India’s shift to insurance-led private healthcare weakens its ability to combat COVID-19: Experts

People watch the launch event of the Ayushman Bharat scheme on 23 September 2018, in Guwahati. Public-health experts pointed out that the scheme in practice leaves many Dalits and rural communities unable to access healthcare. It also weakens the country’s attempt to respond to pandemics. David Talukdar/NurPhoto/Getty Images
29 March, 2020

At 5 pm on 29 March the union health ministry’s website said that India had 869 positive COVID-19 cases, spread over 26 states and union territories. Seven days earlier, Prime Minister Narendra Modi had announced his main attempt to halt the spread of the pandemic: an unanticipated 21-day nationwide lockdown. Amid rising concerns of shortage of essential equipment and services in public hospitals for front-line staff dealing with the epidemic, the sudden lockdown exposed other faultlines. It forced thousands of migrant labourers to walk hundreds of kilometres back to their hometowns and villages. In the preceding days, several reports had emerged of private hospitals having turned away patients showing symptoms of COVID-19, including the first victim of the disease in the country. Though the union health ministry issued an advisory that no suspected COVID-19 patient could be refused, such reports, of private hospitals denying patients care, continued to emerge. Experts I spoke to have raised concerns about another worrying aspect: India’s shift towards a privatised model of health insurance in the past few decades, they said, could mean that many, especially the poor, will be left without access to free healthcare in the pandemic.

Dr T Sundararaman is a former dean of the School of Health Systems Studies at the Tata Institute of Social Sciences and a global coordinator of the Peoples’ Health Movement—a global network of grassroots health activists. He said, “India’s weakened public health infrastructure is unprepared for the COVID-19 pandemic.” Sundararaman said that the lack of supplies illustrates how “the neglect of a robust public-health system in favour of privatised, insurance-led healthcare has weakened India’s ability to deal with a national health emergency.”

In September 2018, the Modi government launched the Pradhan Mantri Jan Arogya Yojana—also known as Ayushman Bharat—the world’s largest state-sponsored health assurance scheme. Ayushman Bharat covers forty percent of the country’s population, focusing on those who are poor and most vulnerable. The official website of the scheme claims to provide medical cover to 10.74 crore rural and urban households. It provides medical cover of Rs 5 lakh per family per annum for medical treatment in empanelled hospitals, both public and private. The PM-JAY website itself notes that public sector hospitals in India “face shortage of workers, physicians and other medical staff and also the issue of deficient supply of drugs and equipment which adversely impacts their functioning.” The reason for this, it notes, is that India’s government expenditure on health has remained stagnant over the last two decades at close to 1.2 per cent of gross domestic product. The rationale for an insurance scheme is that while demand for healthcare services has exploded, the supply of public health infrastructure has not kept pace. 

In theory, the coverage of Ayushman Bharat is extensive in terms of both the population and services it covers. The beneficiaries of Ayushman Bharat are identified using data from the Socio-Economic and Caste census. Additionally, the scheme also has criteria-based deprivation points that include or exclude individuals from the purview of insurance. For instance, in rural areas, landless households, manual scavengers or those from Scheduled Caste or Scheduled Tribe communities are included. Urban areas have a different set of criteria under the scheme.

There are two models of implementation for state governments to choose between. The first is the assurance model, where the state sets up a state health authority without the intermediation of insurance companies. The government pays hospitals money through the SHA. The second model is the insurance model, where the SHA selects an insurance company through a tendering process and pays it the required premiums. The insurance company settles claims. Both models have flaws. In the past, it has been reported that hospitals empaneled in the assurance model have collected money based on fraudulent claims, while in the insurance model, companies have an incentive to reject legitimate claims.  

Several public-health administrators, however, disagreed with the policy shift towards a privatised insurance-led healthcare system. “The millions walking home, most of them would be turned away at the door itself if they have corona-like symptoms,” Sundararaman said. He continued, “I am hearing reports that in Jharkhand many private hospitals are shutting or whittling down their services because they may be forced to take care of COVID-19 patients. Insurance is utterly meaningless within this situation.” He said that, in an insurance-based system, the understanding is that market demand and supply would define the quality of healthcare. “But during a health emergency like now, this fallacy is exposed,” he said.

Keshav Desiraju, a former secretary at the union health ministry, pointed out that the reliance on private hospitals makes accessing healthcare for those from deprived classes and castes very challenging. “The moment I say private hospital, Dalits and a substantial bulk of Other Backward Classes are ruled out,” Desiraju said. “Not just because of their income levels, but the whole system is stacked against them. In Uttarakhand, we had a system of giving pregnant women vouchers and they were free to go to a range of hospitals to deliver, and they came back and said, ‘The nurses don’t talk to us or touch us properly.’ Caste works in insidious ways and that is why you need a good and well functioning public health system.”

According to a World Bank policy articulated in 1993 in a report titled “Investing in Health”, India and other low- and middle-income countries were expected to limit their provisioning of healthcare to a few priority areas. Sundararaman told me that the World Bank’s policy stated that the government’s direct role in healthcare should be limited to the reduction of maternal and infant mortality, and the elimination of tuberculosis and other vector-borne diseases. All other aspects of healthcare should be left to the private sector so that private markets would grow and close these gaps. “The idea that the private sector will fill the gap is completely irrelevant, especially during a public health emergency. The nature of the market is that the private sector will go where there is profit and that is in the urban areas, not even urban slums,” Sundararaman said. A statement on the PM-JAY website itself points to the urban bias among private healthcare providers. It states, “Most providers in the private sector are very small (less than 25 beds), unregulated, with varying standards of quality of care and mostly situated in large metros or urban neighbourhoods.”

Media reports on 24 March said that treatment for confirmed COVID-19 cases as well as symptoms like fever, pneumonia and respiratory failure will be available free of cost to Ayushman Bharat beneficiaries. “That’s fair enough. People will get admitted to Apollo and be reimbursed. I have no problems with that. But that cannot be the basis of public health policy,” Sundararaman told me.

According to a press release from the health ministry published in July 2018, India has 1,003 district hospitals. Below this is a network of 5,568 community health centres and 29,899 primary health centres. If the public health system were robust, the PHCs could have been at the frontline of pandemic control, dealing with case detection and public education. “The state of PHCs in large parts of the country, especially the north, is pitiful,” Desiraju said. He continued, “There would be a building, but there may or may not be a doctor. Every primary health centre should have had a halfway competent MBBS doctor, two nurses and every medicine on the essential list of medicines that every state puts out. If you can ensure this much you will have a very good health system on the ground.”

In 2016, Sundararaman published a paper titled “No Respite for Public Health” in the Economic & Political Weekly, alongside Indranil Mukhopadhyay, then a researcher at Public Health Foundation of India, and VR Muraleedharan, a faculty in the Department of Social Sciences at Indian Institute of Technology, Madras. The paper argued that, “One of the lessons that nations need to learn from the Ebola crisis of Western Africa is that when nations fail to invest in public health systems, they lay themselves open to deadly epidemics that could threaten the health security and economy of a nation. The damage to industry and growth rates that such an epidemic would do is mind boggling.”

The paper, an analysis of health financing, noted that the union health budget had been virtually stagnant since 2010–11—under the United Progressive Alliance regime—and experienced a major cut in 2015–16, the year after Narendra Modi first became prime minister. The actual expenditure on health in 2010–11 was Rs 15,256 crore. This rose by 2.6 percent to Rs 15,655 crore in the next fiscal year. In the financial year 2014–15, the actual expenditure on health fell by 7.3 percent compared to three years earlier, to Rs 14,620 crore. Meanwhile the allocation for health between 2014–15 and 2015–16 dropped from Rs 17,247 crore to Rs 14,068 crore. All the quoted figures are calculated with a constant prices pegged to the base year 2004-05 .

“While the push to engagement with the private sector started during the UPA years, the neglect of the public sector heightened during the NDA regime,” Sundararaman told me, referring to the National Democratic Alliance. “From 2004 to 2012, the UPA had strengthened public health services in a substantial way. But after 2014, investment in public services stagnated and the NITI Aayog”—a think-tank which replaced India’s planning commission—“was looking at different forms of public-private partnerships.”

An analysis of the union budgets of the NDA government by the Centre for Budget Governance and Accountability—an independent non-profit organisation that analyses budgets—in 2019 underlines the neglect of public health. The chapter on health says, “Despite an evident need for investing in building and strengthening public health system, the trajectory of health policy in India is unapologetically shifting towards an insurance-based model of healthcare, which essentially strengthens the private healthcare industry.” On the weakening of public health in favour of the insurance model it says, “The total health budget in 2019-20 has increased by around Rs. 8,500 crore from 2018-19 (BE) and nearly 74 per cent of this increase is owing to the allocations for the health insurance scheme Ayushman Bharat. The brunt of this shift in the policy trajectory is borne by the National Health Mission (NHM) which aims at strengthening the public health system in the country, through National Rural Health Mission (NRHM) and National Urban Health Mission (NUHM).”

Nilachala Acharya, the head of research at CBGA said that even if the quantum of public health expenditure has increased, the nature of spending is benefitting private players. “Public expenditure is happening, but the provisioning is through whatever limited services private players are providing through the insurance model. The private will exclude the majority, which at this time will be a disaster,” Acharya told me. In a pandemic like situation, it is possible that some people in rural areas may have health insurance, but could go untreated because there are no health service providers. “Even in a remote tribal hamlet, people may be insured, but they may not be able to access services because public health facilities are not there and private health providers are concentrated in urban areas,” he said.

The union government’s budgetary allocation for health has remained stagnant at 0.3 percent of GDP since the financial year of 2014-15. Along with the expenditure of states, India’s total health expenditure is only 1.14 percent of its GDP. That is much lower than some of India’s neighbours and peers. “The general understanding is that low and middle-income countries need to spend between 4 percent and 5 percent of GDP to provide reasonable and comprehensive health coverage. Sri Lanka, Costa Rica and Brazil spend around 5 percent of GDP on health while Thailand spends 3 percent to 4 percent,” Sundararaman said. The silver lining is that some states have stepped up. The CBGA found that Assam, Bihar, Mizoram and Himachal Pradesh were among states that had prioritized health spending.

Sundararaman said, “Every epidemic in the past has shown us how our capacity is extremely weak. The weakening of public health systems would come to roost when a big epidemic comes along. We could not anticipate COVID-19, but we should have anticipated the occurrence of epidemics.”