Over the last decade, out-of-pocket expenditures (OOPE) on healthcare have been a significant factor in pushing many Indian households below the poverty line.
The impact has been particularly severe on rural and economically disadvantaged groups, making healthcare unaffordable for millions. According to research by the Observer Research Foundation (ORF), between 3% and 7% of Indian households fall into poverty each year due to the high costs of medical care.
Recognizing the gravity of this issue, healthcare financing has become a critical focus of health policy in India.
On September 25, 2024, the Government of India released the latest National Health Account (NHA) estimates, covering the years 2020-21 and 2021-22. These figures revealed significant progress in reducing OOPE, with a sharp decline from 64.2% of total health expenditure in 2013-14 to 39.4% in 2021-22. This decrease has been accompanied by an increase in Government Health Expenditure (GHE), which rose from 28.6% to 48% during the same period.
This shift, in which GHE overtook OOPE, marks a historic moment in India’s healthcare financing landscape.
The reduction in OOPE was driven, in part, by the increased public health spending necessitated by the COVID-19 pandemic. However, ORF’s analysis shows that the trend toward reduced OOPE predates the pandemic and reflects a decade-long effort to ease the financial burden on Indian households. Despite this progress, OOPE remains high, with 39.4% of health spending still coming directly from patients’ pockets. Achieving the National Health Policy 2017 target of government health expenditure at 2.5% of GDP by 2025 remains a significant challenge.
Several government initiatives have contributed to this shift. The Ayushman Bharat Pradhan Mantri Jan Arogya Yojana (AB-PMJAY), launched in 2018, has provided millions of poor households with free secondary and tertiary healthcare. Additionally, the expansion of primary healthcare infrastructure through the creation of Ayushman Bharat Health and Wellness Centres has brought essential services closer to rural communities, reducing the need for costly hospital visits.