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Healthcare for all ⚕️

Rajasthan’s experiment with universal health coverage will be a lesson for post-pandemic India

This is edition 258 of Beyond The First Order, a premium daily newsletter that demystifies the hidden models, incentives and consequences of the most significant events across India and Southeast Asia

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Good morning,

Every World Health Day has a different theme. We look back at how the theme from 2018—Universal Health Coverage—is taking shape in Rajasthan, India. 

The Employees’ Provident Fund, which is the de-facto retirement product for millions of salaried employees in India, began investing in the stock markets a few years ago. But an accounting quirk means that a certain set of investors get hurt.

Apple has long valued its ‘principles’. But with companies in China banding together against it, a dilution of those very principles is what’s happening.

And Russia’s vaccine against Covid-19 is having quite a time on social media. What gives?

Rajasthan is chasing the Universal Health Coverage holy grail

Today is World Health Day. And every year, the World Health Organization (WHO) marks it with a new vision. This year, it’s ‘Building a fairer, healthier world’. 

In 2018, the focus was on Universal Health Coverage (UHC). The buzzy phrase has dominated the public health conversation in India since its moment in the sun in 2018. In India, it’s better known as Ayushman Bharat—the world’s largest government-funded health insurance scheme. The Ken wrote about it when it was launched. 

Later, another story we wrote mentioned that there was a catch in how the government interprets “universal” in UHC, and that covering the poor is not enough (see chart). In India, between the rich who buy health insurance and the poorest who are covered by the government, is a large middle class without any coverage. 

Last week, the Rajasthan government announced that it will be the first to remedy this with a health insurance cover of Rs 5 lakh (US$6,813) for everyone in the northwestern state. 

Announcements are easy. Execution is where the scheme will succeed or fail. 

The challenge is simple. The state government wants the majority of those not covered by any health insurance to pay the premium. Which would be almost Rs 850 (US$11) annually for a family. The full premium with a private insurer would conservatively be thrice that amount. 

A consultant working with the government on Ayushman Bharat laid out the challenges of enrolling people in the scheme, which the government is starting this week:

  1. Would a person who does not consider health insurance important enough to buy from a private player every year buy it from the government? After all, the premium is just a notional price. The government needs to convince healthy people to worry about their future, which may or may not involve hospitalisation. This is something insurers have struggled with for ages.
  2. Say this person pays the premium and does not fall seriously ill for three years. Will they continue to pay the premium to the government? In developed countries, this model works when the government deducts the premium straight from one’s salary, but India has far more informal workers than formal ones.

Moreover, the approach that Rajasthan has decided to take has not been tried anywhere in India and it does not have any proven success record globally. 

Thus, the fate of the pioneering health insurance-based universal health coverage depends on how the Rajasthan government markets it, and for how long people choose to trust the state. Up until now, only one Indian region has attempted to achieve UHC, the union territory of Delhi. And it is doing it without using health insurance. In post-pandemic India, Rajasthan and Delhi will showcase two different approaches to executing UHC.

The 800-pound gorilla in India’s ETFs

In 2015, India’s Employees’ Provident Fund Organization (EPFO) turned to the tool that’s touted by personal finance geeks as the only sensible way to create wealth—the stock markets. The utility of stocks is that they grow and compound over a long period; and the employees’ provident fund (EPF) is a retirement product for millions of salaried Indians, so you can see how it matches up. 

Earlier, 100% of EPFO money would find its way into bonds issued by the government, banks, and other private companies.

So, for the first time ever, the EPFO began investing up to 15% of its corpus in exchange traded funds. An ETF is a product that usually replicates a stock index, such as the Nifty 50 or the Sensex 30. Its objective is to track the index as closely as possible, at a low cost. This way, the EPFO doesn’t have to break its head over which stocks to choose for its investments.

Now, the ETF market in India is still in its infancy. Unlike mutual funds, you need to have a separate share trading demat account to buy or sell ETFs. With that additional point of friction, there isn’t really too much participation from retail investors. Take, for example, the SBI Nifty 50 ETF which manages over Rs 90,000 crore (US$12.2 billion)—nearly 90% of it is from institutional investors like the EPFO. 

And that means the EPFO has grown into being a majority shareholder, or the 800-pound gorilla which can control certain actions of the ETF it has invested in. Like dividend payouts.

You see, most ETFs in India don’t pay dividends to investors. Dividend payouts are taxed in the hands of the investor as well. So it really doesn’t make any sense to receive dividends if someone is trying to grow their money in a low-cost manner over the long-term.  

But, since the EPFO is the majority shareholder, the ETF has to bend a certain way to accommodate it. And if the EPFO wants a dividend, it better get it. So, in February and March, the SBI Nifty 50 ETF paid out dividends.

“This has been done to favour the EPFO at the cost of all other investors who now have a tax incidence that, too, at a higher rate," Srivastava [ Anubhav Srivastava, partner and fund manager, Infinity Alternatives] added. He explained that EPFO accounting policies forced a declaration of dividend by SBI MF. According to him, if EPFO were to book gains by selling ETF units, the amount realized would be considered as part principal repayment and part gains. However EPFO rules require the organization to invest 15% of incremental flows in equities. Hence a return of money in the form of principal repayment would cause the EPFO to fall short of this 15% requirement.

For India’s salaried class who find a portion of their income going into the EPF, this does not matter. But for other retail investors in the ETF, it’s a problem because they now have to pay tax when they least expected it. And if this is the precedent, investors will be wary of touching any ETF which has money from the EPFO. That’s not a good thing if we want more people investing in low-cost, index-based ETFs.

Could “Nationalism” be Apple’s Achilles’ Heel?

For its sheer scale, long-term horizon, and iconoclastic product thinking, there’s no other company quite like Apple. It was last worth somewhere north of US$2 trillion. Since 2007, when it first launched the iPhone, rivals have been trying to disrupt it; experts have been trying to predict it; and analysts have been trying to short it. All to no avail.

Neil Cybart, one of the sharpest Apple analysts, estimated in 2019 that Apple had over a billion users around the world using over 1.4 billion of its devices across them. Those numbers are likely to be significantly higher today. 

And Apple runs that giant ecosystem like the stereotypical warden runs their hostel. Its ecosystem, its rules. Anyone who dares defy or sidestep its rules will find themselves quickly ejected from the Apple world. Ask Facebook, Epic Games, Google, and Amazon.

If the world’s biggest companies cannot take on Apple, then who can? Countries, perhaps?

Beginning in April, new iPhones and other iOS devices sold in Russia will include an extra setup step. Alongside questions about language preference and whether to enable Siri, users will see a screen that prompts them to install a list of apps from Russian developers. It's not just a regional peculiarity. It's a concession Apple has made to legal pressure from Moscow—one that could have implications far beyond Russia's borders.

Or, companies belonging to one country bandying together?

Some of China’s biggest technology companies, including ByteDance and Tencent, are testing a tool to bypass Apple’s new privacy rules and continue tracking iPhone users without their consent to serve them targeted mobile advertisements.

This tool, launched by the state-backed China Advertising Association, is called China Advertising ID (CAID). What this is trying to circumvent is a new set of rules in Apple’s ecosystem, called App Tracking Transparency (ATT), which moves from the old method where you had to opt-out of sharing your Identifier for Advertisers (IDFA) to an opt-in model.

CAID’s existence puts Apple in a really tight spot, argues Eric Benjamin Seufert.

The development and adoption of the CAID puts Apple in a difficult position. Rock, meet hard place: China is Apple’s second-largest market after the US, and the specter of a WeChat ban on the iPhone during the Trump administration was estimated to potentially reduce Apple’s iPhone sales revenue by up to 30%. Apple already applies a separate standard with its App Store guidelines for certain Chinese developers, allowing eg. Tencent to run what is essentially an app store inside of WeChat. Would Apple simply extend this notion of a separate Chinese principle to privacy and allow CAID to be used for persistent identity by Chinese companies while subjecting companies domiciled elsewhere (read: Facebook) to the restrictions of ATT, which explicitly prohibits fingerprinting?

“Chinese apps are basically forming a union and daring Apple to ban all of them at once,” says this post by Alex Bauer on Adexchanger. He presents two likely scenarios:

- Apple successfully cracks down and CAID goes away. This is clearly what Apple is shooting for – but taking on the entire Chinese tech ecosystem, along with its implicit state sponsorship, may end up being a bigger bite than Apple has the stomach for.

- Apple decides to abandon the whole ATT initiative. If CAID manages to get a foothold in China, it would set a precedent for ATT workarounds that could make it impossible for Apple to enforce the policy in a consistent manner globally.

While Apple probably can't afford to ignore a direct mandate from the Chinese government – if it gets to that point, of course – a public implosion of the ATT initiative would be disastrous for the pro-privacy brand image Apple is trying to build.

Russian vaccine marketing is prestige and politics in one shot

On 1 April, a promoted post popped up on my Twitter feed. In the image, six grinning travellers—without masks—stood on a green field with big airplanes, thrusting V-signs into what looked like photoshopped clouds. “Our social media followers will be the first to be invited to get #SputnikVaccinated in Russia when the program starts,” read the caption. 

The post came from @sputnikvaccine, the Twitter handle of Sputnik V, Russia’s vaccine contribution to the fight against the novel coronavirus. Sputnik V also has an Instagram page—where followers who post their ‘best victory sign photo’ stand to win a summer trip to Russia. Combined with its Facebook page, this vaccine’s social media presence is the only one of its kind, and it’s no April Fool’s joke.

The Russian Direct Investment Fund (RDIF), the country’s sovereign wealth fund, is behind Sputnik V’s marketing. It launched the social campaign to provide “up-to-date information to a global audience,” and also “give mankind hope that they will soon be able to break free from COVID-19.” The handle recently welcomed new followers with an educational video on how Sputnik can help end the tiresome pandemic. 

Posts also advertise the superiority of Sputnik V—which was approved by Putin for use even before its clinical trials were completed—versus other vaccines.

After starting in August 2020 with 38,000 followers and this friendly, factual tone, Sputnik V’s Twitter has grown over 500% and even has a verified badge.

Perhaps the branding and promoted posts are crucial investments for Russia to win in the global Covid-19 vaccine market, projected to be worth US$14.5 billion by the end of 2021. There is also prestige in being seen as the leader in ending a disease that has taken over 3 million lives worldwide.

In reality, Russia is playing to multiple strengths. Just days after the warm educational message, there was this tweet:

The Politico article in question is a take down of Russia’s Kremlin-backed strategy to promote its own response to Covid-19—while undermining the West’s. 

In addition to convivial self-promotion, Russian social media tactics reportedly include distributing articles—written in multiple languages for Central and Eastern Europe—that claim Western vaccines are experimental and unsafe. According to Politico, many of these have been shared widely on Twitter and in anti-vaccine groups on Facebook. Meanwhile, embassies from countries with Sputnik V contracts saw spikes in social media engagement, as large numbers of diplomatic accounts posted positively about the vaccine.

Russia’s expertise with targeted online campaigns is now at least four years old, right out of its playbook for allegedly meddling in the 2016 US presidential elections. Now, the footing is more uneven, as Western pharma companies have a stricter line to toe with regulatory guidelines. Unlike in the US, Europe and the UK do not even allow medicines to be advertised directly to consumers.

Such a global push for Sputnik V’s adoption drew scrutiny to the fact that Russia had, at the end of February, only produced 10.7 million vaccine doses—even when its own population is 145 million. Yet it also rushed to Latin America’s help during their vaccine shortfall. And tensions are high with the EU after 3 countries—Hungary, Slovakia, and the Czech Republic—decided to adopt Russia’s vaccine without the necessary approvals. 

Widespread use of its vaccine would be an important political win for Russia, providing leverage in future geopolitics and the new age Cold War. And ‘Sputnik’ isn’t a new symbol in Russia’s quest to outpower the west—it was the name of the first artificial satellite launched from the earth, by the Soviet Union, at the height of the space race in the 1960s. 

That’s a wrap for today.

Don’t forget to write in with your thoughts and observations on how this pandemic is reshaping businesses, societies, and economies. We will be back tomorrow.

Stay safe,
[email protected]

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