Health financing plays a pivotal role in ensuring access to quality healthcare services for all individuals, including those belonging to the missing middle, forming 30 per cent of India’s population.

The missing middle refers to individuals who are not eligible for government-sponsored healthcare programmes targeting the poor and vulnerable yet struggle to afford private health insurance or out-of-pocket healthcare expenses.

One of the primary challenges in financing the missing middle is the lack of affordable options tailored to their needs. Government-sponsored healthcare programmes like Ayushman Bharat-Pradhan Mantri Jan Arogya Yojana (AB- PMJAY) are targeted towards low-income populations, that is, covering only 40 per cent of the population at the bottom of the pyramid. Nearly 70 per cent of the population is now estimated to be protected by some health insurance coverage including State Government schemes, social insurance schemes and private insurance.

Despite this progress, 30 per cent of the population — over 40 crores middle-income individuals — have limited options for subsidised coverage. Private health insurance plans can be prohibitively expensive.

Further, traditional health financing mechanisms may not adequately address the specific healthcare needs of the missing middle.

Addressing the health financing needs of the missing middle requires a multi-faceted approach that involves collaboration between governments, healthcare providers, insurers, and other stakeholders. Policymakers can explore strategies such as expanding eligibility criteria for government-sponsored healthcare programmes, introducing subsidies or tax credits to make private insurance more affordable, and promoting innovative financing models like health savings accounts or community-based insurance schemes.

Some of the suggested measures are:

Government-sponsored co-pay programmes: These are designed to help reduce the out-of-pocket costs that individuals must pay for premium or direct costs of healthcare services and prescription medications. It can be in the form of premium cost-sharing co-pay or first loss against actual healthcare costs. Further, there can be programmes designed to help cover the cost of prescription medicines, especially for chronic care.

Employer-sponsored health insurance: While it is highly prevalent among many medium to large-size corporations, most employers and employees in the unorganised sector go uncovered. The government should encourage such employers to insure their employees by extending tax incentives and or contributions to the group insurance covered by employers. This should also be made mandatory for outsourced employees.

Individual sponsored health insurance: The government should extend tax incentives to individuals sponsoring health insurance to anyone in their families and should not be restricted to parents or children. Further, individuals should be allowed to seek tax incentives for their employees from unorganised sectors like helps, drivers and support staff as long as they can register themselves as sponsored individuals on an Ayushman Bharat Digital Mission.

Health savings accounts: The government can encourage the use of health savings accounts as a strategic programme to promote individual responsibility in healthcare spending and incentivise savings for medical expenses. This can be done through collaboration between banks and insurance companies and the government can sponsor the premium that covers the insured part. A holistic approach to health financing for the missing middle is essential, incorporating data-driven strategies and collaborative efforts to bridge the existing healthcare gaps.

The writer is Chief of Mission and Founding Director, NATHEALTH Foundation and Partner, Quadria Capital

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