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MODICARE

Modi’s ambitious health policy may dwarf Obamacare

By Commentary

Let’s call it Modicare.

After all, prime minister Narendra Modi’s plan to offer universal healthcare under its National Health Policy (NHP) 2015 is so ambitious in its scope and delivery that it even dwarfs Barack Obama’s Obamacare.

The US president had to fight, cajole, bully and co-opt some of the strongest lobbies in his country to be able to operationalize his healthcare plan. But Modi came out with the draft of his policy without any fanfare, unlike many of his other grand schemes.

Perhaps, the Modi government is wary of the lobbies bombarding it before the policy—that impacts 1.25 billion Indians—is finalised.

The government claims that 63 million people have been driven into poverty due to the high cost of healthcare. So here’s what it is proposing instead.

A $50 billion bill

Till now healthcare services from the government were targeted at rural areas and more specifically at the poor. The NHP shifts to universal healthcare, which means that everyone irrespective of income, age and employment will be covered by healthcare services.

The Modi government wants to more than double the healthcare expenditure from 1.04% to 2.5% of the GDP. The crucial question here is: Where will this money come from?

While Obamacare used tax credits and insurance to ensure coverage for its citizens, the NHP talks about a healthcare tax. But that still does not explain how it will ensure the delivery of services.

The proposed healthcare tax is fairly restricted in its application. As per its definition, it will be a part of excise tax on items such as liquor and cigarettes.

A back-of-the-envelope calculation shows that the government needs $50 billion (Rs3,12,500 crore) to reach 2.5% of the GDP. There is no way any single tax can mop up that kind of money.

Public vs. private

The NHP envisages the government as the biggest buyer of healthcare services in the country. That means every individual will end up buying his or her healthcare services through the government unless and until he or she consciously chooses to opt out and pay for better facilities.

Private sector healthcare providers, therefore, will have to reconfigure their business models, especially if they want to cater to the masses.

Private healthcare industry is a $40 billion (Rs2,50,000 crore) industry in the country. Private sector comprises 70-80% of total healthcare services in the country. Indian private healthcare industry attracted $2 billion (Rs12,500 crore) in 2012-13. The International Finance Corporation, a private equity arm of the World Bank, claims that India is the second most attractive destination in the world for its investment in health.

Last few years the fund flow to hospitals increased because healthcare is a recession proof industry. Moreover, there were impressive profits made, because there is so far no control over the prices of medical services.

Public healthcare is free for people below the poverty line. But public healthcare services are just 20% of the total market. The rest is controlled by the private. Therefore, the general public is at the mercy of pricing dictated by the private healthcare service providers.

Even under Obamacare, pricing is a huge challenge, but quality of services in healthcare is controlled and regulated in the US. In India, however, there is no control over prices, and there is no control over the quality of services provided. Hence, patients do not know why a premium is being charged, and whether it is justified or not.

This may change with the NHP 2015 since the government as a single (and the largest) buyer will negotiate harder. Moreover, as the buyer is the government, we might also see regulatory oversight on pricing coming in.

Where is the system?

The NHP also proposes a shift from free healthcare to prepaid care.

The underlying concept is that the population will pay in the form of healthcare tax on the lines of the education cess. A portion of the excise tax on cigarettes and liquor will flow into the healthcare cesspool.

This shift means that the citizens are already paying for the availability of healthcare. Therefore, the NHP 2015 proposes that they be provided universal access to free drugs and diagnostics.

Obamacare, on the other hand, has opted for insurance-backed cover that provides affordable healthcare. Obamacare gives tax credit to families to buy healthcare insurance that covers the whole family without prejudice to past illness, employment or age. It is a federal government plan, which envisages that every state will set up an insurance exchange, so that citizens in its state can be covered by insurance. The institutional mechanism also envisages the state government facilitating the tie-ups between insurance companies, healthcare service providers and patients.

The NHP, however, does not talk about the way or the system that will have to developed to finally deliver such a huge promise. It also leaves the whole insurance industry out of the discussion, except pointing the insurance industry’s corrupt nexus with private hospitals.

Critical care and costs

The price of drugs, especially for life threatening drugs, is an important area for any affordable healthcare plan. The NHP raises the issue of affordable prices of drugs and says “that it is facing opposition from certain stakeholder.”

In other words, the NHP 2015 is hinting that the pharma lobby is at work here, while clearly asking for reforms.

Although the biggest and, by far, the most ambitious healthcare policy India has even seen, the NHP could still see some dilution as it moves from a draft to a final adoption. Some of the questions we raised in our article may find some solutions as the draft is discussed and debated further.

Whether it is eventually known as Modicare, or some other moniker, one thing is clear—India needs a thorough overhaul of its failing healthcare system.

Follow Yatish on Twitter @yatishrajawat. We welcome your comments at ideas.india@qz.com.