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 Table of Contents  
Year : 2013  |  Volume : 57  |  Issue : 4  |  Page : 254-259  

Rajiv Aarogyasri Community Health Insurance Scheme in Andhra Pradesh, India: A comprehensive analytic view of private public partnership model

1 Assistant Professor, Center of Social Medicine and Community Health, School of Social Sciences, Jawaharlal Nehru University, New Delhi, India
2 Public Health Researcher, Based in Hyderabad, India

Date of Web Publication18-Dec-2013

Correspondence Address:
Sunita Reddy
Assistant Professor, Center of Social Medicine and Community Health, School of Social Sciences, Jawaharlal Nehru University, New Delhi
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Source of Support: None, Conflict of Interest: None

DOI: 10.4103/0019-557X.123264

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The Rajiv Aarogyasri Community Health Insurance (RACHI) in Andhra Pradesh (AP) has been very popular social insurance scheme with a private public partnership model to deal with the problems of catastrophic medical expenditures at tertiary level care for the poor households. A brief analysis of the RACHI scheme based on officially available data and media reports has been undertaken from a public health perspective to understand the nature and financing of partnership and the lessons it provides. The analysis of the annual budget spent on the surgeries in private hospitals compared to tertiary public hospitals shows that the current scheme is not sustainable and pose huge burden on the state exchequers. The private hospital association's in AP, further acts as pressure groups to increase the budget or threaten to withdraw services. Thus, profits are privatized and losses are socialized.

Keywords: Private public partnerships, Rajiv Aarogyasri Community Health Insurance Scheme, Sustainability

How to cite this article:
Reddy S, Mary I. Rajiv Aarogyasri Community Health Insurance Scheme in Andhra Pradesh, India: A comprehensive analytic view of private public partnership model. Indian J Public Health 2013;57:254-9

How to cite this URL:
Reddy S, Mary I. Rajiv Aarogyasri Community Health Insurance Scheme in Andhra Pradesh, India: A comprehensive analytic view of private public partnership model. Indian J Public Health [serial online] 2013 [cited 2023 Mar 29];57:254-9. Available from:

   Introduction Top

Many of the private public partnerships (PPPs) were created during late 1990s focusing on specific diseases such as human immunodeficiency virus/acquired immunodeficiency syndrome, tuberculosis and malaria. Now PPP models are also being used to improve the delivery of health and welfare services in developing countries. However, to understand the PPPs, it is pertinent to understand the nature of partnership, where the common goal is health-care provisioning. In any partnership, there should be joint provision of complementary resources, finances, expertise and joint sharing of risk between the public and private actors. The objective of this paper is to present a critical view of the PPP in Rajiv Aarogyasri Community Health Insurance (RACHI) scheme implemented for the below the poverty line families in Andhra Pradesh (AP) from a public health perspective. The paper is based on review of relevant literature and data from the Aarogyasri website of the AP government.

Given the overwhelming presence of the private sector in health, various state governments in India have been exploring the option of involving the private sector and creating partnerships with it in order to meet the growing health-care needs of the population. The 10 th 5 year plan (2002-2007 )[1] welcomed hi-tech tertiary sector market as a part of health reform and advocated public private partnerships. The 11 th 5 year plan coherently summarizes the state's agenda for furthering PPP. "The approach to PPPs must remain firmly grounded in principles, which ensure that PPPs are formulated and executed in public interest with a view to achieving additional capacity and delivery of public services at reasonable cost." Public private partnerships must aim at bringing private resources into public projects, not public resources into private projects. [2]

Subsequently the draft of the National Health Bill [3] and 12 th 5 year plans [4] all saw the need for private sector participation for the health-care delivery system. The flagship National Rural Health Mission (NRHM) since 2005-2006, committed to upscale government expenditure on health and the central and state government devised various ways to generate additional resources through innovative schemes and involve private sector for health-care under PPP. [5] With inadequate public service systems, state governments in India are experimenting with partnerships with the private sector to reach the poor and underserved sections of the population in health-care delivery through PPP. AP pioneered in launching the Rajiv Aarogyasri scheme in 2007. However, the state has an obligation to make measures to provide universal health protection and restoration to every citizen, while for any private sector; profitability is the bottom line ignoring equity and rationality. Justice Qureshi's high level committee report on private hospital [6] describes the violation of social commitment of the private hospitals. The report directly points out how these corporate hospitals act like "money minting machines," a sector that is interested in making a profit and least interested in the needs of epidemiological investigation of the large majority of the population. [7]

   Health Insurance as a Panacea Top

Since 2003, the central and some governments have launched new medical insurance schemes, all with different features, to extend coverage to workers in the informal sector, particularly those who are poor; however, most of these schemes are still in experimental phase. [8] The largest is the central government's Rashtriya Swasthya Bima Yojana (RSBY) launched in 2008 and specific to states are Yeshasvini scheme in Karnataka launched in 2003, Kudumbasree in Kerala launched in 2006 and Aarogyasri in AP in 2007.

Apart from the last three 5 year plans, which advocated PPP in health-care, other factors led to starting of Aarogyasri in AP. Jayati Ghosh committee on the farmer's suicide in AP [9] brought out the precarious health conditions due to economic distress in the agriculture sector and suggested free care of the poor by the private hospitals, which have benefitted from state subsidies. These recommendations of the report became convenient support to the Chief Minister (CM) Y S. R Reddy, being a medical doctor himself, to provide this innovative health-care scheme for all, through corporate hospitals. Earlier CM relief fund had spent Rs. 168.52 crores to help 55,362 below the poverty line (BPL) patients needing hospitalization. Simultaneously, Dalit movement highlighted problems of young children with heart ailments in the state. Soon CM announced free heart surgeries for these children, by August 2006, 4600 children were operated under the CM relief fund. This magnanimous gesture set the stage for Aarogyasri scheme. [9]

Thus RACHI Scheme started as a PPP model for all the families below poverty line from 1 st April 2007. The aim of this scheme was to ensure health-care at the time of critical and catastrophic illness for the poor who live below the poverty line. The beneficiaries for the RACHI scheme are identified through the white ration cards provided as part of Annapoorna and Anthyodaya Anna Yojana Scheme, for families living below the poverty line. It is estimated that about 80% of the population has BPL ration cards and are considered eligible to utilize the benefits provided by RACHI Scheme. This scheme currently covers nearly 8 crore people who live BPL in 23 districts of AP. [10]

The state government is the sole funding agency for this health insurance scheme. The government takes care of the entire premium on behalf of the beneficiary. In the first financial year 2008-2009, the budget allocation was only Rs. 3,474,000/- which rose to Rs. 925 crores in 2010-2011 [11] and recently asked for 30% hike, estimated to be Rs. 1300 crores. [12]

Nearly 350 hospitals from government and private sector across the state have been involved in implementing the health insurance scheme. Statistical figures mentioned in the Aarogyasri website [13] [Table 1] since the inception of the program, i.e., 1 st April 2007 until September 21 st , 2013 a total of 7,090,728 people have been screened and of those 4,569,087 treated as out-patients and 2,319,669 treated as in-patients under RACHI. Of these, only 549,173 underwent surgeries in a government hospital and 1,537,836 underwent surgeries in a private hospital. The pre-authorized amount received by the private hospital is Rs. 4256 crores, whereas the government hospitals received Rs. 1322 crores only.
Table 1: Vital statistics of the Aarogyasri schemes since inception in April 2007 till 21st September 2013

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   Critical View of the RACHI Top

Even though, the scheme may look fool proof, well-designed and well-implemented there is scope for misuse by the patients as well as providers in this system. An instance of misuse has been captured by the media [14] where it was found that the scheme for free treatment for the underprivileged was being misused by the non-poor. It was found that some of hospitals in the city had admitted patients who could afford treatment, under the RACHI scheme. In November 2009, the media highlighted, how the health providers, the private hospitals have violated the norms by collecting consultation fees, not providing medicines and performing unwanted operations like hysterectomy for the women. [15] A clear violation against the memorandum of understanding they signed with the Aarogyasri trust. A survey done by Center for Action Research and People's Development in 225 villages, in five districts shows rampant hysterectomies being prescribed for everything including irregular periods and cramps, forcing menopause on women as young as 20 years. [16] Another case study by a doctor couple explored the ethics of medical malpractice using instances of un-indicated hysterectomy as a case in point, where women were being actively pushed towards unnecessary hysterectomies especially by private practitioners along with RMPs in the villages. [17] This shows how the state led insurance scheme can be detrimental to woman's health, as seen in population control programs. However, now seeing the misuse in the private hospitals, the hysterectomy surgery has been removed from the list of Aarogyasri services.

Other problems were reported, where the hospitals discharged the patients who underwent surgeries earlier than the stipulated time required for recovery. TV9 a news channel in AP has been raising unethical practices under Aarogyasri scheme through their news channel and YouTube films. The films online show the malpractices and unnecessary surgeries like lumbar surgeries for simple back pain, not providing post-operative care. However, the government has been tracking and monitoring the network hospitals and 51 hospitals, who indulged in malpractice or flouted rules were de-listed. 22 hospitals were suspended from their service to Aarogyasri patients for faking medical bills. [18]

The RACHI scheme has no doubt created access for the rural poor for specialized health services. However, there is a clear shift in focus in terms of setting priorities for providing health care for the poor. Category wise surgeries/therapies until 2012 prioritizes tertiary level super specialty health-care that requires surgery and hospitalization. [19] Around 938 procedures/surgeries are listed in the Aarogyasri scheme in the official website of Aarogyasri Health Care Trust, Government of AP along with the package cost. [13] There are pressing concerns, as the primary health-care delivery system for the poor in rural areas needs to be strengthened. Majority of the poor continue to suffer frequently from infectious diseases such as malaria, gastrointestinal disorders and anemia.

   Diverting Public Health Resources for Private Health Systems Top

The Aarogyasri scheme was strongly criticized by a former Director of Nizam Institute of Medical Sciences (NIMS), Hyderabad. He pointed out how the scheme was feeding into the priorities of the private health-care industry enabling profit making through the soaring numbers of surgeries conducted when compared to those in Government Hospitals. Dr. Raja Reddy also highlighted that 59,000 surgeries were performed with the Rs. 274-crore Aarogyasri budget (mostly in the corporate sector), the Gandhi Hospital could conduct 2.56 lakh operations with a meager budget of Rs. 12 crore. [20] 108 Ambulance services also came in sharp criticism. [21] He referred that the health sector is going through a major crisis in the state due to misplaced priorities of the government, which was manifest in the neglect of tertiary Government facilities like Osmania hospital. [20] However, the trend of more number of patients getting admitted in the corporate sector for treatment compared with government hospitals continued as per the recent statistics published by the government under Aarogyasri scheme as on 22.09.2013. [Table 1] shows that 74% (1,537,836) of the surgeries are done in private hospitals and only 26% (549,173) are done in government hospitals, of the total Rs. 5579 crores preauthorization until 22 September 2013, claimed, the corporate hospital has the highest share of almost 76% (Rs. 4256 crores) and the share of the government hospitals is only 24% (Rs. 1322 crores).

The huge cost paid by the state, the media (YouTubes/TV9) is full of reports "Aarogyasri as corporate dhanasri" (God of Laxmi-money), "corporate hospitals loot Aarogyasri funds", "Aarogyasri has turned in to anarogyasri (illhealth)" "Aarogyasri is a Kalpavriksham" (tree of boon) for corporate hospital. The whole logic of spending crores of rupees under Aarogyasri for surgeries/tertiary care is also spoken as "gorantha labam, kondantha avinithi" meaning "for a nail size profit it is mountain size corruption".

   Neglect of Public Health Care System Top

It is important to utilize optimal resources within the public health system by correcting the systemic deficiencies, which will enable the system to reach a large number of the poor. Contrary to this, it is seen that the cardiology wing of the Gandhi Hospital (a government hospital) was inaugurated on October 2008 with a capacity to perform 1000 surgeries in a year, where only 85 surgeries were performed between January and May 2009. [22] In spite of world class operation theatre facilities set up at Gandhi Hospital, the system is still limping without a pool of specialist doctors to conduct critical surgeries. This situation is exacerbated by the diversion of funds to the private sector instead of attracting doctors into the public system. It is not only at this government hospital even at the level of community health centers in rural areas, many operation theaters remained underutilized due to lack of skilled manpower.

   Question of Sustainability Top

The purpose of the RACHI scheme is to cut down out of pocket expenditure for people living below the poverty line and to provide the financial protection for the catastrophic illness. It is still unclear whether this intention is achieved; it has serious implications and consequences. The state government is finding it difficult to financially sustain and wanted to approach the central government for support. [23] The planning commission rejected this request because it observed that these insurance schemes are turning out to be a "cash cow" for the corporate hospitals. [24]

Sustainability is also questioned, when AP Private Hospitals and Nursing Homes (APNA) and AP Super Specialties Hospitals Association (ASHA) with 270 hospitals as members, formed a pressure group to bargain and lobby around to restore all Aarogyasri tests some of which are for only government hospitals and 30% hike in the tariffs or else threatened to stop treating the poor under the Aarogyasri. [25] Finally, the lobbying and pressure tactics did work and the government succumbed to APNA and ASHA by increasing the tariff by 30% in May 2013. [26] This leads to a major question of sustainability of the whole scheme, for it will continue to encash from the government and public money and will be at the whims and fancy of the private hospitals. The moment funding stops, the services will be ceased.

   Discussion Top

Bennett et al. [27] and others identified five main problems associated with private-for-profit provision of health services. They are related to the use of illegitimate or unethical means to maximize profit, waning concern toward public health goals, lack of interest in sharing clinical information, creating brain drain among public sector health staff and the lack of regulatory control over their practices. All these can be seen in the implementation of the Aarogyashri scheme.

RACHI has been an impressive popular scheme, but it is skewed toward tertiary care and there is no provision for out-patient treatment of everyday illnesses that affects the working capacity of the majority of patient. Thus, it provides for a smaller population at the cost of the majority and focuses on certain chronic diseases at the cost of communicable diseases. Mahapatra [28] analyzed the leading causes of premature mortality and disability in rural and urban areas in AP. He found that most of the overall disease burden is constituted by conditions such as lower respiratory infections, diarrheal diseases, low birth weight (malnutrition), tuberculosis, ischemic heart disease and malaria, the leading causes of mortality. Among the cause of disability accidents due to fall and fire, depression, epilepsy, schizophrenia and protein energy malnutrition among children were among the leading causes. These are the illnesses, which curb daily functioning of the poor and have a significant impact on their economic condition. Many premature deaths and morbidity faced by the vulnerable sections in the rural areas is merely due to deficient publicly provided primary care services and an ineffective referral system coupled with lack of qualified health-care providers. Hence, majority of the rural and urban poor may require basic primary health-care services and access to proper referral services to reduce their disease burden and financial consequences. However, it is important to note that no health insurance scheme focuses as much on curative care that is dependent on high medical technology as that of RACHI and does not cover all kinds of illness that are experienced frequently by the poor that lead to their impoverishment, disability and premature mortality. In every phase since 2007, we see that not more than 5% of the people were screened and lesser than 1% actually got hospitalized and treated for the diseases for the huge amount paid from the public to the private sector. [29] The focus on tertiary health-care to the exclusion of all other forms of medical assistance leads to an inefficient medical care model with a low level of real impact on meeting the needs of health-care and the health of the population. [9]

Scholars have analyzed why publicly financed health insurance schemes are ineffective in providing financial risk protection. Analyzing RSBY and other State Insurance Schemes of AP, Karnataka and Tamil Nadu, suggested that universal health coverage of the population needs thrust for primary health-care and move away from the current trend of piecemeal fragmented approach. [30]

Further, RACHI shows that the corporate hospitals handle the biggest share of the cases and also demand more and more public financing, to the detriment of the public system, which lies under-utilized. Hence there is a double wastage of public funds. Further, community based health insurance covers very small population so has a limited impact from a public health point of view. [31] Thus, it can be seen that this model of PPP is skewed where it is purely public financing and private provisioning with commercial interest overriding all other concerns. It is un-sustainable and threat of backing out by the private sector, when there are no profit margins.

There are contradictions in the policy documents of NRHM [5] promoting PPP models without looking into the dynamics of this partnerships on one hand and on the other hand, states that health insurance can never be a substitute for well-functioning, effective and efficient public health-care system. 11 th plan [2] too advocates PPP and aim at bringing private resources into public projects, instead on the ground it is the other way round, privatizing profits and socializing losses. [32] Health insurance works best when services are available in the remote corners and poor households can actually exercise choice. [5] What is required is developing an integrated public health system that strengthens the primary, secondary and tertiary level care with due emphasis on inter-sectoral linkages. The evidence from RACHI shows that it is not designed to contribute to this kind of integrated and comprehensive vision of health-care. Neither does it provide for reducing the costs of majority of illnesses of the people of AP.

   References Top

1.Planning Commission. Tenth Five Year Plan, 2002-2007. Vol. 2. New Delhi: Chapter on Health, Government of India; 2002.  Back to cited text no. 1
2.Planning Commission. Eleventh Five Year Plan, 2007-2012. Vol. 2. New Delhi: Chapter on Health, Government of India; 2008. p. 256.  Back to cited text no. 2
3.Government of India. Ministry of Health and Family Welfare, Draft National Health Bill-2009.  Back to cited text no. 3
4.Planning Commission. Twelfth Five Year Plan, 2012-2017. Vol. 3. New Delhi: Chapter on Health, Government of India; 2013.  Back to cited text no. 4
5.MoHFW (2005) National Rural Health Mission 2005-2012, Mission Document, New Delhi: Government of India.  Back to cited text no. 5
6.Qureshi AS. High Level Committee for Hospitals in Delhi: Enquiry Report. New Delhi: Maulana Azad Medical College, Govt. of NCT of Delhi; 2001.  Back to cited text no. 6
7.Qadeer I, Reddy S. Medical care in the shadow of public private partnership. Soc Sci 2006;34:4-20.  Back to cited text no. 7
8.Kumar M. Towards universal health coverage in India. Lancet 2011;377:1568-9.  Back to cited text no. 8
9.Shukla R, Shatrugna V, Srivatsan R. Aarogyasri health care model: Advantage private sector. Econ Polit Wkly 2011;XLVI:38-42.  Back to cited text no. 9
10.Aarogyasri Health Care Trust. Rajiv Aarogyasri Scheme achieves following landmarks. Available from: [Last updated on 2013 Jan 20].  Back to cited text no. 10
11.Government of Andhra Pradesh State Health Budget Manual (2007 to 2010). The New Indian Express 3 rd May 2013 accessed on 2013 Sep 12.  Back to cited text no. 11
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14.The Hindu. Misuse of Rajiv Aarogyasri allege. The Hindu. Available from: [Last updated on 2008 Apr 16].  Back to cited text no. 14
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16.The Times of India. The Uterus Snatchers of Andhra. Times of India. Available from: [2010 Jul 31].  Back to cited text no. 16
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20.The Hindu. Aarogyasri scheme draws flak. Available from: [Last updated on 2008 Sep 21].  Back to cited text no. 20
21.The Hindu Business line. Aarogyasri, 108 come in for sharp criticism. Available from: [Last updated on 2008 Sep 22; Last cited on 2011 Jul 09].  Back to cited text no. 21
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23.GoAP (Government of Andhra Pradesh). Finance Minister Budget Speech (2009-2010), by Mr. K. Roasaih, to the Andhra Pradesh Legislative Assembly on 24 th July 2009. Available from: [Last updated on 2009 Jul 24; Last cited on 2011 Jul 09].  Back to cited text no. 23
24.Times of India. Centre refuses to fund Aarogyasri. Andhra Pradesh: The Times of India. Available from: [2011 Jul 11].  Back to cited text no. 24
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27.Bennett S, Dakpallah G, Garner P, Gilson L, Nittayaramphong S, Zurita B, et al. Carrot and stick: State mechanisms to influence private provider behavior. Health Policy Plan 1994;9:1-13.  Back to cited text no. 27
28.Mahapatra P. Estimating National Burden of Disease: The Burden of Disease in Andhra Pradesh in 1990s. Hyderabad: The Institute of Health Systems; 2001.  Back to cited text no. 28
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31.Acharya A, Ranson MK. Health care financing for the poor: Community based health insurance schemes in Gujarat. Econ Polit Wkly 2005;17:4141-50.  Back to cited text no. 31
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