Inadequate Government Health Spending Shifts Crushing Financial Burden onto Indian Households

A groundbreaking study reveals that India’s persistently low public health expenditure is driving up household out-of-pocket costs, exacerbating inequalities amid rising socio-economic pressures. Published in December 2025, the research analyzes data from 1991 to 2023, highlighting how factors like income growth and urbanization fuel private spending on healthcare.

Key Study Findings

The study “Impact of Determinants of Healthcare Expenditure in India: The ARDL Bounds Testing Approach,” featured in the International Journal of Advanced Research, employs advanced econometric models to dissect healthcare spending patterns. It identifies per capita income, secondary education enrollment, urbanization, inflation, life expectancy, and total health expenditure as key long-term drivers of both total and out-of-pocket health costs. Notably, while these factors boost overall demand for care, low public funding leaves households—especially rural and low-income ones—bearing the brunt through direct payments, risking financial catastrophe.

India’s government health spending hovers around 1.84-2.2% of GDP, far below the National Health Policy 2017 target of 2.5% by 2025 and the WHO’s recommended 5%. Out-of-pocket expenditure (OOPE), which stood at about 50% of total health spending in 2021 and 39.4% in 2021-22 (down from 62.6% in 2014-15), remains double the global average, pushing millions into debt or poverty.

Broader Context of India’s Health Financing

India’s dual health system—marked by underfunded public facilities and dominant private providers—has long relied on household payments for 60-70% of inpatient and outpatient care. Total health expenditure reached Rs. 9,04,461 crore (3.83% of GDP) in 2021-22, with government share rising to 48% from 29% in 2014-15, thanks to schemes like Ayushman Bharat-Pradhan Mantri Jan Arogya Yojana (AB-PMJAY), which saved over Rs 1.25 lakh crore in OOPE. Yet, the Union Budget 2025-26 allocated Rs 98,311 crore to health and family welfare, still deemed insufficient by experts ahead of Budget 2026-27.

Urbanization and life expectancy gains, while positive, amplify demand without matching public investment, per the ARDL analysis. Rural households face steeper challenges: over 86% of medical visits originate there, often requiring 100 km travel, with 70-80% costs paid out-of-pocket and three times higher poverty risk from health shocks compared to urban areas.

Expert Perspectives

Health leaders underscore the urgency. Dr. Girdhar Gyani, Director General of the Association of Healthcare Providers India (AHPI), stated, “To secure a healthier future for India, it is imperative to invest in robust health systems today… substantially enhance healthcare funding in Budget 2026–27.” Vinod Paul, Member (Health) at NITI Aayog, credits AB-PMJAY for OOPE reductions, noting, “The decline in out-of-pocket expenditure reflects a very positive indicator.”

Critics argue progress falls short. IUML MP Haris Beeran called the 2.5% GDP target “a distant dream,” with Union Health Minister J.P. Nadda acknowledging steady movement from 1.15% in 2013-14 to 1.84%. Economists warn that without hitting 2.5%, inequality widens, as rising incomes and education drive private spending while public gaps persist.

Public Health Implications

High OOPE entrenches disparities: catastrophic health expenditure (CHE)—costs exceeding 10-40% of household budget—affected 18.2% of households by 2011-12 and up to 24.9% by 2014, rising fastest among the poorest and elderly. Rural poor endure higher infant mortality, malnutrition, and maternal deaths due to access barriers, delaying care and amplifying costs.

For households, this means prioritizing health over education or nutrition, with medications alone claiming 60% of outpatient OOPE amid price gouging. Schemes like AB-PMJAY cover 15 crore families up to Rs 5 lakh annually, yet 40 crore in the “missing middle” lack insurance, exposing them to risks. Projections show total health spend hitting $11.82 billion (2.6% GDP) by 2025, but without public boosts, households remain vulnerable.

Limitations and Counterpoints

The ARDL study robustly uses 1991-2023 data and co-integrating models, but relies on aggregates, potentially overlooking state variations—e.g., Odisha’s 24% CHE rate despite high public use. Government data celebrates OOPE drops, attributing them to AB-PMJAY and free dialysis for 2.5 million, with per capita public spend tripling. Critics note methodology improvements inflate recent figures, and total GDP share stagnates.

Conflicting views exist: while the study flags income/urbanization pushing costs up, optimists highlight AB-PMJAY’s 4 million senior enrollments by January 2025. Policy needs balance—states urged to allocate 8% of budgets to health.

Pathways Forward for Households and Policymakers

Readers can mitigate risks by using public facilities, enrolling in AB-PMJAY if eligible, and opting for generic drugs or Jan Aushadhi stores to cut medication costs by up to 90%. Long-term, experts call for Budget 2026-27 hikes to bridge infrastructure gaps (India short 16% on primary centers, 50% on community ones) and train rural providers.

Boosting public spend to 2.5% could halve CHE incidence by 2025, per NHP goals, fostering equitable access without impoverishing families. Until then, households must navigate a system where illness threatens financial stability.

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.

References:

• https://www.millenniumpost.in/nation/inadequate-govt-spending-transferring-burden-of-healthcare-onto-households-645476