Modicare can be the trigger for healthcare reforms in India

 Finance Minister Arun Jaitley has taken all the risks in his last full budget. The middle class is obviously miffed by the sleight of hand in the income tax announcement. Instead of promising that the government is giving any benefit through standard deduction it would have been better to project it as a replacement for transport and medical allowance. Whether this was strategic mistake or a tactical mistake made by the speech writers only the FM knows.

The FM’s budget speech is the most important policy speech of the year and is dissected closely. Therefore, it is important that it be fair, transparent and complete. The announcement on standard deduction clearly shows clever bureaucrats felt they could fool tax payer. While the lack of details on the massive healthcare insurance scheme shows poor preparedness.

 Two steps are needed quickly on health scheme or Modicare as it is being called. First, the government needs to explain how it will work, details. Second it needs to be launched quickly so benefit can reach citizens before the government gets into election mode. Otherwise it may lead to a higher discontent.

The lack of details means that misinterpretation is increasing. It is an insurance for medical emergencies specifically hospitalisation. Ten crores families that will be insured will have to pay a nominal amount to be recognized and mapped by the insurance system. Jandhan Aadhar and Mobile (JAM) is the digital foundation for rolling out this scheme.

The government should not run or manage this scheme that’s an insurance companies’ role. The govt. role is to create usher the reforms by revamping the regulatory structure and digital infrastructure to roll out this scheme.

Changes in regulations will be needed to make sure that the scheme is attractive enough for the sector: insurance companies, healthcare service providers and recipients. The learnings from the failures in the Rashtriya Swasthiya Bima Yojana and the best practices from CGHS, the defence services healthcare schemes need to be adopted in Modicare. But the scale of the scheme is such that some reforms and incentives maybe needed to make sure that private healthcare service providers accept it. Its important that private sector is part of it as it delivers more than 80% of the healthcare services in the country. They have to accept it, government cannot expect poorly run government hospital sector to deliver this Modicare. Let the mistakes made in NHP 2017 not be repeated with Modicare.

People prefer private hospitals over govt. hospitals. If the scheme is structured properly, regulatory reform done it will help in solving the biggest problem ailing the healthcare services in the country. Rising healthcare prices is leading families to healthcare bankruptcy and is the biggest contributor to pushing people into poverty. Government statistics show the number of households facing catastrophic expenditure due to health costs was 18% of all households in 2011-12 as compared to 15% in 2004-05. Independent estimates suggest that it would be closer to 30% in 2017-18.

 Therefore, the most important impact of Modicare is when govt. becomes the largest buyer of healthcare services it can lead to standardisation of medical procedures and prices. This will bring down the overall prices of healthcare services down. Help improve services and prevent frivolous tests and procedures for even the middle class. To show its sincerity towards this reform the regulatory structure for healthcare sector should be done before the launch of the scheme.

Any insurance company looking at bidding for this scheme, and I am assuming that the government will not manage it would be attracted by size. Therefore, the access and delivery through JAM which means enrolment of citizens already registered as MNREGA beneficiaries or BPL families will have to be done. This is the digital infrastructure that needs to be leveraged for reaching 10 crore families. Insurance companies would obviously be interesting in accessing such large base the government should therefore negotiate the best premium so that the cost to the exchequer and user can be low. 

The myth that everything can only be done by allocating large sum of funds has to be broken. Modicare the reform that can effectively build a new way of delivering better quality of services by creating the enabling environment of regulation and infrastructure around it.

This column was also published here

Those of you who have followed my views on healthcare, I have been saying that NHPS has to be run by insurance companies and private hospitals should be part of it. I am glad to inform you that the government has agreed to almost all my recommendation see the economic times report today https://economictimes.indiatimes.com/news/economy/policy/modicare-private-hospitals-may-be-roped-in-for-nhps/articleshow/62795721.cms my last article mentioned these very reforms and they were submitted to the government too.