. A feature of the VAS that appears to have been effective is village health fairs, which brought specialist care to rural areas. Modicare should invest in similar health fairs or telemedicine to address the need for improved access to specialist.

Finally, looking beyond the VAS example, it is obvious that increasing utilization of health services is only good for health if the care received is high quality. Although some specialty facilities in India are state of the art, there is wide variation in quality of care, and poor technical quality is well documented. According to a recent National Academies of Science Engineering and Medicine consensus committee, of which 1 of us was a member, poor quality accounts for millions of premature deaths in low- and middle-income countries. If facilities lack necessary resources and clinicians are poorly trained, then increasing utilization may not lead to significant improvements in health. For example, the Janani Suraksha Yojana program in India, which provides cash transfers to pregnant women conditional on them giving birth in a health facility, increased rates of institutional births but had no discernible effect on maternal mortality.6 One explanation for this is low-quality obstetric care.

Private clinicians, who treat most common illnesses in India, have little incentive to improve quality because they are not rewarded by the market for doing so.7 Moreover, patients do not appear to be able to distinguish between high- and low-quality clinicians. Incorporating quality improvement initiatives in the massive expansion of insurance coverage will be necessary to improve population health.

In sum, Modicare incorporates several design features that have led to success in past insurance expansions, such as tertiary care coverage, working with the private sector, making enrollment easy, and expanding primary care access in rural areas. However, for the potential to be fully realized, it will be important to also focus on improving quality of care.

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Article Information

Open Access: This is an open access article distributed under the terms of the CC-BY License.

Corresponding author: Zachary Wagner, PhD, RAND, 1776 Main St, Santa Monica, California 90401 (zwagner@rand.org).

Conflict of Interest Disclosures: Dr Sood reported serving as a scientific advisory to Payssurance and Virta Health; serving as an expert witness for the American Medical Association and Goldman, Ismail, Tomaselli, Brennan, and Baum; serving as an international expert for the China Development Research Foundation and the Pharmaceutical Research and Manufacturers of America; and receiving grants from the Agency for Health Research and Quality, the National Institutes of Health, the National Institute for Health Care Management Foundation, Health Care Services Corporation, and the Patient-Centered Outcomes Research Institute outside the submitted work. No other disclosures were reported.

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