Why does India spend so much on out-of-pocket medical expenses?

As per the Insurance Regulatory and Development Authority of India (IRDAI), out of pocket medical expenses make up for nearly 62% of the total healthcare costs in India. The scenario is fairly different when it comes to developed countries like the United States and the United Kingdom, where the out of pocket spends account for only about 20% of the total medical expenses, while in case of developing nations the percentage is about 25%.

Out of pocket spends are a major part of the overall healthcare expense incurred by most of us. In most cases, the overall expenses for treatment and medicines are taken care of through one’s savings, thereby making it very difficult to manage the big blow of medical emergencies. And, given that 90% of Indians do not have any form of health insurance, spending on medical expenses from their savings and income puts immense pressure on households, plunging them into poverty and hindering the overall social and economic growth of the country.

Out of pocket spends & poverty situation in India – how are they related?

According to a data provided by the Public Health Foundation of India (PHFI), out-of-pocket health expenses drove 55 million Indians into poverty in 2017, and of these, 38 million who account for about 69%, were impoverished by the expenditure on medicines alone. One of the main causes of the crippling impact of medical bills on households - inadequate public expenditure on the provision of health and medical services.

Total public health expenditure in India has remained consistent around 1.3% of the GDP between 2008 and 2015, growing marginally to around 1.4% in 2016-17. The world average for the same is around 6%. Given this figure, it is evident that most of the population spend their own savings to avail healthcare services.

The bigger picture

Overall, we see that while 30% of the total health expenditure is incurred by the public sector, out of the 70% being borne by customers, 95% comes from their own income or savings and 5% is covered by insurance. Cancer treatment, cardiovascular diseases and injuries are the healthcare setbacks that dominate the health expenditure in India. Moreover, the highest percentage of money spent from personal savings or income, which is 52%, is towards medicines.

Lack of public expenditure on health, lack of human resources and an overall poor healthcare infrastructure contribute significantly to the healthcare expenditure, further resulting in high expenditure on medical care being spent through personal savings. And, since India is undergoing a transition, both from demographic and economic perspective, it is necessary to protect citizens against catastrophic medical expenditure that plunges them into extreme poverty.

Not only is there a dire need for an increase in public expenditure on health, but also a need for an overall improvement in the access to healthcare facilities and an increase in awareness about the benefits of various health insurance policies around the country. With a focus on economically disadvantaged groups, public policy can achieve equity in health-care financing. Insurance coverage and the facility of subsidised, good-quality, public health facilities will not only improve access to health care but also protect the poor against financial catastrophe.

Out of the total number of people covered under health insurance in India, three-fourth are covered under government-sponsored health schemes and the balance one-fourth are covered by private insurers. And, now that private insurers have moved to complete digitalisation of their purchase journey, they allow you to buy the plans through a 100% online process in a hassle-free way.

Health insurance policies offer you a range of options designed to protect you and your loved ones from the financial pressures of healthcare. What’s more, you can also customise your health insurance policy with features like an extensive medical cover, cashless claim settlement, customised add-on covers and more.