Is the National Health Protection Scheme good public policy?

India recently announced an ambitious plan called the National Health Protection Scheme (NHPS) to provide government-sponsored insurance to roughly 500 million people or nearly 40% of India’s population. Since the announcement, there has been much debate about two issues. First, does this plan make sense? Second, if it is a good idea, what should the design of NHPS look like? In this op-ed we use insights from our prior studies and those of other experts to inform the debate on both of these questions.

So, is the NHPS a good idea? Definitely yes. There are several reasons. First, India under-invests in the healthcare of its citizens and this is affecting the health and financial well-being of Indians. Out-of-pocket payments for healthcare services are very high in our country (about 70%, according to the National Sample Survey Office, 2014), which causes impoverishment to nearly 7% of our population. Health-financing policy directly affects the financial protection of people when direct payments that are made to obtain health services do not threaten their living standards. So the NHPS should be considered a significant move towards universal health coverage.

Second, while not all insurance programmes are successful, there is sufficient evidence that if implemented well, insurance can save lives and improve financial well-being. For example, one study conducted a rigorous evaluation of the government health insurance scheme in Karnataka called Vajpayee Arogyashree Scheme (VAS). In February 2010, the state government offered VAS to below poverty line (BPL) residents only in the northern part of the state, the scheme was later implemented state-wide. Researchers took advantage of the arbitrary boundary in early implementation of coverage to compare outcomes in neighbouring villages on either side of the line. In particular, they conducted surveys and compared outcomes in neighbouring villages on either side of the boundary drawn between the communities chosen for early versus late implementation. Since the eligibility boundary is arbitrary, early and late implementation villages located just above or below the eligibility threshold are likely to be similar and differences in outcomes across these villages are likely due to differential access to VAS. The study found that VAS lowered mortality for covered conditions for BPL families and erased rich-poor disparities in mortality rates. Most of this reduction was due to fewer deaths from cancer and cardiac conditions, which account for the bulk of VAS claims. They found that people covered by insurance were more likely to seek healthcare for their health issues and symptoms (such as chest pain), had better access to tertiary care hospitals, and had better post-operative outcomes likely due to seeking care at higher quality hospitals. They also found that insurance lowered out-of-pocket medical costs and lowered the chances of having catastrophic expenditures that are likely to push people into poverty.

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