The recent Assembly election results have sparked a fresh round of discussion about the socio-economic impact of the social sector schemes launched by the Central government. One such scheme is the national-level health insurance scheme popularly known as the Ayushman Bharat.

In a recent working paper (https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4063386}, shows that apart from other benefits, the implementation of the Ayushman Bharat program is associated with a 21 per cent decline in out of pocket health expenditure and an 8 per cent reduction in the tendency to borrow emergency loans for health purposes, among poor households.

Given the well-known constraints on state capacity to deliver social welfare programmes, it is essential to test the short-term impact of various programmes to gauge whether they are being executed as implemented. Given the scale of the programme — the Ayushman Bharat aims to cover nearly 10 crore households at the bottom of the income distribution — implementing it efficiently is challenging.

A large number of beneficiary households using health insurance instead of borrowing when faced with health emergencies and consequently experiencing a reduction in out-of-pocket expenditure relating to health insurance credibly indicate the effective programme implementation.

Ayushman Bharat could improve human capital by increasing access to curative and preventive healthcare in the long run. It is too early to comment on the long-term impact of the programme. Therefore, the focus here is on the short-term impact of health-related borrowing and out-of-pocket expenditure.

Plethora of schemes

Given the plethora of social sector schemes announced by both the Central and State governments, it is hard to identify and disentangle the impact of a particular intervention. A typical beneficiary of Ayushman Bharat could also be a beneficiary of some other State-level or Central social sector schemes, and therefore, it is generally hard to attribute any impact on a particular scheme. In this context, the fact that some States did not implement the Ayushman Bharat scheme, primarily due to political reasons, can be used for identification.

Any change, theoretically linked to health insurance in Ayushman Bharat implemented regions compared to the non-implemented areas can be reasonably attributed to the programme.

Further refinement by way of comparison between the border districts of the non-implemented States and the contiguous districts belonging to the implemented States in terms of change in outcome is likely to identify the programme’s impact tightly. The border district identification strategy is used in the paper.

Household survey data provided by the Center For Monitoring Indian Economy (CMIE) is used in this study. The survey asks households about their income, sources of income, expenditure, break up of expenditure, among other things. The survey also records the health-related out-of-pocket spending.

In addition, the CMIE conducts three waves of surveys in a year wherein they ask the households about health-related indebtedness. This survey records whether a household has borrowed for health purposes during the survey period of four months.

Although the programme was launched in 2018, it took some time to do the groundwork such as empanelment of hospitals, the issue of health cards, the spread of information, etc. Therefore, the survey round ending April 2019 (starting December 2018) is the first complete survey after Ayushman Bharat was implemented. The study period ends in March 2020 to avoid the impact of the ongoing pandemic confounding the results.

Districts in the sample that implemented Ayushman Bharat, households that are eligible for Ayushman Bharat and fall in the bottom 10 per cent of the income distribution experienced a reduction in out-of-pocket expenditure on health by about 1 per cent after the implementation of the programme.

Interestingly, in a sample of similar households belonging to the adjoining districts that belong to States that did not implement Ayushman Bharat, there is a 20 per cent plus increase in out-of-pocket expenditure on health.

Given the unlikely possibility of neighbouring districts systematically differing in terms of health shocks, it is reasonable to conclude that the programme caused a 21 per cent reduction in out-of-pocket health expenditure within two years of its implementation.

In other words, poor households in Ayushman Bharat implemented regions spent about 21 per cent less on health care than comparable households in non-implemented regions. Interestingly, this pattern is not visible when affluent households that are unlikely to be Ayushman Bharat beneficiaries are considered.

A similar pattern is observed when borrowings related to health emergencies are examined. The programme reduced the probability of such borrowings by about 8 per cent. Once again, this pattern is seen only among poor households, the likely Ayushman Bharat beneficiaries, and not among wealthy households.

Also, using data from a credit bureau, there is no significant decline in other types of borrowings. Thus, the decline in health-related borrowing does not reflect a general reduction in credit supply in Ayushman implemented regions.

A reader may worry that the reduction in health care spending and borrowing reflects households skipping treatment rather than using insurance. There are two pieces of evidence against this hypothesis using data from multiple rounds of the National Family Health Survey. Both health insurance coverage and the average health situation improved in Ayushman Bharat implemented districts when compared to their neighboring districts that did not implement the programme. The 2020-21 Economic Survey records a similar finding.

The results from my study suggest that the Ayushman Bharat programme is achieving its primary purpose in the short run. It remains to be seen whether the programme leads to a significant improvement in human capital in the long run.

The writer is an Associate Professor of Finance, Indian School of Business

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