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ModiCare faces fresh challenge: Existing schemes by state governments

ModiCare faces fresh challenge: Existing schemes by state governments

ModiCare faces fresh challenge: Existing schemes by state governments
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By Sindhu Bhattacharya  Aug 1, 2018 7:16:26 AM IST (Updated)

"World’s largest government-funded health care programme" is facing a peculiar dilemma. Some state governments are hesitant to agree to the central government’s call to sign up for ModiCare, as merging existing schemes with Ayushman Bharat will raise costs while also being a political dud.

Some of the states which are yet to agree to the central government’s call to sign up for ModiCare (also known as Ayushman Bharat) are facing a peculiar dilemma.

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Not only are these states — many of them ruled by non-BJP governments — wary of the political implications of launching a scheme so closely associated with the prime minister’s name, they also already provide health cover to a much larger universe of beneficiaries than what the centre is willing to provide under Ayushman Bharat.
So the states are obviously hesitant, as merging existing schemes with Ayushman Bharat will raise costs while also being a political dud.
The deadline for Ayushman Bharat is inching closer with issues about existing versus new scheme still unresolved. The prime minister is expected to announce the launch of Ayushman Bharat on August 15. And the scheme will have a staggered rollout thereafter, with the most likely start date being Gandhi Jayanti on October 2 this year.
Ayushman Bharat envisages a Rs 5 lakh annual insurance cover at no cost to four in ten Indians. This is the biggest ever health cover, in terms of the corpus as well as the coverage universe.
Increased Burden on States
In most cases where states have existing health cover schemes, the annual insurance cover is lesser than that envisaged under Ayushman Bharat. So merging with the latter would anyway mean an increased burden on state budgets.
Besides, no state government would want to be seen withdrawing health cover from an existing beneficiary family (since the number of beneficiaries under Ayushman Bharat is almost always less than state schemes) so it would necessarily have to merge the existing schemes with Ayushman Bharat, thereby again raising the health cover costs significantly.
Under the Ayushman Bharat memorandum of understanding (MoU), the centre is required to pick up only 60 percent of the tab.
Senior government officials told CNBCTV18.com that 20 states have signed an MoU with the centre to implement the Ayushman Bharat scheme and four more may come on board as early as next week. Rajasthan, Goa and Punjab are expected to sign on the dotted line, with Maharashtra also “hopefully” convinced of the benefits and ready to come on board, the officials said.
The officials quoted above explained that Maharashtra has been reluctant since it already runs the ‘Mahatma Jyotiba Phule Jan Arogya Yojana’ covering 2.2 crore families when Ayushman Bharat is offering a cover for only 83 lakh families.
“Maharashtra is reluctant to run two schemes due to financial implications, the officials said. "But the centre’s hands are also tied since it cannot expand the coverage universe. So the Maharashtra government is looking for a way to sort this out and deal with increased payouts in case the two schemes are merged”.
The Kerala government is faced with a similar dilemma. The state already offers a cover to 35 lakh families when the Ayushman Bharat cover will apply to only 19 lakh families. In repeated conversations between the centre and the officials of the state on the enrollment for Ayushman Bharat, the government has been reluctant to abandon the universe currently covered.
The merger of the existing scheme and Ayushman Bharat poses financial challenges and some more meetings are being lined up to find a way out.
So why did states like Jharkhand signed up for Ayushman Bharat? The state’s Director for Health Services, S K Singh, said the Mukhya Mantri Swasthya Bima Yojana was being firmed up when the proposal for Ayushman Bharat came along. “So we did not have an existing health cover scheme, it was in the process of being formulated. Now, insurance companies have been asked to keep the same premium that they had agreed upon under the Mukhya Mantri Swasthya Bima Yojana for the Rs 5 lakh annual cover when earlier the cover was Rs 2.5 lakh. We will offer the scheme to the universe identified under Ayushman Bharat and for the remaining, we will use the chief minister’s scheme. This way, the universe will automatically get expanded.”
The first states to implement Ayushman Bharat could be any of these four: Chhattisgarh, West Bengal, Jharkhand or Madhya Pradesh. The first two will use a mixed model – trust plus insurance – while Jharkhand will use the insurance model and Madhya Pradesh the trust model.
In the trust model, the state government fixes prices, there is no price discovery and this model is considered ideal for health insurance as a non-profit motive is assured.  So wherever it will be a mixed model, some of the premium amount will be covered by insurance companies, while the remaining will be assured by state governments.
On being asked about the timeline for getting all states and union territories on board, Ayushman Bharat CEO Indu Bhushan told CNBCTV18.COM that “except for Odisha, we expect all states and Union Territories to sign up sooner or later. Sooner rather than later. We expect Rajasthan, Goa, Delhi and Karnataka to join soon”.
Though Bhushan did not comment further, officials have earlier indicated that political implications of agreeing to a scheme which is identified with the prime minister is the biggest deterrent for Odisha. And this has been conveyed to the centre.
Even if the four states which the centre expects on board by next week do sign up, it still means six more remains outside the Ayushman Bharat net – Kerala, Tamil Nadu, Karnataka, Odisha, Delhi and Telangana. How many of these will agree to come on board before the Independence Day announcement remains to be seen?
Officials said the centre has allocated Rs 4,000 crore for Ayushman Bharat till now out of the Rs 10,000 crore that the scheme is supposed to get in 2018-19. Since states are expected to bear 40 percent of the scheme’s burden, the remaining Rs 2,000 crore of the central share should come in the supplementary demand for grants, which will be presented later in the fiscal year.
A Game Changer?
Ayushman Bharat, if implemented in time and efficiently, could well be a game changer in India’s quest for universal health. In a note to clients, brokerage ICICI Securities had said some time back that “This scheme, if implemented successfully, would be one of the largest government-funded healthcare schemes globally as it would have an addressable size of Rs 50 trillion. This would be total healthcare size including hospitals, pharmaceuticals, diagnostics etc, however, hospitals would form the major portion (hospitals currently is less than 50% of the total Indian healthcare market).”
The brokerage went on to say that the Indian healthcare industry (hospitals) is expected to grow at 16-17 percent CAGR (compound annual growth rate) to reach to Rs 8.6 trillion by FY22. “That means if the above scheme is implemented successfully as planned, the healthcare delivery market can grow multifold,” the brokerage said.
Sindhu Bhattacharya is a journalist based in Delhi who writes on a range of topics in business and economy. 
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