The Ayushman Bharat (AB) health insurance program for the masses should be hailed as one of the major achievements of this NDA government. Brilliant in conception, AB gives the poor access to Rs 10 lakhs of annual health cover at a small fraction of the cost of medical insurance policies from the private sector. Furthermore, rather than burdening the Exchequer with more spend on medical infrastructure, AB relies upon the private sector to deliver the program to the masses. Unfortunately for the masses this is turning out to be AB’s Achilles heel. When we travel to state capitals and smaller cities, we run into dozens of hospital owners who complain that the Government does not pay them on time for expenses incurred on patients covered by AB. As a result, as this IndiaSpend article highlights, many hospitals have either partially and entirely pulled out of the scheme. The result says Charu Bahri in this article is:
“How useful would AB-PMJAY be in the eventuality of an emergency? Research shows that many have had poor experiences, and many…still incur catastrophic health expenditure that by the government’s own admission pushes 60 million Indians into poverty each year. Further, awareness is low. Issues plague empaneled hospitals too, with the non-payment of dues to hospitals in Haryana for instance, derailing private sector participation in the scheme.
In October 2023, IndiaSpend had reported on the challenges associated with the scheme. The number of empanelled hospitals is small for the eligible population (for instance, Assam’s 354 providers amount to one hospital for every 100,000 people), we had reported. AB-PMJAY also does not cover the cost of out-patient consultations.”
So why is AB not being able to live up to the expectations all of us have from what is the world’s largest health insurance program? Charu Bahri points to 3 sets of factors.
Firstly, awareness of how AB should work is poor both from the recipients point of view and from the provider’s perspective: ““Poor quality of hospital services” is a leading grievance of beneficiaries, according to Patient Struggles: Grievances in Ayushman Bharat, a study by the Association for Socially Applicable Research (ASAR) India and the Centre for Health Equity, Law, and Policy (C-HELP). The study examined over 110,000 grievances filed by beneficiaries between October 2018 and March 2022. Three in four grievances arose from demands for payment to receive treatment. They identified poor governance (to rein in private hospitals) and the lack of awareness of the scheme as reasons for beneficiaries to succumb to such demands….
Random sampling of the population of Gautam Buddha Nagar, Uttar Pradesh, in 2021 showed very low utilization of the AB-PMJAY scheme, and low awareness of the scheme benefits.
Barely 9% and 19% of potential beneficiaries in urban and rural areas respectively, were aware of the scheme benefits, while 8% and 15% of potential beneficiaries in urban and rural areas respectively, had actually used the scheme.”
Secondly, hospitals who treat patients under AB struggle to get paid and subsequently become reluctant to treat patients covered by the program: “In Haryana, 650 private hospitals (of 1,300 hospitals) empaneled with AB-PMJAY–30 in Gurugram city, the rest across the state–suspended services to patients under AB-PMJAY on August 8, 2025, because of the non-payment of dues totaling about Rs 490 crore….
“Private hospitals’ dues are meant to be released within 15 days but many of those hospitals had been waiting for their payments for months,” explained Dilip Bhanushali, president of the Indian Medical Association (IMA).
“If a payment cannot be made within the assured time and a reasonable extension, hospitals should be paid their dues with interest,” said Bhanushali. “How can small and medium hospitals stay afloat if they aren’t paid?”
While last minute payments averted a suspension of services earlier this year, the financial challenges of especially smaller hospitals led to a firm decision to suspend services in August 2025.
“Many smaller private hospitals are running only because they have taken loans,” Mahavir Jain, president of the IMA’s Haryana chapter, told IndiaSpend.
Delayed payment of AB-PMJAY dues is a concern across the country, from Jammu & Kashmir to Nagaland, and from Ranchi to Assam. As of February 2025, Rs 12,161 crore was outstanding…”
Thirdly, the program is being extended by Centre and States to more people than it was originally intended to cover. As a result, the financial allocation made to AB is proving to be inadequate:
“AB-PMJAY was designed for 40% of India’s population that lives below the poverty line, explained Girdhar Gyani, director general of the Association of Healthcare Providers (India).
But “in recent years, the Centre and several States have extended the free hospitalization benefit to more people,” continued Gyani.
The Union government has extended AB-PMJAY to about 60 million citizens aged 70 years and above, and about 3.7 million Accredited Social Health Activists (ASHAs), Anganwadi Workers (AWWs), Anganwadi Helpers (AWHs), and their families.
States also add people they see as needy. Maharashtra, for instance, covers below poverty line families as well as certain above poverty line families. Essentially, the beneficiary list includes families holding yellow ration cards, Antyodaya Anna Yojana cards, Annapurna cards and orange ration cards from eight districts.
States like Andhra and Telangana have included more than 80% of their population, said Gyani.
But “as the Centre only supports the cost for the population it covers, the financial burden on states is higher, which calls for higher budgetary allocations to the scheme,” he continued.
If a scheme like AB-PMJAY is to succeed across India, the overall health budget allocation needs to be increased from 1.8% to 5% of the GDP, estimated Bhanushali. “Much of this increased allocation would have to be on the AB-PMJAY.””
If you want to read our other published material, please visit https://marcellus.in/blog/
Note: The above material is neither investment research, nor financial advice. Marcellus does not seek payment for or business from this publication in any shape or form. The information provided is intended for educational purposes only. Marcellus Investment Managers is regulated by the Securities and Exchange Board of India (SEBI) and is also an FME (Non-Retail) with the International Financial Services Centres Authority (IFSCA) as a provider of Portfolio Management Services. Additionally, Marcellus is also registered with US Securities and Exchange Commission (“US SEC”) as an Investment Advisor.
