IMA Warns Underfunding and Insurance Pressures Threaten the Backbone of Indian Healthcare

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December 20, 2025

NEW DELHI – The Indian Medical Association (IMA), representing over 350,000 doctors nationwide, has issued a stark warning regarding the future of India’s healthcare system. In a comprehensive policy blueprint and recent national addresses, the association flagged chronic government underfunding and the aggressive expansion of insurance-led models as “existential threats” to the nation’s affordable, accessible medical landscape. The IMA argues that without a shift toward a tax-funded universal system, India risks drifting into a high-cost, exclusionary model that could mirror the struggles of the United States’ healthcare system.

The Funding Gap: A Stagnant Pulse

At the heart of the crisis is a persistent disconnect between policy goals and fiscal reality. The National Health Policy (2017) set a target for public health expenditure to reach 2.5% of the Gross Domestic Product (GDP). However, nearly a decade later, government spending (Union and States combined) hovers between 1.1% and 1.9% of GDP.

“Investment in health has remained stagnant,” stated Dr. R.V. Asokan, National President of the IMA, during a recent conference in Indore. “All governments are neglecting healthcare due to a lack of political will. While our neighbors like Bangladesh and Sri Lanka spend approximately 5% of their GDP on health, we are still struggling to meet the basic needs of our infrastructure.”

According to the Economic Survey 2024-25, while total health spending has nominally doubled over the last four years to ₹6.1 lakh crore, the share of government spending as a percentage of the total budget is actually on a downward trend. For the 2025-26 fiscal year, the healthcare sector accounts for only 1.94% of the total budget, down from over 2% in the pre-pandemic years.

The “Missing Middle” and Insurance Pressures

Perhaps the most concerning development is the plight of the “missing middle”—the 65% of the population, or roughly 90 crore people, who are neither poor enough to qualify for the Ayushman Bharat-PMJAY scheme nor wealthy enough to afford high-end private care.

The IMA points out that the government’s push for private health insurance as a solution for this demographic is “exceedingly unfair,” particularly with an 18% Goods and Services Tax (GST) currently levied on insurance premiums.

“The insurance industry has effectively eliminated the small and medium-sized hospitals that were once the backbone of affordable care,” Dr. Asokan explained. He warns that insurance-led models introduce intermediaries—Third Party Administrators (TPAs) and insurance companies—that prioritize “business interests over clinical decisions,” potentially leading to the commercial exploitation of patients.

Ayushman Bharat: A Mixed Prognosis

While the government’s flagship Ayushman Bharat-PMJAY scheme has provided a safety net for the bottom 40% of the population, the IMA argues it is fundamentally flawed. The association highlights that “unscientific package rates”—the fixed prices the government pays hospitals for surgeries and treatments—are so low that they are unviable for small and medium private hospitals.

As a result, many smaller facilities are being forced to choose between delivering sub-par care or shutting down, leaving patients in rural and semi-urban areas with fewer options. The IMA has called for a radical restructuring where the government directly funds public hospitals and uses PMJAY exclusively for “strategic purchases” from the private sector at rates based on scientific costing.

Statistical Context: The Cost of Care

Out-of-Pocket Expenditure (OOPE): Households still finance nearly 39.4% to 62% of health spending out of their own pockets, one of the highest rates globally.
Infrastructure Shortage: India has 1.3 hospital beds per 1,000 people, far below the World Health Organization (WHO) recommendation of 3.5.
The Medicine Burden: Approximately two-thirds of out-of-pocket expenses are spent on outpatient care and medicines, which are currently not covered by most insurance schemes or PMJAY.

Expert Perspectives and Counterarguments

Public health experts not affiliated with the IMA agree that the transition to insurance-based models requires caution. “Insurance is a financial tool, not a healthcare delivery system,” says Dr. Anita Sen, a public health researcher (unaffiliated with the study). “If we don’t strengthen our primary health centers and public hospitals first, insurance simply acts as a funnel that moves public money into private hands without necessarily improving health outcomes.”

However, government officials and some economists argue that the insurance model is necessary for rapid scaling. They point to the “Heal in India” initiative and the expansion of medical seats (10,000 added this year) as proof of a commitment to long-term capacity building. Proponents of the current model suggest that digital missions, like the Ayushman Bharat Digital Mission (ABDM), will eventually bring the transparency and efficiency needed to lower costs.

The Way Forward: The IMA’s “Blueprint”

To revitalize the system, the IMA’s Blueprint for a Healthier India proposes several critical interventions:

National Healthcare Fund: A dedicated fund to support healthcare entrepreneurs and enable hospital expansion in underserved areas.
Tax-Based Financing: Moving away from contributory insurance toward a general revenue-funded system.
GST Reform: Immediate removal or reduction of GST on health insurance, essential drugs, and life-saving equipment.
Regulatory Balance: Exempting small and medium hospitals from the “clutches” of the Clinical Establishment Act to reduce administrative burdens that drive up costs.

What This Means for You

For the average citizen, the IMA’s findings suggest that while access to doctors may be increasing, the financial risk of falling ill remains high. Until outpatient costs—like daily medications and diagnostic tests—are integrated into social protection schemes, a single hospital stay remains a primary driver of poverty in India, pushing an estimated 5.5 crore people below the poverty line annually.

As the government prepares its next fiscal strategies, the medical community’s message is clear: Health cannot be treated as a purely commercial commodity. It requires a foundational commitment to public infrastructure that places patient dignity over profit margins.

Medical Disclaimer: This article is for informational purposes only and should not be considered medical advice. Always consult with qualified healthcare professionals before making any health-related decisions or changes to your treatment plan. The information presented here is based on current research and expert opinions, which may evolve as new evidence emerges.