PMJAY: Average cost per treatment is 2.5 per cent of the sum assured

On 26th November, Dr Harsh Vardhan, Union Minister for Health and Family Welfare (MoHFW) tweeted that he held a meeting with the officials of the National Health Authority (NHA), the implementing body of Ayushman Bharat or Pradhan Mantri Jan Arogya Yojana (PMJAY) to review the progress of the scheme. PMJAY provides free health insurance coverage to over 50 crores or bottom 40 per cent of the country's population. The scheme guarantees health services for approximately 1300 medical conditions with the financial support of up to INR 5,00,000/- per family per year.

In his tweet, the minister also highlighted that, since its launch in September 2018, the scheme has provided over 1.4 crore cashless treatments worth INR 17,500/- crore to the poorest citizens. A visit to the official website of PMJAY (https://pmjay.gov.in) on 3rd December shows that till date, total admissions under the scheme have been 1,43,66,465. It also shows that claims raised were INR7,564 crore (almost INR10,000 crore less than what the minister tweeted).

Assuming the financial numbers tweeted by the MoHFW is the latest updated figure, a simple back of the envelope calculation shows that the average cost of treatment or the money spent is only INR12,500/- per admitted patient.

Number of Admitted Patients	1.4 Cr
Total Cost of Treatment (Cashless)	Rs. 17,500 Cr
Cost per Treatment (Total Cost / No. of Patients)	Rs. 12,500

If this is the average cost of treatment in the two years since the launch of the scheme and after over one per cent of the population receiving the medical assistance, the question is does the scheme need a maximum coverage of INR5,00,000 per family per year? A study by Shankar Prinja et. al (Designing a Framework for Benefit Packages - Achieving Universal Health Coverage in India) shows that a cover of up to INR3,00,000 will essentially cover 100 per cent of the conditions in the deprived families in rural areas. If an insurance cover of INR3,00,000 is able to eliminate impoverishment, then it is worthwhile to ponder whether we need to provide a benefit cover as high as INR5,00,000?

In addition, studies have also shown that having health insurance has led to excess/unnecessary consumption of medical services leading to issues of moral hazard, both by the provider and receiver of such services. Higher benefit packages may be an incentive for empanelled hospitals, especially private facilities for over prescription and overdiagnosis and consumption of health services. In the absence of a strong regulatory mechanism, the threat of moral hazard looms large, especially since PMJAY is a cashless scheme.

Another important area of concern should be the premiums to be paid to insurance companies for providing the desired cover. Some estimates basis the experiences of the successful implementation of state-run schemes suggest that the premiums to be paid for a scheme like PMJAY will not be less than INR3,000 per household. In a scenario where the average cost of treatment is INR12,500, why pay such hefty premiums and drain the exchequer and allow profiteering by private companies?

As much as PMJAY is important in meeting the healthcare financing needs of the population, a better design will help it achieve efficiency and maybe even allow the government to provide a much-needed shield to many more citizens of the country without draining the exchequer.