Why in the News?
Recent NSS 80th Round (2025) data reveals a striking contradiction: health insurance coverage has increased significantly since 2017-18, yet hospitalisation rates have not improved and out-of-pocket expenditure has sharply increased, especially in private hospitals. This is significant because, for the first time, empirical evidence shows that government-funded insurance schemes are not delivering financial protection, and may even be benefiting relatively better-off groups.
Why has increased insurance coverage not improved healthcare utilisation?
- Stagnant hospitalisation rates: NSS data shows hospitalisation rates remain below 2014 levels in rural areas and only marginally higher in urban areas.
- Shift to private care: Public hospital usage declined, while private sector reliance increased.
- Access barriers: Unavailability of medicines, diagnostics, and high transport costs reduce public healthcare utilisation.
- Inefficiency in coverage translation: Coverage expansion does not ensure actual service delivery or utilisation.
Why is out-of-pocket expenditure increasing despite insurance schemes?
- Rising private sector costs: OOP expenditure increased >70% (rural) and ~80% (urban).
- Partial coverage: Insurance schemes often exclude diagnostics, medicines, and indirect costs.
- Additional charges: Despite coverage, patients are frequently charged extra in private hospitals.
- Low reimbursement rates: Below-market rates under PMJAY incentivise informal billing practices.
Why are insurance schemes disproportionately benefiting the better-off?
- Urban bias: Only 13% of urban beneficiaries belong to the poorest class.
- Awareness gap: Poor households have lower awareness and utilisation capacity.
- Private sector access: Better-off groups are more capable of accessing empanelled private hospitals.
- Structural inequality: Insurance design fails to address social determinants of access.
What fiscal and systemic challenges are emerging from insurance-led healthcare?
- State fiscal stress: Increased hospitalisation under schemes leads to budgetary pressure on states.
- Delayed reimbursements: States like Haryana report delays in payments to private providers.
- Dependence on private sector: Weak public infrastructure leads to over-reliance on private providers.
- Market distortion: Insurance subsidies indirectly support private healthcare expansion.
Is insurance-based Universal Health Coverage (UHC) viable for India?
- Profit-driven incentives: Private providers focus on high-margin treatments, undermining equity.
- Limited preventive care: Insurance model emphasises hospitalisation, not primary care.
- Weak regulation: Insufficient oversight leads to overcharging and unnecessary procedures.
- Public system neglect: Investment in primary healthcare remains inadequate.
What alternative model is suggested for effective healthcare delivery?
- Strengthening public healthcare: Emphasis on universal, tax-funded public health systems.
- Primary care focus: Initiatives like Ayushman Arogya Mandir (AAM) offer comprehensive primary care, including NCDs.
- Integrated approach: Combining preventive, promotive, and curative care
- Regulation of the private sector: Ensures accountability and cost control.
Conclusion
India’s health insurance expansion highlights a structural paradox: coverage without care and protection without affordability. A shift from insurance-led to system-strengthening approaches, especially in primary healthcare, is essential for achieving equitable and sustainable Universal Health Coverage.
PYQ Relevance
[UPSC 2022] Is inclusive growth possible under market economy? State the significance of financial inclusion in achieving economic growth in India.
Linkage: The PYQ highlights the gap between coverage expansion (financial inclusion) and actual welfare outcomes, similar to health insurance failing to ensure real protection. This is directly relevant to analysing whether insurance-led healthcare promotes inclusive growth or deepens inequality.
