Healthcare financing scenario in India

Out-of-pocket expenditure mainly consists of direct costs such as doctor’s consultation fees, medicine charges, laboratory, and other diagnostic charges paid by households.

Healthcare financing scenario in India
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In a developing country like India, private out-of-pocket expenditure rules the cost of financing health care. According to World Health Statistics (2022), 55% of the current health expenditure is out-of-pocket payments. Out-of-pocket expenditure mainly consists of direct costs such as doctor’s consultation fees, medicine charges, laboratory, and other diagnostic charges paid by households. Access to healthcare is difficult to bear the cost without government support and health insurance. High-income countries use their health spending differently that prevent themselves from suffering catastrophe.

Indian system of Health Financing

Health financing in India depends upon direct and indirect payments. Direct payments are the payments at the point of care when a patient fall sick and indirect payments are through taxes, health insurance premiums and deposits into medical saving accounts. Healthcare expenditures are the nation’s resources are spent on healthcare. As per the Indian, National Health Accounts 2017-18, the total health expenditure is 3.3 cent of the GDP. The extent of financial protection available for households towards healthcare payments is 1.35% of GDP (33% of CHE) by the government and out-of-pocket expenditures are 1.62% of GDP (55% of CHE) clearly showing high dependence on households (National Health Systems Resource Centre (2021), (World Health Statistics (2022).). The out of pocket expenditure is high because most of us prefer to go to private health facilities for better services and a short waiting period. However, the cost of private hospitalization is many times higher than the expenditure of government hospitalization. Even the health insurance packages in private hospitals are more expensive than in government hospitals (National Statistical Office, 2019). A. Kastor, 2018 estimated the average cost of hospitalization at INR 19,210, where the out-of-pocket cost of hospitalization for the treatment of cancer was INR 57,232 followed by heart diseases INR 40,947 (A. Kastor, 2018). In India, the high out-of-pocket expenses due to the cost of treatment discourage people to avail of treatments even in case of major illness (D. Barik, 2015). Consequently, 17% of the population was being pushed into poverty because of high catastrophic expenditure (OOPE exceeding 10% of total household expenditure on health i.e. 17% (World Health Statistics, 2022).

Global Perspective

In India, the most important element is to attain the highest possible level of health and well-being for all ages through primitive and preventive healthcare without any financial hardship. The nations with high economic development indices have a different financing system for sustainable health and universal healthcare coverage by the year 2030. This can give us a clue regarding how to go with it.


The United States has become one of the largest economies in the world as seen in Table 1. Health financing is largely funded by taxes, premiums and general revenue. The US spends nearly 19.1 per cent of its GDP on health care, the highest of any developed country in 2021(CMS.Gov (2020). A large portion of about 83% of health spending comes from public spending which includes a large portion of health insurance, and 11% is from out-of-pocket expenditure (World health statistics. (2022). The US spends usually less on inpatient care (including hospital care, physician, clinical and dental services) i.e. 19% however 44% on outpatient care (home healthcare, nursing care, medical products i.e. prescription drugs and medical equipment) (Papanicolas, I., Woskie, L. R., & Jha, A. K. (2018), Centers for Medicare and Medicaid Services. (2019).

Table 1. Health financing statistics for the year 2021.



United Kingdom

United States



1.36 bn

66.6 mn

32.9 mn

83 in GDP

GDP per capita, PPP





GGE to GDP %





GGHE-D % GGE (budget)





Public spending to GDP %





Gov exp. To CHE





Priv to CHE















UHC coverage index





Catastrophic spending





Source: World Health Statistics, 2022. Note: GDP- Gross Domestic Product, PPP- Purchasing power parity, GGE- General Government Expenditure, CHE- Current Health Expenditure, PHC- Primary Health Expenditure, OOPS- Out of Pocket Expenditure.


U.K. healthcare is financed through the National Health Service, local authorities and other public providers of healthcare. The funding is based on taxation; the NHS provides packages of healthcare to its citizens. As of 2021, the UK spends about 11% of its GDP on healthcare expenditures Office of National Statistics, (2021). About 80% of current healthcare funding spend by the government and the rest is private of which 17% is OOPE which is voluntary (World Health Statistics, 2022). NHS expenditure is concentrated heavily on inpatient care (hospital services and curative care) and the other half on long-term facilities, ambulatory providers, providers of medical goods and other providers. The higher government contributions lessen the burden of out-of-pocket expenditure on health. The OOPE is exclusively applied to cost sharing to pay a charge to access health services at the point of use, long-term care, medical goods like equipment and appliances purchased by people and curative and rehabilitative health services (Office of National Statistics, (2021). Therefore, the catastrophic spending is just 4% much lower than in India (World Health Statistics, 2022).


Germany has one of the most expensive medical system care in the world. Germany has affordable medical care, as most of the spending is approximately public and funded by income tax, which is a fixed portion of income or employee-employer contribution, which is shared equally. The payroll tax does not apply to people at the age of 65; even then, they can avail of health care benefits (Ellis, R. P., Chen, T., & Luscombe, C. E. (2014) Germany spend about 13.1 per cent of its GDP on health care in 2020 (German statistics. (2021). The high spending in Germany is mostly from high public expenditure i.e. 85% of current health expenditure and 15% is private (World Health Statistics, 2022). Out-of-pocket expenditure is low at 13% of CHE because people spend out of their pockets only on over-the-counter medicines and medical durables like eyeglasses, hearing aids, dental care, and long-term care. Germany spends the highest on nursing and therapist services and then on medical services as it has a comparatively high nursing and physician population that assures high-quality service availability and timely access for the whole population to effective healthcare (Germany- Country Health Profile (2021). However, the cost of illness in Germany is the highest for the population elderly; however, it is double for the age group 85 or above. The cost of illness for the younger population is less than 3000 euros per inhabitant however between 8000 to 20,000 for the elderly population (Statisches Bundesamt, 2015). Thus, Germany has one of the best ways to finance the healthcare system of the country and its implementation through making health insurance mandatory, which already has a draft law (Ho A. (2015). Hence, only 2% population spends catastrophic expenditures because of increased health service utilization and improved financial protection.


There are an enormous number of ways to achieve Universal Health coverage but health financing plays an important role. Health insurance and large public spending on inpatient care are among the best ways to finance health care according to the high-performing countries. Through that, the risk of financial catastrophes can be reduced and can protect households against indirect negative effects from out-of-pocket expenditures.


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