PM-JAY: A successful model for both healthcare delivery and financial security

This finding in a study by Indian School of Business (ISB) highlights a crucial yet previously unexplored connection between healthcare access and economic stability.

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It addresses the out-of-pocket-expense burden: Access to quality healthcare, a basic right in developed economies, has often remained an elusive privilege for millions in India. In developing economies, health emergencies can trigger financial crises. Dependence on informal credit and the substantial financial burden imposed by out-of-pocket expenditure (OOPE) can lead to a vicious debt cycle. PM-JAY represents a paradigm shift in addressing these systemic inequities.

Prior to PM-JAY, the average OOPE was 10-12% of household income. This was disproportionately higher for rural and economically weaker households. Such expenses often forced families to use funds that could have been spent on education, housing and nutrition. The burden was especially severe for families dealing with chronic illnesses and those requiring tertiary care. Beyond financial hardship, the psychological toll was immense, as they navigated the dual challenges of a medical crisis and financial instability.

Over the last seven years, PM-JAY has led to an almost 17.9% decrease in OOPE and achieved a 152% increase in health insurance coverage in districts covered by the scheme. A study by researchers from King’s College London, UK, and the Heidelberg Institute of Global Health in Germany indicated a 21% decrease in catastrophic health expenditures (CHEs) among beneficiaries.

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Its medical and social impact: PM-JAY covers 500 million beneficiaries from economically vulnerable households identified through the Socioeconomic and Caste Census of 2011 with a ₹5 lakh annual coverage per family. It offers comprehensive coverage without caps on family size or age. Its cashless and paperless model covers 1,350 medical procedures, implemented through an extensive network of 30,529 empanelled hospitals, and ensures that beneficiaries have access to quality healthcare across urban and rural areas. In the last seven years, it has authorized over 83.9 million hospital admissions worth ₹1.16 trillion.

Its integration with Ayushman Arogya Mandirs ensures a dual focus on preventive and curative healthcare. The scheme’s recent extension to all citizens aged above 70 years, regardless of economic status, will benefit an additional 60 million individuals and address a critical gap in healthcare coverage.

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Its effect on financial well-being: Globally, economies that have invested in health insurance have witnessed a ripple effect on socio-economic parameters. Increased health coverage leads to improved health-seeking behaviour, better health outcomes and a reduction in poverty induced by CHEs, even as it fosters a healthier workforce.

The ISB study throws light on this unexplored aspect of PM-JAY’s microeconomic impact. The scheme has decreased health-related borrowing by 4.2%, reduced precautionary savings by 1.5 times, improved liquidity and enhanced people’s loan repayment capacity. Lower default rates have been observed in PM-JAY-implemented regions. By mitigating immediate financial risks associated with healthcare, it serves as an economic and social buffer, bolstering systemic resilience, reducing reliance on informal credit markets and enhancing individual economic security.

The study emphasizes how the programme has transformed healthcare-seeking behaviour, with beneficiaries no longer delaying necessary medical interventions on account of financial constraints. It has also stimulated private-sector participation in healthcare delivery, particularly in tier-2/3 cities, leading to improved healthcare infrastructure across regions.

It’s a model for the Global South: For countries with similar developmental trajectories, PM-JAY offers a valuable blueprint for health sector reform. The World Health Organization and World Bank have recognized it as a model for universal health coverage in developing nations. Global health experts have praised its innovative use of technology for implementation and monitoring, its robust fraud detection mechanisms and its successful integration of public and private healthcare providers. It takes political will, community engagement and cross-sectoral collaboration.

PM-JAY offers other countries valuable insights in four major areas, from comprehensive coverage, leveraging private-public partnerships and scalability through IT infrastructure to data-driven governance and policy integration that aligns healthcare with broader socioeconomic goals. Emerging economies in Asia, Africa and South America can contextualise the PM-JAY framework to address disparities in healthcare access.

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Way forward: Despite its potential, awareness of PM-JAY remains low among eligible populations. Educational campaigns leveraging local networks and digital platforms can address these gaps. Alignment of delivery mechanisms with specific needs of target populations will also enhance utilization rates and programme outcomes. The use of advanced data analytics to monitor usage patterns and predictive modelling to anticipate healthcare needs and effective resource allocation can be next steps for the scheme.

The case study of PM-JAY provides a compelling argument for further investment in comprehensive health coverage. It demonstrates that well-designed government-funded health coverage can serve as a powerful tool for social protection and economic empowerment. By addressing historical inequities in healthcare access, it paves the way for achieving universal health coverage, in line with India’s broader development goals. Enhanced collaboration between Central and state governments in the spirit of cooperative federalism can further expand its impact across India.

The authors are, respectively, CEO and senior specialist, NITI Aayog.