Out-of-Pocket Health Spending in India

Why Indian households pay a large share of health costs directly, how this pushes families into poverty, and how the share has been changing.

Out-of-pocket health spending means money that households pay directly for health care at the time they use it, rather than through insurance or taxes. India has historically had one of the highest shares of out-of-pocket spending among large economies.

How large is it?

According to India’s National Health Accounts estimates, out-of-pocket spending made up over 60 percent of total health spending in the mid-2010s. The share has fallen in recent years, to under 40 percent by around 2021 to 2022, as government health spending increased.

Where the money goes

A large share of out-of-pocket spending goes on medicines, followed by outpatient consultations, diagnostic tests and hospital stays. Many households use private providers, which can be costly.

Catastrophic spending

When health costs take a very large share of a household’s budget, economists call it catastrophic health expenditure. It can force families to borrow, sell assets or cut spending on food and education. Studies have estimated that out-of-pocket health spending pushes millions of Indians into poverty every year.

Why it is so high

Low public health spending: India’s government health spending has long been low relative to GDP, though it has risen.
Limited insurance coverage, especially for outpatient care.
Reliance on private providers where public facilities are weak.
Medicine costs.

Policies

Ayushman Bharat PM-JAY covers hospital care for poorer families and older people.
Jan Aushadhi Kendras sell generic medicines at low prices.
Health and Wellness Centres, now called Ayushman Arogya Mandirs, aim to strengthen primary care.
Free medicines and diagnostics in public facilities in many states.

The cost of a chronic illness

A family member develops diabetes. Each month, the family pays for doctor visits, tests and medicines out of pocket. The amounts seem small individually, but over years they add up to a significant share of income. Low-cost generic medicines and free primary care can reduce this long-term burden.

Thinking hospital insurance covers most health costs

Hospital stays can be very expensive, but for many families, the largest ongoing costs are medicines and outpatient care, which hospital insurance often does not cover.

Key takeaways

Out-of-pocket spending is money paid directly for health care.
Its share of India's health spending fell from over 60 percent to under 40 percent in recent years.
Medicines and outpatient care are major costs, and catastrophic spending pushes families into poverty.
PM-JAY, generic medicine shops and stronger primary care aim to reduce the burden.