India’s bold new health insurance scheme, launched to much fanfare in 2018, aimed to reduce out-of-pocket expenses and build a more equitable system of care. Yet there are persistent concerns the scheme leaves low-income households vulnerable to financial ruin.
AB-PMJAY was hailed as a gamechanger, with the government frequently highlighting its potential to transform lives. Photo: CDC Global, CC BY 2.0
In September 2018, the Indian government unveiled its ambitious health insurance scheme, Ayushman Bharat-Pradhan Mantri Jan Arogya Yojana (AB-PMJAY), to achieve the vision of universal health coverage (UHC). With a promise to revolutionise healthcare access, it aimed to reduce out-of-pocket expenditure (OOPE) and catastrophic health expenditure (CHE)—when OOPE healthcare costs exceed 10% of total household spending—for the bottom 40% of the population by income. It is one of the world’s largest tax-funded health insurance schemes.
At the heart of the scheme was an insurance cover of INR500,000 (USD$5,905) per family per year, a significant upgrade from the earlier government program that provided INR30,000 (USD$354). This enhanced cover enabled the inclusion of costlier procedures, raising hopes for a more inclusive and equitable healthcare system.
AB-PMJAY was hailed as a gamechanger, with the government frequently highlighting its potential to transform lives. In October 2023, its scope was further expanded to include all citizens aged 70 and above, reinforcing its position as a flagship initiative.
However, a deeper dive into data and real-life experiences raises critical questions about the design and implementation of AB-PMJAY. The lofty claims of reducing OOPE and CHE appear to be unravelling.
Families remain vulnerable to financial ruin
For 50-year-old Gita Devi, an agricultural labourer from Barabanki district in Uttar Pradesh, access to healthcare under AB-PMJAY was not a blessing. She was experiencing a lot of pain in her abdomen. After attending various health facilities in her town, Devi was finally diagnosed with gallbladder stones. The diagnostic tests cost her nearly INR20,000 (USD$236)—a significant expense that was not covered by the scheme.
“As the scheme covers only in-patient treatment, these tests were not covered,” says Virendra Kumar, Devi’s son.
Because tertiary care was unavailable in Barabanki, Devi travelled 30km to Lucknow for surgery at RML Hospital, a health facility registered with AB-PMJAY to provide services to insurance beneficiaries. While the surgery, costing INR21,905 (USD$259), was covered by AB-PMJAY, the financial burden of diagnostics and medicines not available at the hospital left her family struggling.
“We borrowed money from friends and relatives just to cover the diagnosis. Even in Lucknow, we had to pay out of pocket for some medicines,” Kumar explains.
While AB-PMJAY provides financial relief for some, it falls short of addressing the broader healthcare burden...leaving families vulnerable to financial ruin.
Devi’s case is not an exception. In Bihar’s Gopalganj district, 62-year-old Bidaan Sharma* faced a far graver ordeal. Diagnosed with renal failure, Sharma sought care at a private hospital registered with AB-PMJAY. Despite holding an insurance card, called the Ayushman Bharat card, his family was informed that the procedure was not part of the scheme’s packages.
Over 1.5 months, the family spent INR1 million (USD$11,806), selling land and borrowing heavily to keep Sharma alive. “We had to sell half of our land and borrow money from relatives,” says Sharma’s daughter, who requested anonymity, fearing repercussions as her father continues to undergo treatment.
These cases reflect a systemic issue: while AB-PMJAY provides financial relief for some, it falls short of addressing the broader healthcare burden of OOPE and CHE, leaving families vulnerable to financial ruin.
Little reduction in out-of-pocket expenses
The cornerstone of AB-PMJAY is its promise to reduce OOPE and CHE. In India, high OOPE has been a persistent issue, particularly for low-income households, often compelling them to allocate a substantial share of their income or savings to cover healthcare costs.
Studies show that on average people in India pay 62.6% of total health expenditure—one of the highest rates in the world. Likewise, 16% of Indian households incurred CHE in 2017–18, according to the National Sample Survey Office 2019. Among low-income countries, the average CHE is 9%.
High OOPE and CHE place a significant financial strain on families, often driving them into poverty, causing them to accumulate debt, and limiting their ability to afford basic necessities such as food and education. Additionally, high OOPE deters people from seeking timely medical care, potentially worsening health conditions and resulting in even higher treatment costs over time.
Research suggests AB-PMJAY is falling short of the goals to reduce OOPE and CHE. A 2023 study that surveyed 57,000 AB-PMJAY-eligible people in six Indian states found that OOPE reduced by INR1,656 (US$19)—a mere 13%—for people who availed AB-PMJAY benefits. It revealed that there was no reduction in OOPE in public health facilities; in private facilities, the reduction amounted to only 17%. India has a mixed health system comprising both a public and private sector.
Even for CHE, there was no significant reduction in public facilities. In the private sector, there was a mere 19% reduction. The study found that AB-PMJAY was not associated with an increase in hospitalisations, but it increased the probability of patients visiting a private facility.
Research suggests AB-PMJAY is falling short of its goal to reduce out-of-pocket expenses. Photo: Acumen
A detailed 2024 study that examined utilisation, quality, and financial protection for inpatient care, based on 15,000 household surveys in the state of Chhattisgarh, reports similar findings. It found hospitalisation of people enrolled under AB-PMJAY involved significant OOPE when private hospitals were utilised. Among people using private hospitals, about 78% incurred CHE in 2021, and about 71% incurred CHE in 2022.
“Enrollment under AB-PMJAY was not associated with reduced out-of-pocket expenditure or catastrophic health expenditure,” write the study’s authors.
Dr Shakeel, executive director at the Centre for Health and Resource Management in Bihar, says these experiences are common. “We hear about such cases all the time. Patients’ burden has not decreased much, even after getting AB cards,” he says, explaining that a lack of robust health infrastructure compounds the problems. “Hinterland [areas] suffer more because the health facilities are far fewer there,” Shakeel says.
“There is a fundamental problem with the insurance model. It promotes profit-making, especially by the private sector. It transfers public money to the private sector.”
Dipa Sinha, a development economist and former faculty member at Ambedkar University Delhi, agrees: “There is a fundamental problem with the insurance model. It promotes profit-making, especially by the private sector. It transfers public money to the private sector. The government should prioritise spending in building public sector infrastructure, which will go a long way in ensuring health and healthcare for all.”
She adds that insurance models shift the responsibility of securing health services onto individuals, leaving them to navigate the complexities of finding appropriate care and treatment. The government, in turn, reimburses costs based on its predefined norms, which often creates additional challenges.
Failure to overcome existing barriers to care
Differences do not exist only between rural and urban areas across India, but also between different states. Owing to stronger health systems even before the introduction of AB-PMJAY, the southern states tend to have much higher rates of authorised hospitalisation than the northern states.
According to the AB-PMJAY dashboard, hospital admissions since the launch of the scheme in the southern state of Tamil Nadu total 9.05 million; in Karnataka the figure is 6.6 million, and in Kerala 5.47 million. Yet northern states such as Uttar Pradesh—India’s most populous state and home to the most hospitals registered with AB-PMJAY in the country—have had only 2.82 million hospitalisations. In Bihar, the figure stands at just 780,000.
“The reason for this anomaly is that the states which already had health schemes and were implementing them well have shown better results with AB-PMJAY,” Sinha says. “These states have historically better governance. On the other hand, governance in states such as Bihar and Uttar Pradesh has been poor and it reflects in uptake of health insurance schemes too.”
She says the failure of AB-PMJAY to overcome these existing disparities is a significant problem. “The government launched the scheme with so much fanfare, claiming that this will solve the major problems associated with lack of access to healthcare in India, especially for the poor. But if even the limited success of the scheme is riding on the previously existing infrastructure, then how is it a gamechanger?” Sinha says.
“If even the limited success of the scheme is riding on the previously existing infrastructure, then how is it a gamechanger?”
That AB-PMJAY covers only in-patient care is another pressing issue, Shakeel says. “In reality, a lot of OOP expenditure is on account of out-patient care. People spend huge proportions of their savings on [care in] out-patient departments and it is completely out of the scheme,” he says.
Sinha says this is a big issue that has become especially apparent since the extension of the scheme to include the elderly. “Elderly people suffer more from chronic diseases such as diabetes and hypertension. They need regular medication. A scheme with just in-patient [care] won’t give them the care that they need,” she says.
And there are other health-related costs that patients accrue for in- and out-patient care that the scheme does not cover. “There are costs related to transport and wage loss, which hinders health-seeking behaviour, but AB-PMJAY doesn’t include that,” Shakeel says.
Capitalising on the promise of AB-PMJAY
Experts agree that there are many steps the government can take to improve the health situation in India and capitalise on the promise of AB-PMJAY.
Sinha says an important step is improving health infrastructure so people have better access to the health system. “First and foremost, India needs strengthening of the public health system. Far flung areas such as Bastar in Chhattisgarh should get proper health infrastructure so that people can avail health facilities at a decent distance from their homes,” she says.
In 2005 India launched a program called National Health Mission, which had goals similar to those of the AB-PMJAY but with a broader view of health delivery. It sought to create public sector health infrastructure, train a skilled healthcare workforce, and focus as much on preventive and primary care as tertiary care. Meeting targets like reduced maternal death and infant mortality was a key focus. Sinha believes India should reorient its healthcare system to align with these principles.
However, she acknowledges that changes like these will take time to implement and recommends a series of interim steps. “The private sector should be regulated and standard costs of treatment should be imposed and implemented. This will avoid hospitals from charging from people over and above the AB-PMJAY rates,” Sinha says.
She adds that setting up a medicine procurement system and filling healthcare worker vacancies in the public sector will be crucial. For the elderly, she advocates for a more comprehensive plan that includes chronic diseases and covers other needs specific to this cohort.
Shakeel agrees changes need to be made to AB-PMJAY to ensure that people can use existing services and OOPE are reduced. “The government needs to ensure that hospitals do not charge the patients beyond the prescribed rates. It should also ensure that whenever patients need treatment, it is available close to their home,” he says.
AB-PMJAY is an ambitious scheme, but significant gaps persist six years after its introduction. Tackling issues like high OOPE and CHE and ensuring the availability of quality healthcare services will be vital for its success and impact, now and into the future.
*Name changed at interviewee’s request
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