Budget 2018

Opinion: Modicare is more an election gimmick than a real solution to India’s health needs

The mega health insurance scheme announced in Budget 2018 is largely geared towards the corporate healthcare industry’s interests.

After years of Budget speeches that have had little to say on health and have provoked even less discussion on the subject, it was a surprise to find almost every commentary on Budget 2018 – presented on Thursday – highlighting the government’s new health scheme as one of the major takeaways. The National Health Protection Scheme, dubbed Modicare by some, promises Rs 5 lakhs per year per family for secondary and tertiary care hospitalisation and aims to cover 10 crore families. Many went so far as to say that being a pre-election year, the government had finally decided to invest in health. Prime Minister Narendra Modi went on air to claim this was the largest health scheme ever proposed anywhere in the world. Finance Minister Arun Jaitley, in his press conference, highlighted the programme as a major pro-poor measure of Budget 2018. Many Opposition leaders, too, gave it a cautious welcome, although almost all of them added that they were not sure if the necessary funds for the scheme had been allocated.

But what is the reality? A cursory study of the Budget leads to considerable disappointment.

If we compare it with last year’s revised estimates, the increase in budgetary outlay for the health sector is trivial, and in real terms probably stagnant. On some key components, especially the National Health Mission, there is a decline in allocations. The fact that last year’s revised estimates for the health sector were significantly higher than the initial budgetary allocation shows that the health department not only spent the resources allocated to it but needed more to keep essential operations going. The budgetary estimate for 2017-2018 was Rs 48,878 crores, the revised estimate is Rs 53,198 crores and the budgetary allocation for the current year is Rs 54,667 crores. Thus, this year’s allocation shows an increase of 11.8% over last year’s allocation but only a 2.7% increase over the revised estimate. In terms of public health expenditure as a proportion of gross domestic product (the total value of goods and services produced in the country), it has declined further.

Health cover fact check

One of the major announcements of the Budget, the National Health Protection Scheme promises health cover to 10 crore families. In contrast to the government’s projection of the great benefits of this scheme, here is a quick reality check.

The scheme was, in fact, announced in the 2016 Budget – the only difference being that the sum assured was raised from Rs 30,000 to Rs 1.5 lakhs then and to Rs 5 lakhs now. The scheme has not been operationalised in the last two years. Moreover, not even 50% of the funds under the existing health cover scheme have been spent in the past year. A simple reason for this is that many large states already have better designed insurance schemes in place.

Finance Secretary Hasmukh Adhia said in a post-Budget interview that it would take six more months to finalise the scheme and then perhaps a few more months to contract insurance agencies and providers. In his view, it is uncertain if the scheme will be fully implemented this year. We may add that it is uncertain the scheme will be implemented before the general elections due in 2019, though it will no doubt give the ruling Bharatiya Janata Party a major talking point for the polls. This promise of the government providing Rs 5 lakhs in treatment cost to each family is a spin that can be quite convincing if most media channels choose to amplify it uncritically.

The financial requirement for this scheme, if we go by premiums paid in successful state-run schemes, will not be less than Rs 3,000 per household, which would mean an outlay of close to Rs 30,000 crores. The Rs 2,000 crores allocated for health insurance in the Budget is less than what most state governments spend on similar schemes. There is, of course, the possibility that the Central government may give a small top-up to what the states are spending and include these state schemes – but it is unlikely the states would agree to this.

A number of studies and National Sample Surveys show that existing government health insurance schemes, which already claim to cover close to 40 crore people, are failing to provide financial protection. Catastrophic health expenditures remain at more or less the same levels, with and without government-funded insurance coverage. The jury is still out on whether these schemes improve access to hospitalisation.

The jury is still out on whether government-run health insurance schemes improve access to hospitalisation. (Credit: HT)
The jury is still out on whether government-run health insurance schemes improve access to hospitalisation. (Credit: HT)

Boost for corporate hospitals

One must also take note of the widespread reports of profiteering by private hospitals with an increase in irrational and unnecessary care. These are referred to as “moral hazards” in the medical insurance industry and in academic literature, and are well-known across the world. But in the Indian context, where there is very little regulation of the private sector and weak governance, these problems become much more pervasive and intense.

That some leading healthcare business leaders have given the health scheme announcement a wide welcome should make us reflective. The Rs 1.5-lakh sum assured is not a key barrier for existing schemes and raising the sum to Rs 5 lakhs may not be necessary. A ceiling of Rs 1.5 lakhs is quite adequate for over 95% of requirements. For conditions with higher treatment costs, such as burns or certain complex cancers, disease-specific exceptions can be made.

Also, rates of reimbursement in existing schemes are still too low to attract participation by elite corporate hospital chains. In most states, only one in five private hospitals are empanelled and the rest are rejected on some technical ground or the other, usually related to quality. These are informal ways of controlling expenditure and rationing care. The private hospitals that get empanelled would no doubt have a market advantage over the others. The increase in insurance cover to Rs 5 lakhs has addressed the corporate sector’s complaint of low reimbursement rates. If, with corporate influence, reimbursement rates are now negotiated upwards and quality standards tipped in favour of corporate providers, the advantage that affordable private care providers have will be lost. This will help corporate consolidation of the market.

To sum it up, the National Health Protection Scheme is just a programme being re-announced. The funds allocated for it will not be enough to get it going on the proposed scale. It will overlap or even interfere with well-established state programmes. Though it could potentially provide wide financial protection or improved access, recent experience with similar schemes indicates that these benefits are elusive. There are enough reasons to believe that this scheme will lead to a significant increase in profits for the private healthcare industry, which is perhaps its intention. Finally, it could help corporate healthcare providers consolidate, at the cost of more affordable smaller providers and enterprises.

Not really the world’s largest

There is another jumla element in this health budget that is probably the biggest and most dangerous. In his Budget speech, the finance minister stated, “This will be the world’s largest government-funded healthcare programme.” Since then, this line has been very emphatically articulated and repeated by the prime minister and broadcast by television channels. Repeated often enough, it could be accepted as the truth.

But let us take a step back. Is not the National Health Mission, with a Rs 30,000-crore budget covering a 120-crore population, a much larger scheme? Don’t earlier programmes such as reproductive and child healthcare reach more beneficiaries and with much more funds? What is India’s large public health system if not a government programme for healthcare? Even in the case of insurance programmes, the National Health Protection Scheme of Budget 2018 will not be the world’s largest. China’s comprehensive health insurance programme covers an even larger population, though ineffectively. Almost all industrialised nations with the exception of the United States have universal healthcare schemes or national health insurance programmes with 100% coverage.

By projecting the sum assured of the insurance coverage as the sum allocated under the scheme to each household, and packaging this promise as Modicare, a powerful electoral strategy is being forged. Will it work? We do not know. But a more lasting effect – and perhaps this is its intention – may be the creation of a discourse where health insurance schemes are perceived as the only healthcare schemes and attention is diverted from the government’s central task, which is to provide equitable and affordable healthcare to all its citizens. The United States is the only country where such an equation is made. Accepting this discourse unquestioningly, decrying only the lack of funding for the scheme, and making it an implementation problem could be a trap since Modicare, as it stands now, is geared more towards taking care of the corporate healthcare industry’s interests in the name of the poor than it is in the health needs of the country’s poor.

The writer teaches at the School of Health Systems Studies, TISS.

Support our journalism by subscribing to Scroll+ here. We welcome your comments at letters@scroll.in.
Sponsored Content BY 

The next Industrial Revolution is here – driven by the digitalization of manufacturing processes

Technologies such as Industry 4.0, IoT, robotics and Big Data analytics are transforming the manufacturing industry in a big way.

The manufacturing industry across the world is seeing major changes, driven by globalization and increasing consumer demand. As per a report by the World Economic Forum and Deloitte Touche Tohmatsu Ltd on the future of manufacturing, the ability to innovate at a quicker pace will be the major differentiating factor in the success of companies and countries.

This is substantiated by a PWC research which shows that across industries, the most innovative companies in the manufacturing sector grew 38% (2013 - 2016), about 11% year on year, while the least innovative manufacturers posted only a 10% growth over the same period.

Along with innovation in products, the transformation of manufacturing processes will also be essential for companies to remain competitive and maintain their profitability. This is where digital technologies can act as a potential game changer.

The digitalization of the manufacturing industry involves the integration of digital technologies in manufacturing processes across the value chain. Also referred to as Industry 4.0, digitalization is poised to reshape all aspects of the manufacturing industry and is being hailed as the next Industrial Revolution. Integral to Industry 4.0 is the ‘smart factory’, where devices are inter-connected, and processes are streamlined, thus ensuring greater productivity across the value chain, from design and development, to engineering and manufacturing and finally to service and logistics.

Internet of Things (IoT), robotics, artificial intelligence and Big Data analytics are some of the key technologies powering Industry 4.0. According to a report, Industry 4.0 will prompt manufacturers globally to invest $267 billion in technologies like IoT by 2020. Investments in digitalization can lead to excellent returns. Companies that have implemented digitalization solutions have almost halved their manufacturing cycle time through more efficient use of their production lines. With a single line now able to produce more than double the number of product variants as three lines in the conventional model, end to end digitalization has led to an almost 20% jump in productivity.

Digitalization and the Indian manufacturing industry

The Make in India program aims to increase the contribution of the manufacturing industry to the country’s GDP from 16% to 25% by 2022. India’s manufacturing sector could also potentially touch $1 trillion by 2025. However, to achieve these goals and for the industry to reach its potential, it must overcome the several internal and external obstacles that impede its growth. These include competition from other Asian countries, infrastructural deficiencies and lack of skilled manpower.

There is a common sentiment across big manufacturers that India lacks the eco-system for making sophisticated components. According to FICCI’s report on the readiness of Indian manufacturing to adopt advanced manufacturing trends, only 10% of companies have adopted new technologies for manufacturing, while 80% plan to adopt the same by 2020. This indicates a significant gap between the potential and the reality of India’s manufacturing industry.

The ‘Make in India’ vision of positioning India as a global manufacturing hub requires the industry to adopt innovative technologies. Digitalization can give the Indian industry an impetus to deliver products and services that match global standards, thereby getting access to global markets.

The policy, thus far, has received a favourable response as global tech giants have either set up or are in the process of setting up hi-tech manufacturing plants in India. Siemens, for instance, is helping companies in India gain a competitive advantage by integrating industry-specific software applications that optimise performance across the entire value chain.

The Digital Enterprise is Siemens’ solution portfolio for the digitalization of industries. It comprises of powerful software and future-proof automation solutions for industries and companies of all sizes. For the discrete industries, the Digital Enterprise Suite offers software and hardware solutions to seamlessly integrate and digitalize their entire value chain – including suppliers – from product design to service, all based on one data model. The result of this is a perfect digital copy of the value chain: the digital twin. This enables companies to perform simulation, testing, and optimization in a completely virtual environment.

The process industries benefit from Integrated Engineering to Integrated Operations by utilizing a continuous data model of the entire lifecycle of a plant that helps to increase flexibility and efficiency. Both offerings can be easily customized to meet the individual requirements of each sector and company, like specific simulation software for machines or entire plants.

Siemens has identified projects across industries and plans to upgrade these industries by connecting hardware, software and data. This seamless integration of state-of-the-art digital technologies to provide sustainable growth that benefits everyone is what Siemens calls ‘Ingenuity for Life’.

Case studies for technology-led changes

An example of the implementation of digitalization solutions from Siemens can be seen in the case of pharma major Cipla Ltd’s Kurkumbh factory.

Cipla needed a robust and flexible distributed control system to dispense and manage solvents for the manufacture of its APIs (active pharmaceutical ingredients used in many medicines). As part of the project, Siemens partnered with Cipla to install the DCS-SIMATIC PCS 7 control system and migrate from batch manufacturing to continuous manufacturing. By establishing the first ever flow Chemistry based API production system in India, Siemens has helped Cipla in significantly lowering floor space, time, wastage, energy and utility costs. This has also improved safety and product quality.

In yet another example, technology provided by Siemens helped a cement plant maximise its production capacity. Wonder Cement, a greenfield project set up by RK Marbles in Rajasthan, needed an automated system to improve productivity. Siemens’ solution called CEMAT used actual plant data to make precise predictions for quality parameters which were previously manually entered by operators. As a result, production efficiency was increased and operators were also freed up to work on other critical tasks. Additionally, emissions and energy consumption were lowered – a significant achievement for a typically energy intensive cement plant.

In the case of automobile major, Mahindra & Mahindra, Siemens’ involvement involved digitalizing the whole product development system. Siemens has partnered with the manufacturer to provide a holistic solution across the entire value chain, from design and planning to engineering and execution. This includes design and software solutions for Product Lifecycle Management, Siemens Technology for Powertrain (STP) and Integrated Automation. For Powertrain, the solutions include SINUMERIK, SINAMICS, SIMOTICS and SIMATIC controls and drives, besides CNC and PLC-controlled machines linked via the Profinet interface.

The above solutions helped the company puts its entire product lifecycle on a digital platform. This has led to multi-fold benefits – better time optimization, higher productivity, improved vehicle performance and quicker response to market requirements.

Siemens is using its global expertise to guide Indian industries through their digital transformation. With the right technologies in place, India can see a significant improvement in design and engineering, cutting product development time by as much as 30%. Besides, digital technologies driven by ‘Ingenuity for Life’ can help Indian manufacturers achieve energy efficiency and ensure variety and flexibility in their product offerings while maintaining quality.

Play

The above examples of successful implementation of digitalization are just some of the examples of ‘Ingenuity for Life’ in action. To learn more about Siemens’ push to digitalize India’s manufacturing sector, see here.

This article was produced on behalf of Siemens by the Scroll.in marketing team and not by the Scroll.in editorial staff.