The Problem with Modicare

The Union Budget is a big financial event in India. Each year, the finance minister of the nation sets the national priorities and also the plan to fund them. The 2018 budget came in as a shocker for most people in India. The middle class was hoping for a significant tax reduction. However, there was no reduction in taxes. Instead, the taxes were increased to some extent.

On the other hand, India has announced the most ambitious health care scheme known to the world. It is colloquially being called Modicare because it is being introduced under the leadership of Prime Minister Narendra Modi. This scheme is likely to provide insurance to 100 million families, i.e., about 500 million individuals. The insurance provided will be to the tune of Rs.5 lakhs per family.

Critics are not very upbeat about Modicare. The scheme has started facing criticisms from various people even before any changes have been implemented. In this article, we will understand the various shortcomings of the proposed Modicare scheme.

• Transfer of Wealth: The biggest criticisms being leveled against Modicare is that it is not economically viable. Many economic experts believe that this scheme has been created only to gain political mileage. It is for this reason that the benefits are targeted towards a specific class of people who become the majority of the vote bank. This is where Modicare is in sharp contrast to Obamacare.

  Obamacare provided a universal health benefit to every American regardless of their economic status. Even the middle class was covered under Obamacare.

  On the other hand, Modicare specifically excludes the middle class. The plan is meant to only fund the lower class.

  The irony is that middle class is expected to pay the entire bill. Income tax revenues in India are largely generated by the middle class. However, they will not receive any benefits. Hence, it can be said that Modicare is a giant transfer of wealth scheme. It taxes the middle class to pay for the lower classes in order to achieve political gain.

• Lack of Funding: Another major problem with Modicare is the lack of funding that the government has in place to fund a program of this magnitude. The Indian government has allocated 2 trillion rupees towards this scheme. This amount is woefully inadequate given that 50 billion individuals are going to be covered by this scheme. Hence, the government has budgeted only Rs. 40 per individual per annum. Obviously, the health insurance premiums are not that low. Hence, it is likely that the expenditure from this scheme will cause a drastic spike in the fiscal deficit. Once again the comparison with Obamacare provides some context.

  In 2010, President Obama was of the opinion that providing healthcare to entire nation would cost the US government close to $940 million over a ten year period. However, within two years, the estimates were revised to $1100 billion. This gives an idea about the amount of expenditure required to sustain such a program.

  If we assume that the cost of providing healthcare in India is one-tenth as compared to the United States, the government is still woefully short of money. Hence, it seems to be only a political decision with little economic or financial backing.

• Fragmented Healthcare System: Modicare is likely to face another major challenge. The fact of the matter is that healthcare is highly fragmented within the nation. The cost and quality of healthcare received vary widely depending upon the location. Hence, it would be difficult for the government to keep a check on whether the insurance claims they are paying out are genuine.

  Also, the hospitals that are being built in India are only in Tier-1 and Tier-2 cities. There are very limited healthcare facilities that are provided in smaller cities. It is for this reason that the government is likely to face problems in implementing this problem. They will face problems such as availability of healthcare professionals, distribution of medicines, etc.

  Mexico has already tried to implement a similar healthcare program. They have also faced the same difficulties since a majority of their population resides in rural areas whereas the majority of the healthcare infrastructure is in urban areas.

• Healthcare Inflation: healthcare inflation is closely linked to the percentage of the population that is insured. When people pay from their pockets, they are very cognizant of the costs that they are paying for different treatments.

  On the other hand, if the insurance company is paying, people stop comparing costs or even thinking about them. This is the reason why an increase in insurance coverage almost inevitably leads to an increase in healthcare costs. The United States has suffered from these increasing healthcare costs.

  Most Americans who do not have insurance are simply not able to afford healthcare. They often have to fly to other countries like India in order to obtain cost-effective healthcare.

To sum it up, Modicare is a political program. The sole objective of the program is to garner political benefits for the ruling party.

The program is neither morally correct nor economically feasible. It is a forceful redistribution of wealth from the middle class to the poor. The middle class now have to pay their own insurance premium as well as that of the people below poverty line.

Authorship/Referencing - About the Author(s)

The article is Written and Reviewed by Management Study Guide Content Team. MSG Content Team comprises experienced Faculty Member, Professionals and Subject Matter Experts. We are a ISO 2001:2015 Certified Education Provider. To Know more, click on About Us. The use of this material is free for learning and education purpose. Please reference authorship of content used, including link(s) to ManagementStudyGuide.com and the content page url.