In a recent circular, the Insurance Regulatory and Development Authority of India (IRDAI) has mandated life and general insurers to extend individual cover in certain identified gram panchayats. A similar exercise is expected to be taken up by the General Insurance Council. According to the National Family Health Survey, over two-fifths of households have at least one member covered under health insurance, which in turn corresponds with other estimates of just over 50 crore people being covered. Of this, the bottom half is being serviced by publicly-funded health insurance (PFHI) schemes such as Ayushman Bharat Pradhan Mantri Jan Arogya Yojana (PMJAY) under which approximately 21.9 crore beneficiaries have been verified. In sum, two-thirds of the population has no insurance cover, while most of those covered are the non-poor.

While insurance coverage among the poor leaves much to be desired, the key issue is whether it has worked well for the insured poor by curbing their out-of-pocket expenditure (OOPE). Let us take the case of PMJAY or Ayushman Bharat. PMJAY mainly covers inpatient care. It provides services by empanelling private and public hospitals and the services are designed to be cashless and completely free for enrolled households. Various States, such as Haryana, have enhanced the income limits for which cover is available, while southern States have their own schemes. However, studies suggest that enrolment in PFHI schemes is ineffective in ensuring financial protection. Reshmi et al (BMJ 2021) show that PMJAY did not enhance financial risk protection of the beneficiaries. In another study done in Chhattisgarh, it emerged that private hospitals empanelled under PMJAY charged patients in a big way while also claiming reimbursement from the government.

Therefore, publicly-funded health insurance schemes are ineffective in controlling OOPE. It can be safely assumed that more than half of all health spending in India is still met by patients. According to a PIB release on January 31, 2023, OOPE as a proportion of total health expenditure (which would include spending by government, insurance companies, organisations and individuals) was 48.2 per cent in FY19, which is likely to have increased with Covid despite the introduction of PMJAY in September 2018.

What is required is a policy shift where resources are allocated less for health coverage through insurance, and towards more publicly-funded institutions that ensure health for all. The overall pie too must increase. Central and State health spending as a percentage of GDP increased from 1.4 per cent in FY20 to 2.1 per cent in FY23, but that was because of Covid. It must go up much further. Universal care rather than insurance coverage should be the required goal.