The non-implementation of the Prime Minister Jan Arogya Yojna (PM-JAY) is one of the hotly debated issues in the run-up to the upcoming Assembly elections in West Bengal. PM-JAY aims to provide health insurance up to Rs 5,00,000 to 10 crore poor households. While the state government thinks that the existing state-level health schemes are sufficient, the opposition BJP thinks otherwise and has promised to implement the scheme if elected to power. Therefore, the question of whether PM-JAY has made any material difference—both in terms of health and economic outcomes—becomes timely and relevant.
The recent Economic Survey examines the change in health outcomes of West Bengal and its neighbouring states around the implementation of PM-JAY. The correct way of measuring the impact of any intervention is through changes in outcomes due to the intervention and not through levels. The levels are influenced by many factors, including historical factors. Using data from two national health surveys—one conducted before and one after PM-JAY—the Economic Survey finds that while health insurance coverage increased in neighbouring states by 89% after the implementation of PM-JAY, it decreased by 12% over the same period in West Bengal. It also finds significant underperformance by the state in terms of health outcomes. For example, the rate of decline of infant mortality is 8% less in West Bengal when compared to its neighbouring states. The economic survey then compares all states that implemented PM-JAY with those that did not and finds directionally similar results. In sum, the survey finds that PM-JAY did lead to an improvement in health outcomes.
We use the ongoing pandemic to conduct external validation tests for the hypothesis made in the Economic Survey. The PM-JAY covers testing, treatment and incidental expenses relating to Covid-19. If PM-JAY is indeed effective, it should result in higher levels of testing and consequently lower case fatality rates (defined as deaths/total positive cases). Even when the treatment is in a government facility, the patients and family incur incidental expenses that can be large. Therefore, insurance coverage should motivate people to get tested and treated early. Even private hospitals are likely to offer services without any fear of default on medical bills.
We test the above hypothesis by first comparing West Bengal and its bordering states. We use the positivity rate—the proportion of positive cases among the tested—as a measure of testing intensity. The WHO has repeatedly stated that a high positivity rate indicates the possibility of a large number of infected patients who could infect others remaining untested and untraced. Also, early detection is likely to lead to lower death rates. We find that the test positivity rate of West Bengal is 6.7% as against 1.7% in its neighbouring states. Similarly, the case fatality rate for West Bengal is 1.8 times higher than that of its neighbours. We find similar results when we compare all states that did not adopt PM-JAY initially and their neighbours. Thus, these results further validate the finding in the Economic Survey.
Finally, we examine the impact of PM-JAY on the economic well-being of the poor. There is evidence to show that health insurance plays a significant role in ameliorating economic distress. In a country where 65% of health expenditure is out of pocket, it is easy to see the connection between healthcare expenditure and economic distress. Think of a daily wage labourer forced out of his job due to a health shock. The health shock is likely to have a catastrophic impact on the family in the form of loss of income, depletion of savings, curtailment of children’s education and in some extreme cases, impairment of the ability to afford necessities. Health insurance could play a significant role in ameliorating such distress. Due to a lack of microdata, it is hard to reliably measure such distress. Because distressed households are also likely to default on their loan commitments, we consider the loan default rate as a proxy for economic distress.
We obtain information about the performance of small ticket loans lent to the poor. The borrowers are likely to be beneficiaries of PM-JAY. We conduct a much tighter border district level comparison of loan default rates between states that adopted PM-JAY and those that didn’t. Note that border districts are likely to be similar on various socio-economic factors that induce loan defaults. We compare the change in default rate before and after the programme. We find that the districts in West Bengal have more than double digits higher incremental default rates when compared to border districts of neighbouring states. The result holds even when we conduct the border district test for all states that did not adopt PM-JAY. Further, the flow of new credit also declines significantly in non-adopting states.
It is clear from the findings of the Economic Survey and our additional analysis that the PM-JAY has ushered in significant benefits to the poor in terms of health and economic outcomes. Not surprisingly, two states that did not opt for PM-JAY showed the maturity to do so during the pandemic. We hope that even West Bengal will opt for PM-JAY irrespective of the electoral outcome.
Aditya Murlidharan and Prasanna Tantri
The authors are with the Indian School of Business, Hyderabad
(aditya_m@isb.edu, prasanna_tantri@isb.edu)