High coverage, high enrollment, but a persistent ‘health protection gap’: Evaluating Modi’s PMJAY

It’s 2018 in India. Your average per capita income is Rs 91,921 a year and 16 percent of this, Rs 20,135, could go towards a single hospitalisation. You’re unlikely to have insurance either – at this point in time, just 19.1 percent of urban Indians and 14.1 percent of rural Indians have medical insurance.

And yet you’re one of the lucky ones. For India’s poorer families, medical expenditure is far more devastating, considering they are unlikely to earn even a fraction of this income in the first place. And more than 80 per cent of India have no way to pay for their hospitalisation except through out-of-pocket expenditure.

This is the context in which the Narendra Modi government launched the Pradhan Mantri Jan Arogya Yojana, or PMJAY, in 2018.

PMJAY is the world’s largest publicly funded health insurance scheme, providing secondary and tertiary care hospitalisation services to about 15.5 crore poor and vulnerable families in India. These 60 crore beneficiaries form the bottom of the population (in terms of income and assets) and are the most likely to not get medical help because they can’t afford it.

The help and hope offered by PMJAY to these families can’t be overstated – but there are drawbacks.

One, it does not cover costs incurred on out-patient care, which is 40-80 percent of all out-of-pocket medical expenses incurred in India. 

Two, PMJAY is a fully government-funded programme where the central government pays 60 percent of total costs for most states, while state governments pay the rest. However, the actual split is roughly around 28 percent by the centre and 72 percent by the states, as we’ll explain later in the story.

Three, despite PMJAY and its ambitions, about 40 crore people – 30 percent of the population – still have no medical coverage at all. 

So, what’s gone wrong and right with the Modi government’s flagship insurance programme? How does it stack up to similar initiatives by the former UPA government? Which states lag in terms of coverage? Are as many women as men getting access?

Let’s find out.

A little context 

First, some background on how PMJAY works.

PMJAY provides beneficiaries with a cover of Rs 5 lakh per family per year for secondary and tertiary care hospitalisation at public and private-empanelled healthcare providers.

Benefits under PMJAY are portable across the country. A beneficiary can visit any empanelled private or public hospital in India to avail of cashless treatment even if they’re signed up for the scheme in a different state. 

One of the stated goals of the scheme is to “mitigate catastrophic expenditure on medical treatment”. Scheme beneficiaries can avail of nationwide cashless access to treatments for approximately 1,929 procedures, covering up to three days of pre-hospitalisation and 15 days of post-hospitalisation expenses. 

Other costs related to treatment – like drugs, supplies, diagnostic services, physician’s fees, room charges, surgeon charges, and OT and ICU charges – are also covered. All pre-existing conditions are covered from day one with no cap on family size and age. But, as mentioned before, PMJAY does not cover out-patient care.

The primary criteria for PMJAY eligibility were derived from the Socio-Economic Caste Census of 2011, which identified poor and vulnerable families in rural and urban India based on a list of depravity criteria. Based on this data, the scheme targeted 10.74 crore families and around 50 crore individuals. 

By 2022, the beneficiary base was broadened to cover 12 crore families by including households enrolled under the National Food Security Act for foodgrain distribution. Additionally, it included families covered in the Rashtriya Swasthya Bima Yojana (launched by the UPA government in 2008) but who were not present in the census database.

Based on additional criteria added by certain states and union territories, the list of eligible beneficiaries as of 2023 has been expanded further to about 15.5 crore families. States have to pick up the full tab for any beneficiaries added beyond the criteria established by the central government (SECC 2011, NFSA, and RSBY). At least 23 states have opted for this approach. Through this, they either reach a much larger number of people or provide coverage of more than Rs. 5 lakh or both.

States can implement PMJAY either under a trust mode (the state directly implements the scheme without the involvement of an insurance company), an insurance mode (an insurance company is selected to manage the scheme), or a hybrid mode that combines aspects of both.

As of 2024, 23 states and UTs have opted for the trust mode, seven for the insurance mode, and three for the hybrid mode. West Bengal, Odisha and Delhi have opted out of PMJAY entirely, citing their own state-level schemes.

The finances of PMJAY

In most states and union territories with a legislature, the central government bears 60 percent of the cost and the states 40 percent. In Himachal Pradesh, Uttarakhand, Jammu & Kashmir, and the seven Northeastern states, the sharing ratio is 90:10. For states and UTs without a legislature, the central government may contribute up to 100 percent on a case-by-case basis.

However, there is an important caveat to this cost structure.

The central government defines a ceiling rate for insurance premiums paid per family which sets a maximum limit to the central share of contribution. The centre’s contribution is roughly 60 percent of this rate in line with its cost-sharing formula described above. As of 2023, this cap is Rs 1,500. If insurance companies or state agencies charge higher premiums than the cap in their respective territories, the extra amount is borne by the states and UTs.

From 2019 to the end of 2023-24, the centre spent Rs 23,575.89 crore on PMJAY. For the sake of simplicity, we’ll assume all states and UTs paid 40 percent, which means states and UTs paid a total share of Rs 15,717.26 crore. This gives us a total government expenditure of about Rs 39,293 crore on PMJAY.

We’ll assume further that all this money was spent on insurance and state agency premiums alone, with administrative costs being negligible.

Now we come to the crux of the matter. As of March 2, 2024, the PMJAY dashboard says Rs 80,000 crore was spent on authorised hospital admissions. This gives us a claims ratio of over 200 percent – meaning more than twice the amount paid as premiums (by centre and state) was spent on hospitalisations. How could this have happened?

So, if the centre spent only Rs 23,575 crore and the total expense was Rs 80,000 crore, the only logical implication is that the remaining amount was borne by states, UTs and payouts by insurance companies. No insurance company will take consistent losses if the premiums paid to them don’t cover the payouts being made. And we already know the centre capped its contribution to insurance premiums.

Using this maths, it is reasonable to conclude that the actual funding split for PMJAY is around 72 percent by states and 28 percent by the centre – a significant departure from the indicative 60:40 split. 

In principle, this is perfectly acceptable as health is a state subject. However, in practicality, this does not point to a long-term financially viable scheme. The fiscal burden of this scheme is bound to waiver the state governments’ resolve at some point. The additional burden on state finances  also assumes greater significance given the ongoing fiscal tussle between the centre and states. 

Hits and misses 

Now, let’s turn to how PMJAY fares under various metrics.

Scheme coverage

The number of families verified and successfully enrolled by each state is directly proportional to the funds that the centre will release to the state under the programme. Thus, it is in every state’s interest to enrol as many eligible families as they can under the centre’s criteria.

As discussed earlier, beneficiaries for the scheme have been identified using data from the 2011 Socio-Economic Caste Census, the National Food Security Act and the Rashtriya Swasthya Bima Yojana. States have also been given considerable freedom to identify, verify, and enrol eligible families using their best available data.

Twenty states chose to use only Census or SECC 2011 data. Others like Andhra Pradesh, Tamil Nadu, Kerala and Chhattisgarh relied on data prepared by their civil supplies departments. Yet others relied on data sources like the Public Distribution System in the case of Jharkhand, or the state statistical outline in the case of Himachal Pradesh. The full list of how different states identified eligible families can be accessed here.

But while the original coverage aggregate target of 12.09 crore beneficiaries has been superseded at the national level, there is a considerable difference in performance at the state level.

States and UTs like Puducherry, Uttarakhand and Ladakh verified more than 1.5 times the target provided to them. Others like Uttar Pradesh, Madhya Pradesh and Haryana, though usually basket cases of misgovernance, performed well by superseding their target by more than 25 percent. In fact, most states and UTs superseded or nearly fully met their targets, barring these three groups of states:

(1) Punjab, Mizoram, Jharkhand, Chandigarh and Nagaland with verification rates of 80 percent.

(2) Goa and Manipur with verification rates of 60-70 percent.

(3) Sikkim, Arunachal Pradesh, Tamil Nadu and Bihar with verification rates languishing at 50 percent or below.

The worst performance on this metric has been clocked by Tamil Nadu and Bihar with verification rates of 39.66 and 32.15 percent, respectively. 

The case of Tamil Nadu is most curious as it is one of the wealthiest states in the country with an elaborate welfare setup. But this anomaly is explained by the state’s own Chief Minister's Comprehensive Health Insurance Scheme which gives health cover to an estimated 1.57 crore families, more than twice its target estimate under PMJAY.

The case of Bihar is more troublesome. The state has verified only one-third of its target while it has no complementary scheme at the state level. It recently announced setting one up but that would come into play only next year. 

Similarly, Manipur and Nagaland have state-level schemes that target another one lakh families each. This might explain their below-average performance for PMJAY.

Cards issued

The Modi government has been racing against time to issue as many PMJAY cards as possible before the Lok Sabha polls. The interactive chart below summarises the performance of different states in the issuance of PMJAY cards.

Nineteen states have performed better than the national level of 57.46 percent, issuing about 31 crore cards. Fourteen have fared below this average. This includes typically better-governed states like Kerala, Tamil Nadu, and Karnataka. The high enrollment in their state-level schemes could explain these states’ low issuance of cards against their PMJAY target.

However, the worst-performing state here too is Bihar. The state’s performance is horrendous at a mere 13 percent of the cards issued against the target.

Hospitals empanelled per lakh beneficiaries

Under PMJAY, 17,135 public and 12,626 private hospitals have been empanelled for a total of 29,761 hospitals. The average number of beds in these empanelled hospitals is 48. This works out to an average of 14.28 lakh beds for 31.63 crore beneficiaries – about 4.5 beds per 1,000 people. 

As low as it seems, this number is still many times better than the national average of 0.6 beds per 1,000 people.

The interactive chart summarises the number of hospitals empanelled per state against the beneficiaries targeted and enrolled. At an all-India level, there are about 9.41 hospitals per lakh of beneficiaries enrolled. Twelve states are below the national average, including Kerala. 

The case of Kerala is interesting because it has 1.13 “government” hospital beds per 1,000 people. The state’s public health infrastructure alone (without accounting for private care available) puts it at nearly twice the national average of 0.6. However, the number of hospitals in the state is just 3,556  for a population of nearly 3.51 crore people. This implies 10.13 hospitals per lakh people in the state. On the face of it, this number seems low. However, when juxtaposed with the bed-to-population ratio, it likely points to an average hospital in Kerala having a much higher bed capacity. The same logic likely explains the state’s low rank on the hospital empanelment metric under PMJAY.

The rest fare better, with Karnataka, Sikkim, Tamil Nadu and Arunachal Pradesh being the best.

An important aspect is the uneven distribution of empanelled hospitals within a state. For example, in Tamil Nadu, Thoothukudi district has 19.59 lakh people and Chennai district has 49.86 lakh people, or 2.5 times more people. Chennai also has nearly 3.8 times as many empanelled hospitals as Thoothukudi. This variance in access to care is noticed throughout the country. 

Another statistic of concern is that over 25 percent of all empanelled hospitals in the country are inactive. That needs to be looked into because it results in poor access to care despite signing up for benefits of the scheme. 

Authorised hospital admissions by state

India’s average hospitalisation per 1,000 people was 29 in 2019-20. However, average hospitalisation per 1,000 people is nearly 160 under PMJAY. This is a significant outcome that the government can be proud of. It implies that a larger proportion of those in need of hospital care in India, especially from the lowest economic strata of our society, are able to get it.

Better-governed southern states lead on this metric, while the usual suspects struggle to keep pace. Big states like Maharashtra, Uttar Pradesh, Bihar, Madhya Pradesh, Haryana and Telangana are all below the national average. This further underscores the need for spreading awareness in these states regarding the benefits of these schemes.

Gender

Research into previous government funded health insurance schemes reveals that women tend to have unequal access and utilisation of their entitled coverage despite having the same benefits as men. 

For example, the Rajiv Arogyasri Community Health Insurance Scheme in undivided Andhra Pradesh indicates that women had a lower share of hospitalisation (42 percent) when compared to men. Data from various districts in Tamil Nadu also reveals a lower utilisation level for women, ranging from 20 to 40 percent.

PMJAY seems to have circumvented the issue of gendered variation in access to care, at least at the national level for which the data was easily available. The share of men and women in the issuance of PMJAY cards as well as hospitalisations is nearly equal. This is a huge accomplishment.

UPA vs NDA

PMJAY is a signature Modi scheme – a scaled-up version of the UPA’s Rashtriya Swasthya Bima Yojana in all aspects. This includes the beneficiaries targeted (12 crore versus 7 crore), coverage provided (Rs 5 lakh versus Rs 30,000 per family), and beneficiary enrolment mechanisms (entitlement versus voluntary).

Aside from its scope and ambition, PMJAY also seems to have beaten RSBY on execution on key metrics.

After five years of its implementation, RSBY managed to issue only about 10.41 crore smart cards to its beneficiaries while PMJAY issued over 28 crore. Similarly, while RSBY funded only about 49 lakh hospitalisations, PMJAY funded over 6 crore. On the metric of empanelled hospitals too PMJAY superseded RSBY by adding 26,901 hospitals, nearly 2.5 times as many.

While some might argue that the relative rapidness of PMJAY’s success stems from it subsuming RSBY and building on top of it using UPA-era digital commons (undeniably true), PMJAY’s ambition and success stand on their own merit. However, as we see in the next section, it is not without its fair share of discrepancies and lacunae. There is plenty of scope for its improvement. 

Discrepancies in the scheme

In August 2023, the Comptroller and Auditor General of India submitted an audit report on PMJAY that highlighted many shortcomings in the scheme.

Some of the key structural deficiencies that the report mentions are quoted below: 

• In several states/UTs, there was a shortage of infrastructure, equipment, doctors, etc. Available equipment was found non-functional. Some of the empanelled healthcare providers neither fulfilled minimum criteria of support system and infrastructure nor conformed to the quality standards and criteria prescribed under the guidelines. 

• In several states/UTs, mandatory compliance criteria for empanelment of hospitals were not fully followed. These related to issues of infrastructure, fire safety, biomedical waste management, pollution control and hospital registration certifications. In some cases, fire safety certificates had expired before the provider’s empanelment under PMJAY.

• Some of the empanelled healthcare providers did not conform to prescribed quality standards and criteria which were crucial to the safety and wellbeing of the beneficiaries and were mandatory minimum conditions for empanelment.

• Anti-fraud cells were not set up in four states and UTs. Meanwhile, claim review committees were not set up in 11 states and UTs, and morbidity review committees in 11 states and UTs.

• State or district grievance redressal committees were either formed after a delay, or without adequate members to carry out their proper functioning, or not set up at all. In cases where bodies were set up, some of them failed to meet regularly.

• Seven states and UTs did not adopt the whistleblower policy to receive complaints related to disclosures on allegations of corruption, medical and non-medical fraud, etc against any stakeholder involved with the implementation of PMJAY.

• Audits were either not conducted or conducted in fewer numbers in 22 states and UTs. 

These findings underline the importance of taking steps to fortify both the quantity and quality of healthcare providers to keep up with the increased demand resulting from PMJAY. They also highlight the challenges of formulating nationwide schemes given highly uneven resources, capabilities and even political will within different states.

The main administrative deficiencies pointed out include:

• Instances where hospitals were empanelled but specific treatments were not was noticed across several states.

• Beneficiaries were treated for non-empanelled services. Around 14,000 people were charged by hospitals in such circumstances leading to high out-of-pocket expenditure.

• Registration of multiple beneficiaries against same or invalid mobile numbers.

• Physical verification was not conducted by the district empanelment committee before empanelment of EHCPs in at least three states. 

• De-empanelled hospitals providing care and being compensated for it post exclusion from the scheme. 

Most of these findings are not egregious. Also, some administrative irregularities are inevitable given the scope and scale of the scheme. As the scheme guidelines evolve, many of these issues will likely improve. 

The government’s response to the CAG report wasn’t this sanguine though. In fact, in a rare instance of public inter-agency friction, the government issued a press release to rebut the CAG report. There were even reports that the officials responsible for the report were transferred shortly. Such needlessly angry reactions show the government in poor light and tarnish the image of an ambitious scheme that is otherwise making a real impact on the ground. 

Fixes for the future

As the Standing Committee on Health noted in its report on the Ayushman Bharat scheme, there is much for India to learn from the experience of Latin American countries and the US, as far as universal health coverage goes. 

While insurance schemes targeted at specific sections of the population might be a good place to start, long-term financial viability and affordability of the system will likely depend on a broader risk pool that includes poor and vulnerable families as well as high-income families. This will prevent the issue of adverse selection and allow for some cross-subsidisation. 

It is also a cause of concern that almost half a decade has passed and only about 57 percent of verified beneficiaries have been on-boarded onto the scheme. States need to catch up on enrolling beneficiaries rapidly. The Standing Committee’s report points to an information, education and communication gap that various stakeholders, including NGOs and civil society, need to help fill. Beneficiaries need to know about their eligibility as well as how and where to exercise their entitlements. 

As enrolment numbers increase and people have more awareness, service usage under the scheme will naturally increase. This will pose a greater fiscal strain on government finances, especially state budgets, given the current structure of the scheme where the central funding has a cap. As costs of the programme inevitably increase over time, governments will need to find the budgetary resources to ensure quality of care does not suffer. As demand increases, governments should also consider investing in healthcare facilities in areas where there is particular paucity. 

As we mentioned at the start of this story, as much of 80 percent of out-of-pocket expenditure is due to out-patient care costs that are not covered under the scheme. This is an area of service enhancement that the government must consider since one of the most pertinent policy goals of PMJAY is to reduce the burden of out-of-pocket expenditure on India’s poorest families, thereby preventing catastrophic healthcare expenditure. 

There are also closer-to-the-ground implementation hurdles that can greatly improve the customer service experience of beneficiaries. For example, in the same report, the Standing Committee found that several empanelled healthcare providers were not offering all specialities available at their hospital under PMJAY even if there was a corresponding package for it. The committee rightly insisted that these specialities be included in a time-bound manner. 

Health insurance fraud is another area of concern. To give some context, the incidence of health insurance fraud in the United States and Europe is estimated to be 10 percent of healthcare spending. In India, that number could be as high as 35 percent – and the National Anti-Fraud Unit of the National Health Agency is only able to detect frauds in about 0.25 percent of total admissions. We need to have more robust fraud detection capabilities that detect unnecessary medicalisation and false medical billing, to prevent costs from spiralling. The practice of following evidence-backed standard critical protocols before recommending procedures, especially those that are medically invasive, should be mandated as far as reasonably possible. 

Finally, let’s expand the scope of the discussion beyond just PMJAY to the larger question of healthcare coverage of the general population. According to Niti Aayog, at least 30 percent of the population (40 crore individuals), referred to as the “missing middle”, are devoid of any financial protection for health. In the absence of a low-cost health insurance product, the missing middle – spread across rural and urban areas – remains uncovered despite the ability to pay nominal premiums. 

There’s another metric that tracks adequacy of health coverage. This is the health insurance protection gap, the subject of this 2023 report by the National Insurance Academy. The health insurance protection gap denotes the disparity between an individual’s total healthcare expenditure and the extent of health insurance coverage they possess. The overall gap for the entire sample was estimated at 73 percent. 

This indicates a significant gap in health protection. It’s likely a consequence of insufficient insurance coverage and escalating healthcare costs, including medical inflation. This protection gap is widespread across class, gender, rural/urban areas, age groups, occupations, etc. It is a truly pan-India problem that nearly 75 percent of Indian households face, despite close to 70 percent of them having access to some form of public or private insurance. 

With the ambitious target of universal healthcare firmly in sight, it is imperative that India figures out a way to insure the missing middle and close the protection gap. After all, that’s what Viksit nations do. 

Infographics by Gobindh VB

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