The ‘Missing Middle’: How to Provide 350 Million Indians with Health Coverage?

Abstract

Despite recent expansion in its population covered by public-funded insurance, a large section of India’s population remains at major financial risk from health shocks. This segment of the population, sometimes referred to as the ‘missing middle’, typically consists of population groups that are, or have been, engaged in informal sector work, and are not poor enough to be eligible for state-subsidised contributions to insurance premiums; and potentially includes many even among those who satisfy the eligibility criteria. We estimate that the missing middle number is at least 300–350 million in India, with large variations in their economic circumstances. Using extensive international and India-based evidence, we assess two approaches to cover the missing middle: an expansion in public sector health delivery and a contributory demand-side financing system, that is currently popular in India. We conclude that a mix of the two approaches appears to be the most feasible in the short run, given limited regulatory and management capacity and resource constraints, with a longer-run emphasis on integrated systems. The approach proposed in the paper is also likely to help address the problem of shallow coverage of existing health insurance coverage that concerns large numbers of people extending beyond the group comprising the missing middle. JEL codes: I13, I14, I18