Five years ago, the Government spent Rs 1 tn on its five major welfare programmes in the areas of food subsidy, fuel subsidy, fertilizers subsidy, education, and employment. Today, the expenditure on these programmes is Rs 3 tn. In the next five years, going by stated Government plans, the spend on the same areas would be Rs 6 tn. Hence, welfare spending is set to increase six-fold over 10 years, not accounting for additional spending that may come about when political circumstances so demand.

Politicians argue that the sheer size and poverty of India demands such large sums of money to be spent. But in our view, this is not the case. Through the judicious use of technology and sensible design, it is possible to derive disproportionate value out of every Rupee spent. Two little known success stories of the recent past illustrate the point.

Jankari

The state Government of Bihar implemented a programme called Jankari in 2007, which is a call centre-based mechanism for lodging Right to Information (RT I) applications. Amongst the greatest constraints in realising the benefits of the RT I are first, illiteracy and lack of knowledge (many citizens do not know that this mechanism exists, or may not know how to draft applications); and second, the prospect of harassment by officers responsible for receiving and acting upon RT I applications. In a state like Bihar, these constraints are magnified on account of its low literacy levels and historically high levels of corruption. Jankari is a simple way to get around both. Citizens can simply call a public number to file an RT I application, request a status update of a previous application, or file a harassment report that is sent directly to the Department of Home. The call centre operators guide callers on how best to frame their applications and who to address it to – two crucial aspects of making an RT I application effective.

There are at least two reasons why Jankari is such an ingenious (and scalable) programme. The first is the smart solution it has devised to overcome the basic constraint in any such mechanism which is, how to collect the statutory fee of Rs 10 per application, given that most users will neither have credit cards nor online bank accounts. The answer: Add Rs 10 to the call bill. Jankari is linked with all state-owned telephone exchanges in Bihar and can therefore, collect the fees directly from BSNL, who in turn recovers it from the caller (in the next phase, private telecom operators will also be connected to the programme).

The second is the market-based solution for operating the scheme, wherein the operator receives a revenue share that is linked to call volumes. The operator, BELTRON (Bihar State Electronics Development Corporation Limited) receives Rs 8.60 for each RT I application, which it shares with its outsourced service provider Call2Connect, the company that actually operates the call centres. BSNL receives the remaining share of Rs 1.40. In this manner, every party has an incentive to increase genuine RT I call volumes through better service levels and the programme is not subject to the whims of bureaucrats and politicians. More importantly, it delivers an important citizen service without eating into the impoverished state’s limited financial resources.

Since its inception in 2007, call volumes have quadrupled from over ~7,000 calls in the first year to over 30,000 in 2011. That’s almost 100 calls a day exclusively for RT I-related matters – no mean achievement for a state where more than half the population is illiterate and hence, un-empowered. Calls have come from every district in Bihar, and today, at least two other states are actively working to replicate the model while several others are in the early stages of doing the same. There are of course, several challenges still to be overcome – incorporating private telecom companies, improving the quality of service delivery and raising awareness levels across the population. Nevertheless, at a time when the Government is struggling with the sheer complexity and budgetary ramifications of ‘grand’ programmes such as, the one envisaged under the Food Security Act, Jankari has quickly provided an effective, low-cost and scalable way to make an immediate difference. At Rs 22,000 per operator seat for Jankari, a figure that compares favourably with industry standards after accounting for scale differences, the budget is clearly within the reach of every Indian state that may wish to replicate this model.

Through the judicious use of technology and sensible design, it is possible to derive disproportionate value out of every Rupee spent. Two little known success stories of the recent past illustrate the point

The Rashtriya Swasthya Bima Yojana

The Rashtriya Swasthya Bima Yojana (National Health Insurance Programme) was a low-key scheme launched in 2008, to replace the existing method of providing health insurance to poor families, which was failing on account of corruption, pilferage of benefits, ghost beneficiaries, and industry disinterest. The primary and most important change in RSBY versus its predecessor was the introduction of a biometric-enabled smart card, handed out to each beneficiary. The card comes pre-loaded with an insurance cover of Rs 30,000 and once issued, requires no other documentation or protocol to be satisfied by the beneficiary – in one step, eliminating most channels of corruption and misdirection of benefits.

This is not all. The scheme is based on the commercial participation of insurers and hospitals, who generate income per card issued (premium for the insurer) or utilised (reimbursement paid to the hospital). As compared to the disinterested participation of insurers in erstwhile health insurance programmes, the RSBY already works with a dozen insurers and thousands of hospitals (more than half, private) across the country. But its greatest evidence of success is its sheer enrolment numbers.

Data for 2011, before the scheme had completed three full years, shows that over 30 mn families had already been enrolled, covering over 80 mn individuals. (The low rate of individuals compared to families is due to challenges in verifying all members of a family in a single location, typically arising out of faulty BPL databases prepared by state Governments.) Compared to this, in the 25 years since the launch of Mediclaim, India’s first health insurance product, traditional health insurance covers only 30 mn individuals.

The economics is simple. The Government pays a maximum of Rs 750 as annual premium per smart card (the actual premium is determined through competitive bidding by insurers on a district-level basis and averages ~Rs 550 on a national basis), while the beneficiary pays Rs 30 as registration charge. This premium finances a cover of Rs 30,000 that can be availed by up to five members of a family. The security and ease of portability (the card can be used anywhere in India unlike the previous domicile-based programmes) has led to higher utilisation rates, thereby achieving the scheme’s primary objective. From 2.3 per cent of empanelled members availing of hospitalisation, the utilisation ratio had risen to 5 per cent by 2010. This is well above the average ratio for access to hospitalisation amongst the poorest 40 per cent of India’s population (1.7 per cent of this population) as reported by NSSO’s 2004 survey.

Despite all this, the programme makes money. The burnout ratio for insurers empanelled in RSBY – the proportion of premium income that is spent in reimbursing hospital claims, paying for administrative costs and service tax – averaged 80 per cent in the third year of the scheme. This makes it even more profitable than commercial private health insurance, which in 2009-10 had a claims’ ratio of 103 per cent (that is, private health insurers were paying 103 per cent of their premium income to settle claims, not accounting for administrative expenses). However, there are significant variations across districts, with some reporting up to 130 per cent burn out ratios and others reporting less than 50 per cent. The former implies excessive utilisation of hospitalisation benefits and the latter implies underutilisation. Clearly, a major objective going forward is to bring these divergences down.

The RSBY already works with a dozen insurers and thousands of hospitals (more than half, private) across the country. Its greatest evidence of success is its sheer enrolment numbers

Yet, all this comes at a modest price of Rs 4.6 bn1 – the Central Government’s revised expenditure estimate on RSBY in the previous fiscal year – the clearest indication of how sensible design and the use of technology can deliver disproportionate benefits compared to cost. It has been estimated that the total cost burden even if all BPL families were to be enrolled, would be only Rs 24-33 bn pa (currently, about 40-50 per cent of BPL families, depending on which definition of BPL is used, have been enrolled). There are calls to raise the insurance cover from Rs 30,000 to a higher figure and if this is accepted, outlays will increase commensurately. Even then however, the figures would not be financially crippling, given the objectives the programme would have achieved. Costs would not rise proportionately as insurers and hospitals would reap economies of scale that can be shared with the Government. And as the programmes enter phase II – getting non-BPL families to enrol and pay for their premiums themselves – volumes would increase further. The latter in fact, has already been commenced and almost a quarter of a million APL (Above Poverty Line) families have enrolled so far.

Conclusion

Amidst the gloomy reality of a policy paralysis in Government and slowing growth across the economy, such examples are a clear and encouraging pointer to the economic and welfare gains that are well within the nation’s reach. A lot can be achieved through intelligent design and the judicious use of technology and neither of these is really very hard to come by. Things can, and do, work in India.