India’s health financing landscape has witnessed a transformative shift, notably in public health expenditure and the reduction of out-of-pocket expenditures (OOPE). For decades, OOPE has been a significant financial burden on Indian households, often pushing families below the poverty line, particularly in rural and poorer states. However, recent National Health Account (NHA) estimates reveal a significant decline in OOPE, signaling a historic movement in India’s health policy.
Decline in Out-of-Pocket Expenditures
Historic Financial Burdens
Over the past decade, OOPE in healthcare has consistently strained Indian households. Research has shown that annually, 3 to 7 percent of households fall below the poverty line due to these expenses. Rural and poorer regions have been disproportionately affected, exacerbating the financial vulnerability of disadvantaged groups.
This troubling trend has remained a focal point of health policy discussions in India for years. The high rate of OOPE not only strained family budgets but also interrupted essential spending on other critical needs such as education and housing. Particularly for rural and economically disadvantaged populations, the lack of financial protection schemes compounded their vulnerability, often leading to a cycle of debt and impoverishment. Studies and policy discussions have consistently highlighted the urgency for governmental intervention to alleviate this heavy burden on Indian households.
Recent Improvements
The NHA estimates for 2021-22 show a dramatic decline in OOPE from 64.2 percent in 2013-14 to 39.4 percent—a substantial reduction catalyzed by increased public spending during the COVID-19 pandemic and sustained government efforts. This decline is part of an ongoing trend rather than an isolated event spurred by the pandemic.
This significant decrease in OOPE is not merely a statistical anomaly but reflects a deliberate policy shift towards greater government intervention in healthcare financing. The pandemic, while catastrophic, expedited the infusion of public resources into the healthcare sector, underscoring the necessity of robust public health frameworks. Over the years, the cumulative effect of various government initiatives designed to provide financial relief and enhance healthcare access has borne fruit. Moreover, the sustained efforts have shown that strategic investment in healthcare can lead to lasting improvements in reducing OOPE.
Increase in Government Health Expenditure
Shift in Spending Composition
Government health expenditure (GHE) has seen a significant rise, increasing from 28.6 percent in 2013-14 to 48.0 percent in 2021-22. This increase highlights the government’s intensified focus on public health, with GHE overtaking OOPE as a component of total health spending for the first time.
This upward trend in GHE represents a paradigm shift in how health financing is approached in India. By taking on a larger share of health spending, the government has not only provided financial relief to its citizens but also demonstrated its commitment to strengthening the public health infrastructure. This shift also aligns with the broader objectives of the National Health Policy, which aims to make healthcare more accessible and affordable for the general population. This intensified focus on public health spending is an acknowledgment of the critical nexus between health and economic stability.
Persistent Challenges
Despite this progress, OOPE still constitutes 39.4 percent of total health spending, indicating ongoing challenges that need continuous attention and strategic policy measures to further alleviate the financial burden on households.
While the decline in OOPE marks a positive trajectory, the high remaining percentage signifies that much work still needs to be done. Persistent challenges include addressing the inefficiencies in healthcare delivery, ensuring equitable access across different regions, and bridging the gap between urban and rural healthcare services. Moreover, the quality of care provided under government initiatives must be continually monitored to ensure that it meets acceptable standards. Financial accessibility is just one aspect; the effectiveness and quality of healthcare services also play a crucial role in the overall well-being of the population.
Total Health Expenditure and GDP Target
Decline in Total Health Expenditure
While public spending has increased, total health expenditure as a percentage of GDP has decreased over the past decade. This reduction can be attributed to increased public investment, which has lessened the health spending burden on families.
This trend is significant as it demonstrates a successful realignment of financial burdens from individuals to the state. The decrease in total health expenditure as a percentage of GDP suggests that as public investments grow, the pressure on individual households to bear healthcare costs diminishes. This realignment is essential for the economic stability of families and the broader economic health of the nation. Government investments in health not only benefit individual well-being but also have far-reaching effects on national productivity and economic resilience.
National Health Policy Aim
India’s government aims to achieve a national target of 2.5 percent of GDP for public health expenditure by 2025, as stipulated in the National Health Policy 2017. This goal underscores the government’s commitment to enhancing healthcare infrastructure and accessibility.
Achieving this target will require sustained political will, efficient allocation of resources, and a focused implementation strategy. The 2.5 percent GDP target is ambitious yet attainable with the right mix of policy measures, regulatory oversight, and public-private partnerships. Notably, the government must also navigate the challenges posed by disparities in state capacities and healthcare demands. A collaborative approach involving both central and state governments, supplemented by innovative health financing mechanisms, can pave the way for achieving this national health expenditure goal.
Role of State and Union Governments
Historical and Recent Spending Patterns
Historically, about two-thirds of overall GHE has been borne by states, with the union government contributing the remaining third. The pandemic led to a slight alteration in this spending pattern due to increased union government allocations.
The historical division of health expenditure responsibilities underscores the diverse capacities and priorities between state and central governments. While states have traditionally been closer to the ground realities and thus more attuned to local healthcare needs, the central government’s increased spending during the pandemic highlighted the need for coordinated action in times of crisis. This shift also underscored the potential for the central government to provide significant buffers and support to states, particularly for large-scale health emergencies and infrastructural investments.
Allocations and Utilization
Post-2022, there have been inefficiencies in the utilization of the union budget allocations within the health sector, with unspent funds at the year’s end. However, allocations have not reverted to pre-pandemic levels, indicating the government’s intent to sustain increased health funding.
Despite increased budget allocations, the inefficiencies in utilizing these funds highlight the persistent challenges in the health sector’s bureaucratic and administrative frameworks. Ensuring the effective use of these allocations requires stringent oversight, transparency, better planning, and more robust financial management systems. The government’s intent to sustain higher levels of health funding is promising. Still, it underscores the need for enhancing the capacity of health institutions to absorb and efficiently deploy these funds for maximum impact. Streamlining processes and reducing bureaucratic bottlenecks could significantly improve the health systems’ responsiveness and efficiency.
Health Initiatives Reducing OOPE
Ayushman Bharat Pradhan Mantri Jan Arogya Yojana (AB-PMJAY)
Launched in 2018, AB-PMJAY has been instrumental in reducing OOPE for secondary and tertiary care by facilitating hospital admissions for 69 million people, significantly easing the financial burden on households.
AB-PMJAY represents one of the most substantial health policy interventions in recent Indian history. By providing health insurance coverage to millions, it ensures that critical medical treatments do not push vulnerable families into poverty. The scheme’s success lies in its scope and inclusivity, covering a wide range of medical conditions and treatments. Its implementation has also catalyzed improvements in hospital infrastructure and the delivery of care, particularly in rural areas. However, ongoing efforts are necessary to ensure that the scheme reaches its full potential, addressing issues such as beneficiary awareness, infrastructure bottlenecks, and maintaining the quality of care provided.
Pradhan Mantri National Dialysis Programme (PMNDP)
Operational since 2016, PMNDP has benefited 2.5 million poor patients through its 748 centers, providing essential health services that alleviate OOPE for those in need of regular dialysis treatments.
PMNDP has significantly alleviated the financial burden on families requiring regular dialysis by offering these services free of charge or at minimal cost. It addresses a critical need for ongoing medical treatment, thus preventing the catastrophic expenditure that dialysis can impose on households. The program’s success is seen not just in the number of patients it serves but also in its role in improving the accessibility and reliability of dialysis services across India. Expansion and strengthening of this program can further ease OOPE and provide a lifeline for many patients with chronic kidney conditions who would otherwise face insurmountable healthcare expenses.
Ayushman Arogya Mandirs (AAMs)
These centers, originally termed Ayushman Bharat Health and Wellness Centers, provide comprehensive primary healthcare in rural areas, including free essential medicines and diagnostic tests, thereby reducing OOPE for basic healthcare needs.
AAMs are a cornerstone initiative in the move toward comprehensive and continuous healthcare. By focusing on primary health care, these centers aim to address health issues before they necessitate more expensive secondary or tertiary care. The provision of free essential medicines and diagnostics is particularly impactful in rural areas, where access to affordable healthcare is often limited. The centers offer preventive, promotive, and curative services, which are crucial for reducing the incidence of diseases that can later become financial burdens. The expansion and effective management of AAMs are crucial for ensuring sustainable health improvements and reducing OOPE.
Impact of PMBJP
Expansion and Effectiveness
The Pradhan Mantri Bhartiya Janaushadhi Pariyojana (PMBJP) has expanded aggressively since its launch in 2008, resulting in substantial household savings on medicines. From just 80 outlets in 2015, the scheme now operates extensively across India, providing affordable generic medicines.
The rapid growth of PMBJP outlets has been a game-changer for affordable healthcare. By making generic medicines available at lower costs, the program significantly reduces the OOPE on prescription drugs, which often account for a large portion of healthcare expenses for many families. The program not only improves access to necessary medications but also challenges the market dynamics that lead to high drug prices. The network of Janaushadhi Kendras serves as convenient access points for quality generic medicines, ensuring that financial constraints do not hinder people from accessing essential drugs.
Economic Benefits
The expansion of PMBJP has not only reduced the OOPE for medicines but also contributed to overall household savings, improving the economic stability of numerous families.
The financial impact of PMBJP extends beyond health savings; it also positively affects household budgets, allowing families to allocate resources to other crucial needs such as education, nutrition, and housing. The model has potential for further expansion, and its continued success could prompt structural changes in the pharmaceutical industry, fostering a more competitive and fair pricing environment. The scheme’s sustainability and effectiveness depend on maintaining the quality and availability of generic medicines, as well as continuous efforts to expand its reach, especially in underserved areas.
Economic Analysis of Health Spending
Per Capita Government Spending
From 2004-05 to 2021-22, per capita government spending on health increased from INR 465 to INR 2018, reflecting the government’s robust investment in healthcare and its commitment to reducing the financial burden on individuals.
This increase in per capita government spending signifies a deliberate strategy to bolster the healthcare infrastructure and services available to the population. The rise is indicative of a broader realization of the link between public health investment and economic stability. By investing more in health, the government aims to provide a safety net that reduces the financial strain on individuals and fosters a healthier, more productive populace. This trend also aligns with global health strategies advocating for increased government spending in health to achieve universal health coverage and improve health outcomes.
OOPE Trends
India’s landscape for health financing has undergone a remarkable transformation, particularly in public health spending and the reduction of out-of-pocket expenditures (OOPE). For many years, OOPE has been a major financial strain on Indian households. This burden has often forced families below the poverty line, especially in rural and economically disadvantaged states. However, recent estimates from the National Health Account (NHA) indicate a noteworthy decline in OOPE, marking a historic shift in India’s health policy direction.
This shift is due to several factors, including increased government investment in healthcare infrastructure and the implementation of health insurance schemes such as Ayushman Bharat. These efforts aim to provide broader access to medical services and reduce the financial burden on individuals. By decreasing OOPE, the government hopes to create a more equitable healthcare system, where access to medical care is not determined by one’s financial status.
Moreover, enhanced health literacy and preventive care initiatives have played essential roles. Public awareness campaigns about common health issues and the importance of early intervention have empowered citizens to seek timely medical help, avoiding costlier treatments down the line. The decline in OOPE is also attributed to the government’s push for generic medicines and price caps on essential drugs, making healthcare more affordable.
In summary, India’s health financing system is evolving to alleviate the economic strain on households by promoting government-sponsored programs and preventive healthcare. This historic movement sets the stage for a healthier and more financially secure population.
