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Dissecting ‘Modicare’

Anand Teltumbde ( is a writer and civil rights activist with the Committee for the Protection of Democratic Rights, Mumbai.

Narendra Modi has been good at launching fantastic schemes, most of them being just the renaming or rehashing of the existing ones but pedalled as novel, and confidently communicated to the masses as such. There are as many as 23 such legacy schemes of the United Progressive Alliance that have been rebranded by the National Democratic Alliance under him as its own. It may be admitted to his credit that these schemes underwent substantial reconfiguration and scaling.

Narendra Modi has been good at launching fantastic schemes, most of them being just the renaming or rehashing of the existing ones but pedalled as novel, and confidently communicated to the masses as such. There are as many as 23 such legacy schemes of the United Progressive Alliance that have been rebranded by the National Democratic Alliance under him as its own. It may be admitted to his credit that these schemes underwent substantial reconfiguration and scaling. While the government may be complimented for professionally modifying them, their expansion smacks of the Bharatiya Janata Party’s hyperbole and also its zeal to further its neo-liberal agenda to benefit private capital at the expense of public resources. The latest of such rebranded schemes is the Ayushman Bharat–National Health Protection Scheme (AB–NHPS), called by his minions as “Modicare.”

The existing Rashtriya Swasthya Bima Yojana was launched on 1 April 2008 by the Ministry of Labour and Employment (being administered and implemented by the Ministry of Health and Family Welfare since 2015) to provide health insurance coverage for below poverty line (BPL) families through a decentralised implementation structure at the state level. It provided for total insurance cover of ₹ 30,000 per family per annum, with cashless attendance to all covered ailments and transportation costs within an overall limit of ₹ 1,000. The insurance cost was to be borne by union and state governments in the ratio of 75: 25. It had won plaudits from the World Bank, the United Nations, and the International Labour Organization as one of the world’s best health insurance schemes. If this modestly formulated scheme failed in implementation (Ghosh and Datta Gupta 2017), then the far more ambitious AB–NHPS that targets 100 million families with an insurance cover of ₹ 5 lakh each, and a higher share of contribution from the states (60: 40) without any commensurate infrastructural support naturally creates scepticism.

India’s Healthcare

The public health expenditure in India (total of union and state governments), despite recent increases in allocations, has been little over 1% of the gross domestic product (GDP). It is abysmally low as compared to the world average of 6% and even to our neighbouring countries like Maldives (9.4%), Sri Lanka (1.6%), Bhutan (2.5%) and Thailand (2.9%). The National Health Policy (NHP), 2017 aspires to increase it to 2.5% of the GDP by 2025, but the fact remains that India has not even met its 2010 target of 2%. India’s total health expenditure, which is 3.89% of the GDP is among the lowest in the world as seen from Table 1.

It is even lower than the average for sub-Saharan (5.35%), low-income countries (6.02%) and far below that of high- income countries (12.38%). Out of the total expenditure, about one-third (30%) is contributed by the public sector, which is also far lower than that of other developing countries (Brazil 46%, China 56%, Indonesia 39%) and developed countries (United States 48%, and United Kingdom 83%). The out-of-pocket (OOP) xpenditures—the payments made directly by individuals at the point of services that are not covered under any financial protection scheme—dominate to the extent of 95%, the balance 5% being insurance. Table 2 provides distribution of the OOP expenditure.

This OOP expenditure is typically financed by household revenues (71%), followed by state government (13%), union government (5%), other funds (7%) and local body funds (1%). About 86% of the rural population and 82% of the urban population are not covered under any scheme of health expenditure support. Due to this high OOP healthcare expenditure, about 7% of the population is pushed below the povery line threshold every year.

Modicare and the Poor

It is in this context that Modicare will be implemented. The scheme seeks to provide coverage for hospitalisation at the secondary (provided at district hospitals) and tertiary (provided at specialised hospitals like All India Institutes of Medical Sciences, Apollo, etc), levels of healthcare. The need of the poor, however, is to get cost-free access to basic health services. The High-Level Expert Group set up by the Planning Commission (2011) had recommended that the focus of healthcare provision in the country should be towards providing primary healthcare. It had rightly observed that focus on prevention and early management of health problems can reduce the need for complicated specialist care provided at the tertiary level. As such, the priority of the government should have been to create a robust network of primary health centres (PHCs) with reasonable infrastructure in terms of beds, doctors, nursing staff and medicines, and an effective delivery model. In the absence of this, the poor have to go to private doctors and purchase costly medicines as prescribed by them. In urban areas, general practitioners (GPs) who provided healthcare at a nominal cost in the neighbourhood are vanishing fast and are being replaced by specialists (MDs) who charge multiples of what a GP would charge for consultation (which invariably included medicine). In rural areas, even where there are PHCs, there are no doctors to run them. Due to the lack of infrastructure, both at the PHC as well as in the village, to professionally and personally engage them, the qualified doctors are not ready to work in rural areas. The skewed distribution of doctors in rural and urban areas indicates this basic malady.

The private sector consists of 58% of the hospitals in the country, 29% of beds in hospitals, and 81% of doctors (Thayyil and Jeeja 2013). According to the National Family Health Survey–3, the private medical sector remains the primary source of healthcare for 70% of the households in urban areas and 63% of the households in rural areas. A study conducted by the IMS Institute for Healthcare Informatics in 2013, across 12 states in over 14,000 households indicated a steady increase in the usage of private healthcare facilities over the last 25 years for both outpatient and inpatient services, across rural and urban areas (Kannan 2013). Some studies observed that healthcare providers in the private sector tended to extract more money by making patients stay for longer durations and conduct more diagnostic tests compared to their public counterparts (Basu et al 2012). The thrust of Modicare on hospitalisation does not address the needs of the poor whose OOP expenditure is mostly spent on buying medicines, private hospitals and diagnostic tests and not on hospitalisation. Such schemes covered only 4% of illnesses, and yet consumed a quarter of the state’s health budget (Sengupta 2018).

Intent versus Actions

The NHP does speak of establishing 1.5 lakh “health and wellness centres” as the foundation of India’s health system, which is certainly laudable as it will bring healthcare closer to people. They do address real health issues of people. But, it was allocated just ₹ 1,200 crore in the budget and expected contributions of the private sector through corporate social responsibility (CSR) and philanthropic institutions in adopting these centres. This is the much-touted model of public–private partnership that lies behind most of Modi’s public schemes. The NHP may thus be counting on private initiatives as it is not at all reflected in Modi’s budget allocations. The allocation of ₹ 52,800 crore for health in 2018–19 was merely 5% higher than the revised estimate of ₹ 50,079.6 crore in 2017–18. It is estimated that to meet the NHP objectives, the governments, both central and state, should increase their total allocation towards health to ₹ 8 lakh crore, up from the current ₹ 2 lakh crore by 2025, which means the central government health budget alone should increase at least 20% year-on-year for the next seven to eight years. There is no evidence of that happening yet.

The same could be said of the AB–NHPS. It is faulted by many public health experts for its underestimation of resources. According to them, the actual fund needed might be as high as ₹ 2.5–₹ 3 lakh crore. Many private hospitals, including the Indian Medical Association, problematised low package rates for various procedures and interventions. Even after conceding the volume discounts, the insurance premium estimated by Niti Aayog at ₹ 1,000–₹ 1,200 per family appears too optimistic when compared to Andhra Pradesh’s existing Aarogya Raksha plan, which costs ₹ 1,200 per individual for ₹ 2 lakh cover for little more than 1,000 diseases. Even if we were to take it to be valid the scheme would entail ₹ 10,000–₹ 12,000 crore every year as against the allocated ₹ 3,333 crore. Even factoring in states’ contribution (40%), the allotted fund adds up to only a portion of the required amount. The other imponderable is its assumption that it will subsume existing health schemes of the states. Whether the states will really forsake their political branding of such a pro-people scheme is a vital question that could be answered only by the unfolding politics.

Like any of Modi’s schemes, the AB–NHPS may be a good concept but has been launched without adequate preparation. The issues relating to funds may be covered up by the government, but how will it create doctors and hospital beds? Modi’s own economic adviser, Bibek Debroy, had sensibly admitted that the scheme would take 20 years to be fully rolled out (Iyer 2018). There are other issues too—no protection for outpatient department or medicine expenditure, lack of public health infrastructure, workforce, quality, insurance frauds, excessive diagnostics and interventions by private sector, overcharging, etc—which are hanging without any certain answers. What is certain, however, about the AB–NHPS is that it will channel huge public funds to the private coffers of the insurance companies and private hospital chains, with questionable gains to the target population.


Basu, Sanjay, Jason Andrews, Sandeep Kishore, Rajesh Panjabi and David Stuckler (2012): “Comparative Performance of Private and Public Healthcare Systems in Low- and Middle-income Countries: A Systematic Review,” PLOS Medicine, Vol 9, No 6, pp 1–14.

Ghosh, Soumitra and Nabanita Datta Gupta (2017): “Targeting and Effects of Rashtriya Swasthya Bima Yojana on Access to Care and Financial Protection,” Economic & Political Weekly, Vol 52, No 4, pp 61–70.

Iyer, Sriram (2018): “It May Be 20 Years before Modicare Reaches All of India’s Poor,” 7 March,

Kannan, Ramya (2013): “More People Opting for Private Healthcare,” Hindu, 31 July. 

Sengupta, Amit (2018): “Modicare: A Problem or A Panacea?” Business Line, 30 March.

Thayyil, Jayakrishnan and Mathummal Cherumanalil Jeeja (2013): “Issues of Creating: A New Cadre of Doctors for Rural India,” International Journal of Medicine and Public Health, Vol 3, No 1, pp 8–11.

Updated On : 19th Oct, 2018


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