India’s finance minister recently announced a new Health Insurance scheme during his budget speech. The proposed scheme, which has been dubbed as Modicare, will bring poorest ten million household in the country under the social security umbrella. Modicare would provide rupee five lakh cover to the poorest ten million households in the country. The premium cost will be paid by the government, where State governments will have to make up to forty percent contribution.
Modicare is likely to subsume all existing national or state level health insurance schemes. While details are eagerly awaited, it is likely that the scheme will be implemented via trusts or public sector insurance companies. However, it is clear that this will be the biggest such healthcare scheme across the globe. By any measure, implementation of this scheme could bring a seismic shift in the health insurance and healthcare industries in the country.
Firstly, the sum insured promised per household surpasses sum insured under many corporate group policies. It will bring the poorest households in the country at par with the corporate employees in terms of health cover. The parity can have massive socio-economic impact in a country where the poor are often one heath scare away from total bankruptcy. Out-of-pocket (OOP) expense on medical care in India are in excess of sixty percent compare to global average of eighteen percent. As Modicare starts to replace some of the OOP expenses, it could result in lowering household expenditure and thereby boosting consumption. It will have a tremendous impact in reducing health inequality across socio-economic strata.
Secondly, healthcare providers will now find it viable to set up hospitals and clinics even in villages and small towns. With increased ability to pay, public will not have to flock to government hospitals in the big cities. Modicare will create healthcare demand and boost the paying capacity in small towns and villages. Healthcare projects which were hitherto unviable will become viable across the country. Capital investment in new healthcare project will boost local economies and create jobs. Indirect benefits of the proposed scheme could reach healthcare, education, construction, medical equipment and real estate sectors.
Lastly, the scheme will require a step change in the operating model of health insurance in the country. The proposed scheme will subsume Rashtriya Swasthya Bima Yojana (RSBY), which was one of the most ingenious social schemes launch by the government. Amongst its many innovation, it provided a blue print for standardising the healthcare cost across the country. RSBY provided a mandate to set fixed payment against each expenditure type. Standardised cost structures across healthcare providers is the holy grail for the insurance industry. Automatic linkages between care provider and insurance companies could help streamline the claim processes with standardised payments. It will enable insurers to provide truly cashless services through a fully inter-connected healthcare ecosystem. Cashless payments with connected ecosystem will have a transformational effect on entire health insurance sector.
Needs supporting digital healthcare ecosystem
The impact of Modicare on healthcare industry could be substantive. It could finally bring India’s healthcare providers and insurers at par with the rest of the world. Most developed nations today have fully connected patient databases and online payment ecosystems. As a result, the insured patients rarely have to make any payments beyond the co-pay requirement. Once the proof of insurance is provided, hospitals can directly connect with the insurers and receive payments in a time-bound manner. Modicare would require a similar system for India to operationalise a scheme on such scale.
At TrueCover, we whole heartedly welcome the initiative by the government. Before the launch of Modicare, government will need to streamline a number of operational issues. Healthcare cost will need to be standardised and premiums structured accordingly. Digital Insurance and connected ecosystem will play a key role in the success of Modicare. But the announcement itself has given hope to millions of consumers. Along with the direct beneficiaries, all health insurance buyers stand to gain in the long term as the digital future of insurance becomes a reality.