The Impact of Out-of-Pocket Health Expenditure in India

Out-of-Pocket Health Expenditure in India

Out-of-Pocket Expenditure (OOPE) is when households directly pay for medical care, often from savings or by selling assets. It remains the main source of Healthcare Financing in India, creating hardships, especially for poorer households.

1. What is OOPE and Why is it Important?

OOPE refers to payments households make at the time of receiving healthcare. Since insurance coverage is limited, families often spend directly, which increases financial vulnerability.

2. How Has OOPE Trended in Recent Years?

According to National Health Accounts (NHA), OOPE as a share of total health expenditure declined from 64.2% (2013-14) to 39.4% (2021-22).

However, alternative surveys like CMIE and NSSO indicate steady or even rising burdens, suggesting that official NHA data may underestimate household hardships.

3. Why Do Estimates Differ?

NHA data: Based on official accounts and projections.
NSS & CMIE surveys: Directly collect household-level spending details.

The discrepancy arises because NHA often excludes variations in insurance coverage, informal payments, and newer consumption patterns.

4. Factors Driving OOPE

High medical costs: Medicines form the largest component of spending.
Low insurance penetration: Limited coverage outside formal employment.
Hospitalisation: Rising costs in both private and public facilities.
Pandemic impact: COVID-19 caused temporary spikes in household health spending.

5. Policy Responses

Ayushman Bharat (PM-JAY): Expansion of hospitalisation coverage.
Strengthening public health facilities: To reduce dependence on private providers.
Promotion of generic medicines: To lower treatment costs.
Focus on vulnerable groups: Ensuring better financial protection.

6. Current Challenges

While NHA data shows a decline, ground realities suggest many households continue to face heavy expenses. Families often borrow money or sell assets to afford treatment.

Effective policy framing requires validation from multiple surveys to capture the true financial burden of healthcare.

Synopsis

India’s out-of-pocket health spending has declined in official estimates, but household surveys reveal persisting hardships. Medicines, hospitalisation, and low insurance coverage remain the main drivers of this burden. Reliable data from multiple sources is essential for effective health financing reforms and to reduce inequalities in access to care.