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Budget 2018: How achievable is Arun Jaitley's promise of health cover for 500 million poor Indians?

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Arihant Panagariya
Arihant PanagariyaFeb 02, 2018 | 13:21

Budget 2018: How achievable is Arun Jaitley's promise of health cover for 500 million poor Indians?

Even as the media went into a frenzy as soon the government proposed the idea of a sponsored health insurance, it was also reminiscent of that fateful day (November 8, 2016) when demonetisation of Rs 500 and Rs 1000 notes was announced. A grand scheme intended to tackle an incredibly serious policy issue with almost no details of know-how in the public domain.

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Yet, it was celebrated as if the outcome it sought had already been achieved. Yesterday (February 1) seemed no different. Once again we forgot what Narendra Modi was good at: fooling us with lofty goals with a tinge of morality added to it.

“Modicare”, as it’s now being touted, seeks to provide health insurance to about 100 million “vulnerable” families across India. About 40 per cent of the country’s population (or 500 million beneficiaries) will be "protected" under the scheme. Yet somehow its being touted as a system of universal healthcare. A universal scheme should generally cover all citizens, but that’s a matter of separate debate. Unsurprisingly, it overshadowed pretty much everything else in the discussions around the Budget (including a higher fiscal deficit, the introduction of long-term capital gains tax and changes to custom duties for about 50 items).

It was supposedly the "aha moment" of the 2018 Budget for many TV news anchors and commentators. The general consensus was that the poor and the destitute end up spending a large portion of their income on secondary and tertiary healthcare and that the government is right in providing a helping hand. Imagine if they don’t need to save for a rainy day? Imagine if they are free to use that money to consume goods and services? Imagine what would it do to accelerate growth, and thereby generate greater revenue? Undoubtedly, all of these instances are possible, but it requires a rock-solid combination of detailed plans, smooth execution, a big pot of cash and a ton of luck.

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Image: Reuters photo

Unfortunately, the way our governments are designed, its hard if not impossible to hit such a sweet spot. In this case as well, no basic plan has been charted out yet. The current plan is to draft a plan in the next six months. In terms of execution, it’s best not to glorify government’s notoriously poor record in implementation of schemes.

As for cash, the government could easily end up spending thousands of crores of rupees (maybe a lot more depending on premiums). Where will the money come for it is anyone’s guess. But what seems eerily similar to demonetisation is that no cost-benefit analysis of the scheme seems to have been done. And just like demonetisation, this will most certainly become BJP’s major talking point during elections.

Leaving aside these minor technicalities, one has to seriously ask if 500 million individuals in India need mandatory insurance from the government? Sure, no one is arguing against not providing subsidy to those below poverty line (and maybe others). But what about those who can? Wouldn’t they be better off left alone in deciding their choice of insurance and allow the government to use the valuable tax revenue for an alternative purpose? Choice matters as that will allow greater competition amongst private/public insurance companies and not just benefit those who are contracted with the government. India has only so many resources at hand and it would have been ideal to allow states to chart their own course (health is a state subject) rather than initiate a massive scheme from the top.

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Secondly, most debates moved around the ifs and buts on the health coverage. Not many offered a view from an ideological and principled standpoint. It’s rather easy to get bothered by questions around the government’s ability to fund or implement the project, but its far more important to ask if the government should sponsor such a scheme at all. A similar scheme was proposed in 2016 which offered a coverage of Rs 30,000 per family. That has now been raised to Rs 5 lakh per family. Those in Opposition can always offer another substantial hike until we will reach a point of no return. What are the chances that the government will do away with such a mandate even when most Indians will easily be able to afford it?

Third, instead of focusing on drafting policies (reforming land, labour and capital) that would eventually pull people out of poverty and allow them to make enough money to pay for their own and family’s health/education, the government is creating another tax-payer funded entitlement. Yes, both (growth and redistribution) can go on simultaneously, but there is just not enough noise and movement on the former. What looks probable right now is that we will go through another loop of good intentions and bad outcomes.

But considering how lucky PM Modi is (and was through the execution of demonetisation), it may just work in his favour, of course electorally.

Last updated: February 02, 2018 | 13:21
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