On 23 September 2018, India’s Prime Minister Narendra Modi announced the launch of the National Health Protection Scheme or “Modicare” (PM-JAY; Pradhan Mantri Jan Arogya Yojana – Ayushman Bharat), a dual-pronged health development plan focused on expanding insurance coverage as well as improving access to care. With the plan crossing the 100-day threshold as 2019 gets underway, states continue to cement collaborations with the central government to implement the plan nationally and enrollment is gaining steam among both patients and health providers. With continued progress, the plan holds the potential to be a game changer for the Indian healthcare system. For the international life sciences industry, new opportunities for strategically priced offerings may be found as the scheme takes shape.

India’s largest government-sponsored healthcare scheme, Modicare was launched with a goal of providing treatment and health insurance coverage for nearly 100 million vulnerable and underprivileged families, accounting for roughly 40% of the Indian population. The initiative caters to the needs of the urban and rural poor by improving access to quality healthcare services at secondary and tertiary levels, with the goal of improving health outcomes and overall quality of life in a continued move toward universal health coverage.

The Modicare scheme is comprehensive, covering 1,400 illnesses, including pre-existing and serious conditions such as cancer, heart ailments, kidney and liver disorders and diabetes. The annual insurance amount of up to INR 5 Lakh (~US$7,000) per household covers all interventions, medications and pre-hospitalization expenses. Because the scheme is flexible, beneficiaries can take advantage of services in any participating states, which also includes more than 13,000 government approved public and private hospitals across the country. Modicare offers cashless services upon producing an insurance card and patients therefore need not undergo the hardship of paying out-of-pocket for expenses. As pre-existing and many chronic diseases are covered in the scheme, it will also better serve the sizable population that is unable to afford higher-premium private health insurance.

Among the challenges to Modicare meeting its coverage expansion objectives, authorities will most likely need to adjust the existing reimbursement framework for health care providers. Provider payment will be based on a prospective government-determined package rate tied to the type of procedure and therapeutic category. Representatives for a range of stakeholders from physicians to private hospitals have questioned the viability of the scheme’s current reimbursement rates, particularly for small- to medium-sized facilities. Overcoming this challenge will be critical as Modicare targets widespread participation of private facilities as an essential element of successful expansion given disparities in access to public facilities across the country.

Modicare follows on the heels of several large-scale health insurance plans targeted toward specific populations in India in recent years. So far, these plans have succeeded in increasing enrollment, but with coverage that is often broad but not deep. Recent studies have found the design of India’s previous universal health schemes on which Modicare is modelled have yet to truly limit the burden of catastrophic health expenditures. Instead, many patients find themselves paying out of pocket for additional billed services at private facilities. The government should develop proper systems to track these instances as well as to monitor outcomes and prevent abuse of services to help ensure the program’s long-term sustainability. In order to truly curb improper billing practices, the government will also need to better standardize treatment guidelines across hospitals.

If successfully implemented, Modicare would represent a world-leading experiment in health coverage expansion, reaching upwards of 500 million individuals. This would also drive increases in India’s traditionally very low public healthcare expenditure, which currently sits at roughly 1% of GDP. It would also potentially significantly reduce high out-of-pocket health expenditures in the country, which at 65% are double the global average. That said, enthusiasm may be tempered by questions about continued funding commitments. As might be expected, Modicare is anticipated to cost federal and state treasuries considerably—roughly $1.7 billion per year—with funding set to be increased in line with growing demand.

For the life sciences industry, discussions surrounding the need for sustained funding underscore an emphasis on cost containment that could be expected to limit access to innovative treatments. Nonetheless, opportunities exist for product strategies designed to respond to Modicare’s twin goals of improving both access and quality of care. Major pharmaceutical firms have already signaled interest in offering lower-cost versions of their products under the new health scheme to take advantage of the expanded patient pool. However, the government will need to continue to tweak its health policies in order to facilitate uptake of these products and shield them from further price reductions.

Whether funding commitments keep pace with the system’s escalating requirements will likely be the central driver of Indian healthcare reform’s ultimate success or failure. And of course, the government would still need to expand health insurance to the remainder of the population to achieve truly universal health coverage. Still, India stands on the verge of a leap forward in health coverage, should the political (and financial) determination be found.


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