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Low health care expenditure to impact risk-pooling model: NITI Aayog

Think tank plans building up system for middle class, which isn't covered under any health scheme

Sanjeeb Mukherjee  |  New Delhi 

health care
The Aayog is mulling building up a health care system for the middle class

The country’s low expenditure on public (estimated to be 0.9-1.1 per cent of GDP) is a big constraint in growing the subsidised risk pooling model in

This is particularly true for the poor and sick and those who need them the most, a report by NITI Aayog, released on Monday, said.

The current Pradhan Mantri Jan Arogya Yojana (PM-JAY), commonly known as Ayushman Bharat, is an example of a subsidised risk pooling model in the sector.

The report titled, ‘Health Systems for a New India: Building Blocks – Potential Pathways to Reforms’ that was released by Vice-Chairman Rajiv Kumar, in the presence of Bill Gates, said better evidence-based decisions on what components of the health care package are to be subsidised for these populations are the need of the hour.

The Aayog, meanwhile, is mulling building up a health care system for the middle class, which is still not covered under any public health care system. The system would exclude those covered under the newly-launched scheme that mainly caters to the bottom 40 per cent population of the country.

Meanwhile, the report said that estimates suggest that per-capita expenditures in health care for the poor (after cost-effective public goods are financed for the entire population) would more than triple if public funds were to be fully targeted only for the poor. While India’s public expenditure on health care has stagnated at around 0.9-1.1 per cent of GDP, in China it is 3.2 per cent of GDP. In Chile, it is 4.9 per cent and 9.4 per cent of GDP in Germany. (see chart)

The report said that out-of-pocket (OOPs) expenses, that are health care expenses, aren’t covered by any insurance coverage, are expected to remain high for the next decade as well unless substantial improvements are made to risk pooling models in the country.

Studies show that around 62 per cent of an individual’s total expenditure on health care in India is on OOPs, which the report advocates changing to a more risk-pooling model.


Complementing the PM-JAY as a good start, the report said the scheme targeted well (population and health interventions) and scaled up properly (with good contract management systems and capabilities). It has the potential for harnessing the rapidly developing power of private insurance in the right direction.

“This is a legacy, which today is still at the initial implementation stages. However, it can serve as a foundation for accelerating subsidised risk pooling growth, rebalancing demand and supply-side financing in the public sector. It can steer private insurance development in the right direction (away from its current market failure direction),” the report said. The report came down heavily on Employees State Insurance Corporation (ESIC) hospitals in the country on the ground that given the lack of expansion of supply (own or contracted), health service utilisation for ESIS beneficiaries is extremely low. It is among the lowest in India as well as among social insurers in the world.

“This low performance not only deprives its members from due access to services but, is likely contributing to labour market distortions in the country as well,” the report said.

The report also calls for greater synthesis among the Centre’s PM-JAY, Rashtriya Swasthya Bima Yojana (RSBY), state scheme and also ESIC to ensure that greater benefits accrue to the poor and the needy.

It has suggested a six-point guideline for transforming the health sector in the country. This includes changing the health system financing structure away from the predominant undesirable OOP spending into larger risk pools, with strong strategic purchasing capabilities.

First Published: Mon, November 18 2019. 21:31 IST