At a macroeconomic level, human capital is crucial for economic development of countries. At a microeconomic level, 150 million people worldwide face financial catastrophe due to medical expenditure. An estimated 7 percent of India’s population is pushed into poverty each year due to medical expenses. Several countries are now moving towards improving access to health care and reducing cost of private health care by providing public insurance.

But the entire purpose of public health insurance is defeated when a sizable population does not sign up. Health insurance is also rendered worthless if people do not have access to health care facilities.


The Tata Centre for Development, in collaboration with the University of Chicago and the Government of Karnataka, conducted a randomized control trial that examined the impact of India’s previous government-run program—Rashtriya Swasthya Bima Yojana (RSBY)—on the health and financial security of roughly 50,000 people in Karnataka.

The study has direct relevance for Pradhan Mantri Jan Arogya Yojana (PMJAY)—also known as Modicare—which covers up to 500 million poor and near-poor Indians for up to Rs. 500,000 (US$7,000) in hospital expenses. Important lessons for PMJAY emerged from the study.

It became evident that the success of such an ambitious health insurance program hinges on three primary factors: whether people sign up for the service, whether they use it, and whether hospitals participate.

The team has briefed Indu Bhushan, CEO of PMJAY, and is now directly working with the government, suggesting ways to encourage enrolment and help ensure a successful roll-out.


The research has recommended putting more effort on information and education campaigns. Besides reducing paperwork and hassle costs for beneficiaries—PMJAY—according to the research findings, must ensure that hospitals have functioning payment systems and do not turn away patients.

Besides addressing demand and supply issues, sound financing and a strong data infrastructure are also important. According to the research team, for a financing scheme like PMJAY, it is important to get the data backbone right, without which claims can’t be tracked and paid, and without which the plan runs the risk of failing.