Is Ayushman Bharat going to enlarge the role of the private sector in healthcare?

Patients wait for their turn to consult the doctor at the separate ward for Ayushman beneficiaries at Shri Ganesh Vinayak Eye Hospital in Chhattisgarh Photo: Radhika Merwin / The Hindu BusinessLine

Presenting the Union interim budget for 2019-’20, Finance Minister Piyush Goyal hailed the creation of Ayushman Bharat as a major achievement of the Narendra Modi government. But the design of the “world’s largest health care programme” — as it has been described — has raised the hackles of both state governments as well as that of health activists. In this article, former Union Health Secretary K. Sujatha Rao, who is also the author of “Do We Care? India’s health system" (OUP, 2017), expands on these misgivings. Many states, she points out, have objected not just to the political overtones that have marked Ayushman Bharat’s rollout — with the credit all accruing to Mr Modi — but also to the fact that it provides little room for local thinking in designing implementation strategies to accommodate local conditions, preferences, and cost effective solutions. She also explains how the guidelines will deepen the grip of the private sector and intensify the process of the commercialisation of health service delivery.

The Union government’s much publicised flagship programme, Ayushman Bharat, has evoked mixed responses from several state governments. West Bengal has walked out of the National Health Protection Scheme (NHPS) component of the programme. Telengana, Delhi and Odisha have expressed their reluctance to join it, with the working president of the ruling Telengana Rashtra Samithi (TRS) K T Rama Rao saying in a recent interview, “The Centre is trying to push it down the throat of all states. Why do that?”1

 The misgivings of some of the states to the scheme suggests that the design and architecture of the scheme has implications related to its impact on fostering the principle of cooperative federalism that Prime Minster Narendra Modi said he is committed to. At another level, there is the apprehension that the design may further deepen the control of the private sector on the health system.

As these issues of design impact the financing and future sustainability of the scheme, they need to be deliberated, argued and carefully assessed and the trade-offs fully understood.

Is Ayushman Bharat Hurting Federal Principles?

The NHPS belongs to the existing genre of government-sponsored health insurance programmes, riding piggyback on similar schemes that in the southern states are at a mature stage of implementation. The Centre finances 60 per cent of the costs incurred on the target beneficiaries in the states. It is similar to the Rashtriya Swasthya Bima Yojana (RSBY) in that respect but with the sum assured now a whopping Rs five lakhs as compared with the RSBY’s Rs 30,000: the coverage has enabled expansion to include tertiary care. Then why are some state governments unhappy with the scheme?

The controversies have arisen because of the political overtones that have accompanied the rolling out of the NHPS, its timing and branding: as Mr Rama Rao said, “I see a clear political motive.” Unlike other centrally sponsored programmes, for this scheme, a personalised letter with Mr Modi’s photograph has been sent to over 7.5 crore beneficiaries, ensuring the latter very high visibility. The union government has also mandated that the term AB must precede the state’s name for the programme: taken together, this is perceived as “stealing the credit” from the concerned state government. There is some justification in both these concerns. For one, the state governments are not only funding 40 per cent of the scheme (barring the north eastern and hill states that get 90 per cent funding from the Centre) and bearing the cost and responsibility of its implementation, they are also covering double the number of beneficiaries funded by the central government. For another, furthering the perception that the NHPS is a central government initiative and taking all the credit is like putting salt on a wound as the idea for Ayushman Bharat itself originated in united Andhra Pradesh and was further improved and laboured upon by other state governments.

.. the design (of Ayushman Bharat) may further deepen the control of the private sector on the health system.

The question of who gets the credit may not sound so important in the larger scheme of things. But for political parties going for elections — when the  people’s perception is critical — these are sensitive issues. They also raise questions about Centre–state relations in a federal polity. There are two ways of looking at this issue.

Centrally Sponsored Schemes2

When the Centre and states share the financing of any scheme, they must share credit for any success and bear equal responsibility for failure. After all, the concerned central government ministry is held accountable by the Parliament and the Comptroller and Auditor General (CAG) for outcomes and results for the money released to states. It is in this context that the National Health Agency (NHA), charged with the responsibility of implementing the AB programme, is duty bound to build an institutional architecture right down to the district levels in order to closely monitor its implementation. The NHA has, therefore, come up with comprehensive and detailed guidelines for the contracting and outsourcing of the job to commercial companies that function as third party administrators (TPA). In addition, guidelines to contract companies to detect fraudulent claims are also being put in place. The architecture includes an intermediary State Health Society to be established by the state governments at the state level.

The advantage of the above approach is two-fold. One, it enhances the implementation and institutional capacity for monitoring and administering several aspects of the programme at decentralised levels. It also helps the NHA to keep a close watch on the utilisation of the funds released and the performance in terms of depth and quality at the district level in accordance with the guidelines laid down. Such information is vital for it to be able to implement the vision of a national health insurance programme, such as Medicare or Medicaid in the United States.

The relational power between (third party administrators) and the local health administration, their control over data and their deep pockets can give rise to impulses and tendencies that can harm the building of a balanced health system.

The disadvantage, as seen in other Centrally Sponsored Schemes (CSS), is that standardisation and uniformity in a country that is highly diverse, unequal and disparate, tends to stifle innovation and local thinking in designing implementation strategies for accommodating local conditions, preferences, and cost effective solutions. Standardisation may help Delhi monitor the scheme, but it is costly. The administrative charges of administering such an ambitious institutional structure can be high. In the U.S., such administrative expenses are said to account for almost 25-30 per cent of the total premium value. Then, the TPAs are commercial companies, most probably foreign-owned. The relational power between them and the local health administration, their control over data and their deep pockets can give rise to impulses and tendencies that can harm the building of a balanced health system. 

Another view, that is also an accepted approach for some programmes, implies what Mr Rama Rao alluded to:  “The Centre should say this is your budget. Whether you dovetail it with Arogyashri or you come up with a new scheme I don’t care, but use it.” This would mean that the central government releases funds to the state governments and allows the latter to design and implement the programme. Under such a model of financing, the release of funds would be based on achieving certain milestones and outcomes. This is, simply put, the way Canada funds its states. Such an approach would then challenge the state governments to select the best way of implementation – whether through public hospitals or the private sector, community health insurance programmes or commercial or both, outpatients alongside, and hospitalisation, the stepping up of primary and referral pathways to reduce hospitalisation and so on. The design would be contextualised for the states’ level of development, resource base and epidemiological status and, most importantly, one that is affordable and in keeping with its own level of development and capacity. In such a model, the state would be an active player: it would have a higher level of ownership and accountability, a greater scope to innovate and scale up more rapidly with a far greater variety and combination of approaches to achieve the laid down outcomes and targets. 

The flip side however, is that there is no automaticity in states’ spending on health. There is enough evidence to suggest that central grants are not utilised on time, and delays, diversions to other schemes and misuse or inappropriate use are not uncommon. Telengana itself is a good example to demonstrate this fact: its own insurance programme is affected due to the inordinate delays in releasing funds to hospitals for services rendered. In both Telengana and Andhra Pradesh, central grants are not released till half the year is over. This is because the state in question may have different priorities. Telengana pays more attention to its irrigation projects, Andhra Pradesh to building its new state capital — and both for populist programmes. In other words, in most states, health is still not a central concern. This then means that the central government would need to make the financing framework more stringent to ensure the timely implementation and prompt utilisation of the funds they are meant for.

Ayushman Bharat’s architecture does seem to be tilted towards centralisation and therefore, perceived as encroaching on federal principles.

Since the Seventh Schedule of the Constitution very clearly lays down that the responsibility of providing and monitoring hospital services is that of the state government, Ayushman Bharat’s architecture does seem to be tilted towards centralisation and therefore, perceived as encroaching on federal principles. But then if one takes money, one also has to be bound by the strings attached. This is an important issue and needs to be debated thoroughly for gaining greater clarity.

 

Does AB deepen privatisation? 

The question is tautological as India’s health system is already one of the most privatised in the world, with three quarters of out-patient treatment and two thirds of in-patient treatment being provided by the private sector. In any case, it is unrealistic to expect it to be otherwise. The health sector always had — and will continue to have — private participation. Its nature is what should concern us – one that is changing, and has gained a huge momentum with the introduction of Ayushman Bharat.  

The transition of the private sector in health from the kindly doctor, more concerned with getting his patients well than the remuneration he receives, to a commercial service that a skilled technician is providing to clients in need, has been rapid and one that the state has been ill-prepared for. Commercialisation in service delivery, in education, in drugs and manufacture of devices is in the hands of investors whose bottom line is unabated profiteering without effective checks or balances.

Over-diagnosis, denial of treatment, overmedication, unnecessary surgeries and the use of unethical means with the aim of making profits has become commonplace in the public discourse in India.

In the above context then, the question whether Ayushman Bharat deepens privatisation assumes relevance. This is more so in the absence of accompanying laws and regulations to enhance provider accountability to the patient. The private sector in health has many positives, yet what is universally acknowledged is that it is weak on ethics and patient safety or patient’s wellness. Over-diagnosis, denial of treatment, overmedication, unnecessary surgeries and the use of unethical means with the aim of making profits has become commonplace in the public discourse in India. This has resulted in the virtual breakdown of trust between private providers and patients. The shut down of Max hospital3 by the Delhi government for close to a month without much justification is indicative of the government’s failure to come up with laws, regulations, protocols, systems and procedures that will incentivise good behaviour and make unethical conduct unprofitable and not worthwhile.

In such a messy ecosystem, Ayushman Bharat  has been parachuted as a milk and honey deliverer from maladies. Recently the Union cabinet took a decision to make the NHA an autonomous body to design, implement and monitor the scheme4. Though it is to be governed by a Board chaired by the Union Minister of Health, with the Health Secretary a member, there appears to no link with the Ministry. For example, according to media reports, the Union Health Secretary is to be confined to only answering parliamentary questions on the NHA. Clearly, no lessons have been learnt. The major reason why RSBY failed is because it worked without the active engagement of the Union Ministry of Health. Such an institutional design has the potential to cause severe distortions unless the linkages and functional responsibilities are clearly spelt out.

 

Recent Initiatives of NHA

...the National Health Agency is in the process of introducing certain processes that may undermine the public sector and irreversibly deepen the grip of the private sector – hospitals, insurance companies, third party administrators – and intensify the process of the commercialisation of health service delivery.

First of all, as an autonomous body, created by an executive order and not a law, it is unclear as to whom the NHA is accountable to. It is also independent of any checks and balances and not answerable to adverse implications, if any, on the public health system as a result of its decisions. While the issue of accountability is ambiguous, the NHA is in the process of introducing certain processes that may undermine the public sector and irreversibly deepen the grip of the private sector – hospitals, insurance companies, third party administrators – and intensify the process of the commercialisation of health service delivery.

The discomfort among activists and state health ministries is based on the nature of the guidelines for some initiatives for policy direction that are now in the public domain as they have been reported in the media. There are four major concerns :

…the pricing of services, a contentious issue between the hospitals and the National Health Agency, has been or is proposed to be outsourced to a commercial firm.

1. It is learnt that the pricing of services, a contentious issue between the hospitals and the NHA, has been or is proposed to be outsourced to a commercial firm. Elsewhere, since pricing is the heart of the success or failure of the scheme’s financial sustainability, governments keep a tight control upon and undertakes it in consultation with academic institutions and actuaries working with government to arrive at pricing strategies. Such outsourcing of a critical function does raise concerns. Besides, pricing of services is what the NHA has to negotiate with health care service providers. How is confidentiality or integrity of the process maintained or assured in such a framework? In 2015-’16, the Association  of Healthcare Providers, India,  a Karnataka-based association took up a limited exercise of working actual prices for about 20 dominant procedures with experts from IIM Bangalore and the National Accreditation Board for Hospitals & Healthcare Providers (NABH). These indicated amounts that were 30 per cent higher than the state’s package rates5. However, the report became controversial, with activists questioning the methodology adopted. Overall, the report did not see the light of day.

2. A similar concern arises on the proposal to outsource monitoring, empanelment, settling of claims, grievance redressal – all vital functions of a government body —to commercial companies. Fraud check has been given out to four U.S.-based companies, providing them access to a huge data base. When it is acknowledged that data Is knowledge and India has very weak privacy and data protection laws, not to talk of the ability to enforce them, such outsourcing raises concerns. The U.S. does have private companies undertaking such functions, and WIPRO, an Indian company for example, does do back-end checks to detect fraud. But then the U.S. has stringent laws and provisions for privacy. Do we? There may not be any basis for worry, but then policy has to be always designed for the worst case scenario, not for the best. Besides, it is not clear how much this will cost and what the sharing pattern will be. Will it end up thrusting a high cost system on states that are struggling for funds for their more important health needs? Are there cheaper options?

3. The discomfort among activists and state health ministries is based on the nature of the guidelines for some initiatives for policy direction that are now in the public domain as they have been reported in the media. There are four major concerns :

The detailed guidelines with the contract agreement to hand over large portions of district hospitals to private investors to establish the supply of specified services – cardiac, cancers, respiratory etc. — suggests a hybrid model that has no precedence, not even in the U.S. This is a brainwave of The United States Agency for International Development (USAID)-Niti Aayog initiative: it is apprehended and with justification, that it will destroy the public hospital system in India and deepen the control of the private sector and create monopolies rather than a competitive environment, adversely impacting the cost of care.

The detailed guidelines with the contract agreement to hand over large portions of district hospitals to private investors to establish the supply of specified services – cardiac, cancers, respiratory etc. — suggests a hybrid model that has no precedence, not even in the U.S.

4. Finally, the concessions – land, viability gap funding up to 40 per cent of the project cost, concessional tariffs for water and electricity etc. — being offered to attract private investment in supply deficit areas, mainly in Tier 2 and 3 cities, are again problematic. While incentives need to be provided, the question is: to whom? Are they to support non-profit and small and medium hospitals to grow or for corporates to deepen their footprint? Several small and medium hospitals are already pulling their shutters down, unable to compete with the deep pockets of the corporates. Typically, corporates survey an area, identify a hospital with maximum practice and buy the owner out. Such scoping also includes government hospitals. Who benefits in such a game of musical chairs? Equally worrying are the government’s contradictory policies. While giving concessions that do have substantial fiscal implications, it also levies 18 per cent GST (Goods and Services Tax) on hospital services and taxes inputs, up to almost 30 per cent, making them costlier. At the other end, consolidation of corporate tertiary hospitals, that provide nearly three quarter of tertiary care, is taking place at a furious pace. Max, Fortis, Medanta in Delhi, Seven Hills Hospital, Jaslok in Mumbai, Care in Hyderabad and other such iconic hospitals are all being bought off by private equity firms and foreign conglomerates. It is a matter of time before six to eight hospital chains aggregate the provisioning of tertiary and secondary services at prices they will be able to dictate. Clearly, the Union Government is confused and its right hand does not seem to know what the left hand is doing.   

The concerns

On the face of it, none of the above should normally worry us. Yet they do only because of the unregulated environment in which the private sector is operating, its own track record where the trust between the doctor and the patient is fragile and the distortions this has created. Secondly, in the absence of accompanying laws related to say privacy and data security, legal processes for infringement of guidelines etc, misuse or malpractices cannot be ruled out. In other words, who in the district is going to supervise the functioning of these companies? The relational power between the regulator, ie the District Medical & Health Officer (DMHO),  and the company will be quite imbalanced as it will be in the case of the investor and the district hospital authority. In most high stake Public Private Partnerships, there is a cloak of secrecy, and information is difficult to access.  Fourthly, the district level agencies and the fraud detection companies also report  to the NHA. What will such centralisation of information imply for governance at the state and district levels?

What causes confusion is a simple issue. In Ahmedabad, a five star looking, excellently designed and beautifully built public hospital has recently been dedicated to the nation by the Prime Minister. That is the way to go, not the extensive concessions and incentives being provided to private investors for establishing hospitals in Tier 2 and 3 cities without commensurate investment in making the district hospitals strong and resilient, as this may end up weakening the public hospitals.

The choice before public policymakers is whether to ..become a copy cat version of the U.S. health system, or regulate it in order to moderate the commercial aspects and insulate care providers from the investors through a well-crafted strategy.

Private sector behaviour can be regulated and controlled by creating a competitive environment, competition not among monopolies but between the the public and private sectors. The choice before public policymakers is whether to further deepen this process and become a copy cat version of the U.S. health system, or to regulate it in order to moderate the commercial aspects and insulate care providers from the investors through a well-crafted strategy. The first option is easy as all it needs is a range of U.S.-based consultant firms to prepare the documents. The latter is tough, for that requires time, patience, a nuanced understanding and a thorough grasp of ground realities.

Conclusion

The issues and questions raised in this article should be ones that ought to be argued, debated and discussed thoroughly by our lawmakers as Ayushman  Bharat and its design are going to be fundamentally changing the very nature of the health system. Though a democracy, our political processes are weak. Has anyone, for example, heard of a gruelling and insightful debate on Ayushman Bharat in Parliament or our state legislatures? Counter views are disdainfully brushed aside. In such a situation, decisions are taken by a few bureaucrats in powerful positions, led by consultants who are not accountable for the advice they give. This is not a new phenomenon and is typical of developing countries that are controlled by technical bureaucracies rather than people-centred democratic processes. In the absence of any clarity, it is essential that the Union government issues a White Paper for public discussion, laying down clearly the implications of Ayushman Bharat for federal principles, its cost and sustainability. But the ways things are, I suspect that is asking for too much. 

[K. Sujatha Rao is a former Union Secretary of the Ministry of Health and Family Welfare, Government of india. Of her 36 years service as a civil servant, she spent 20 years in the health sector in different capacities at the State and federal levels.

Rao was chairperson of the Portfolio Committee of the Global Fund for HIV/AIDS, TB and Malaria (GFATM) 2007-09; Member of the Global Advisory Panel of the Bill & Melinda Gates Foundation; Founding member of the Public Health Foundation of India; Member of the Advisory Board of the Ministerial Leadership Program of the Harvard School of Public Health and member of the High Level Panel on Global Risk Framework of the National Academy of Sciences, U.S.

A MPA from Harvard University, USA 1991-92, she was a Takemi Fellow at the Harvard School of Public Health 2001-2002 and Gro Harlem Brundtland Senior Leadership Fellow at HSPH in 2012. She is author of the book entitled "Do We Care? India's Health System", published by Oxford University Press.

She can be contacted at [email protected]]

Citations:

1. In an interview published in The Hindu in January 2019 Return To text.

2. Central transfers to states are done in three ways – through the Finance Commission, through Central Sector Schemes under which the Centre provides 100 per cent financial assistance and may or may not implement the scheme directly, and through the CSS, but under which the financial aspect is shared on a 60:40 ratio with states, except those that get 90 per cent central aid. Return to Text.

3. In 2017, due to a misdiagnosis, an infant died that raised much public anger forcing the Delhi government to shut down the whole hospital for weeks. Though legally the action was questionable and undoubtedly caused inconvenience to other patients in the hospital, yet Max did not seek legal recourse.Return to Text.

4. The notification has not been issued laying down its functions and responsibilities.Return to Text.

5. Under government sponsored health insurance schemes, reimbursement is based on rates fixed for a set of services that may include a whole set of actions from diagnostics, surgery, drugs and other hospital costs. This is seen as simplifying payment systems. Return to Text.

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