PM-JAY Scheme of Ayushman Bharat (launched in 2018)

Benefits coverage under various government-funded health insurance programs in India has traditionally been capped at INR 30,000 to INR 3,00,000 per family per year, resulting in a fragmented system. PM-JAY provides cashless coverage of up to INR 5,00,000 per year for specified secondary and tertiary care conditions to each qualified family. The policy covers all expenses associated with the following components of the therapy.

• Medical examination, treatment, and consultation
• Pre-hospitalization
• Medicine and medical consumables
• Non-intensive and intensive care services
• Diagnostic and laboratory investigations
• Medical implantation services (where necessary)
• Accommodation benefits
• Food services
• Complications arising during treatment
• Post-hospitalization follow-up care for up to 15 days

The benefits of INR 5,00,000 are available on a family floater basis, which means they can be utilized by one or all family members. The RSBY had a five-member family cap. However, in light of the lessons learned from such programs, PM-JAY has been constructed in such a way that there is no restriction on the size of families or the age of individuals. Additionally, pre-existing disorders are covered from day one. This means that any eligible person who was previously covered by PM-JAY will now be able to receive treatment for all of their medical issues under this program beginning on the day they enroll.

Why PM-JAY: A Background

Over the last few decades, the world’s attention has been focused on India, as its economy has consistently ranked among the world’s top three fastest-growing economies. Despite great progress in various sectors, India is still classed as a Lower Middle-Income Country (LMIC) by the World Bank, mostly due to inconsistent socioeconomic and health statistics. 

According to statistics, more than 20% of India’s population still lives on less than $1.9 per day (2011 PPP). According to a World Bank prediction, more than 34% of India’s population will be between the ages of 15 and 35 by 2021. India can be quite hopeful about sustained economic growth for a few more decades until a greater reliance ratio creeps in.

However, the apparent benefits of a larger demographic dividend are jeopardized by India’s epidemiological change, which has created an unprecedented “triple burden of sickness.” While the quest to eradicate major communicable diseases continues, the population continues to endure a disproportionate burden of non-communicable diseases (NCDs) and injuries. This results in a sustained increase in the demand for health care.

However, with a total population of over 1.3 billion, India’s provision of adequate and cheap healthcare falls short. The data demonstrate an overwhelming preference for private health care services, which account for approximately 70% of all visits for health care requirements in India and account for 50% of total hospital beds. However, the majority of private-sector providers are extremely modest on an individual basis (with less than 25 beds). Additionally, they are unregulated, have variable levels of care, and are concentrated in large metropolises or urban neighborhoods, leaving a significant gap in health services for India’s disadvantaged people.

However, as the world’s second most populated country, India’s public hospitals are inevitably overworked. Their utilization varies considerably, and they frequently face difficult constraints due to a lack of appropriate money, a paucity of educated health personnel, and an unpredictable and frequently deficient supply of pharmaceuticals and equipment, all of which impair their operation.

One of the primary causes of this condition is the country’s public health care system’s continual underfunding. Over the previous two decades, India’s overall health expenditure has been stable at around 1.2 percent of GDP (Source: National Health Accounts, 2015). India spends only 21% of its overall health expenditure on government revenue and up to 62% on out-of-pocket expenses (Source: National Health Accounts, 2015). As a result, it has been determined that rising health care costs, combined with high out-of-pocket expenses, are a significant source of poverty in India.

Not only does it keep people impoverished, but it also reintroduces nearly 6 crore Indians to poverty each year. The following graph illustrates this scenario succinctly by comparing the OOP to overall health expenditure over a two-decade period.

Historically, the Central and various State Governments have attempted to enhance demand-side financing by introducing a variety of government-funded health insurance plans. The Rashtriya Swasthya Bima Yojana (RSBY) was launched at the government level with an annual benefit of INR 30,000 per family and covered primarily secondary care hospitalization, but many State programs covered tertiary care diseases. However, these plans operated independently of the country’s wider health care system, significantly fragmenting risk pools. Additionally, none of these programs were connected to basic health care.

To address these issues, the Indian government took a two-pronged approach through Ayushman Bharat. The strategy’s first component was illness prevention and health promotion, with the goal of containing the growing epidemic of non-communicable diseases. This was to be accomplished by converting the existing network of Sub-Centers and Primary Health Centers into Health and Wellness Centers (HWC). Over the following few years, about 150,000 HWCs will be established throughout the country, with the goal of reducing the overall illness burden and hospitalization needs of the population.

The second component was the launch of the Pradhan Mantri-Jan Arogya Yojana (PM-JAY), which aims to establish a system of demand-driven health care reforms that meet the immediate hospitalization needs of eligible beneficiary families in a cashless manner, thereby shielding the family from catastrophic financial shock. In the long run, the PM-JAY hopes to enhance the availability of its services through its incentive system. The private sector is projected to expand in unserved parts of Tier-2 and Tier-3 cities as demand increases.

PM-JAY will create an incentive for public hospitals to prioritize disadvantaged patients and will provide a mechanism for them to collect additional income to upgrade their infrastructure and cover service deficiencies. PM-JAY has absorbed the previous RSBY and also works in conjunction with a variety of state-funded health insurance/assurance programs.

Due to its size, PM-JAY is the world’s largest health insurance/assurance scheme, providing health coverage to over 10.74 crore poor families, or a staggering 50 crore Indians who account for 40% of the country’s poor. It is entirely government-funded and covers a wide array of secondary and tertiary care hospitalizations. PM-primary JAY’s purpose is to reduce catastrophic out-of-pocket health expenditures for its poor population by increasing access to high-quality health care. Further details about its evolution, planning, eligibility, and state-by-state implementation will be explored in the sections that follow.