[Burning Issue] Low Health Expenditure in India- Prospects and Challenges



  • According to the latest National Health Accounts Report, India’s total health expenditure went down from 3.9 per cent of the Gross Domestic Product (GDP) in 2013-14 to 3.2 per cent in 2018-19.
  • The fact is alarming as it points toward the reducing health expenditure of the government at a time when the Health sector in the country is already under pressure from multiple issues such as poor infrastructure and the burden of the pandemic.
  • In this context, in this edition of the burning issue, we will talk about India’s healthcare sector, issues that ail it and possible solutions to these issues.

About the National Health Accounts Report

  • India’s National Health Accounts (NHA) estimates report for FY 2018-19 is the sixth in the series of NHA reports prepared by the National Health Systems Resource Centre (NHSRC).
  • The report is based on the globally accepted framework of System of Health Accounts, 2011, which enables cross-comparability of estimates across time along with international comparisons.
  • The NHA report presents two estimates for the expenditure incurred within the health sector during a financial year: Current Health Expenditure (CHE) and total Health Expenditure (THE).
  • CHE includes the recurring expenses corresponding to the final consumption of health goods and services within a financial year. THE, on the other hand, reflects both current and capital expenditure incurred in the health sector within a financial year.

About the Healthcare Sector in India

  • The Healthcare industry in India comprises hospitals, medical devices, clinical trials, outsourcing, telemedicine, medical tourism, health insurance, and medical equipment.
  • The hospital industry in India accounts for 80% of the total healthcare market. The hospital industry is expected to reach $132 bn by 2023 from $61.8 bn in 2017; growing at a CAGR of 16-17%.
  • In 2020, India’s Medical Tourism market was estimated to be worth $5-6 Bn and is expected to grow to $13 Bn by 2026.
  • The primary care industry is currently valued at $13 bn. The share of the organized sector is practically negligible in this case.
  • ‘Public Health’ subject comes under the state list under the 7th schedule of the constitution.

Some Data about Healthcare Expenditure in India

  • According to the latest National Health Accounts Report, the current health expenditure(CHE) for the year was Rs 5,40,246 crore or 90.58 percent, while the rest was capital expenditures. Of the government health expenditure, the Union government’s share was 34.3 percent.
  • Out-of-pocket expenditure on healthcare by households has declined by 16 percentage points, from 64.2 per cent to 48.2 per cent in the same period. It was even higher in 2004-2005, at 69.4 per cent. While this is a welcome improvement, the figure remains significantly higher than the global average.
  • The economic burden of healthcare in India is largely borne by households that contribute Rs 3,24,717 crore to the current healthcare expenditure.
  • For 2018-19, the health expenditure for India was estimated to be Rs 4, 470 per capita.
  • Among the different types of healthcare providers, the major share of CHE is incurred at private hospitals (28.7 percent), followed by pharmacies (22.6 percent), and government hospitals (17.3 percent).

Challenges in the Healthcare sector in India

(A) Outdated Medical education in India

  • Limited government seats: The number of seats available for medical education in India is far less than the number of aspirants who leave school with the dream of becoming doctors.
  • Lack of skills: Though the institutes are managing to hire professors and lecturers, there is a lack of technical skills. Finding faculties in clinical and non-clinical disciplines is difficult and there are very few faculty development programs for upskilling the existing lot.
  • Lack of digital infrastructure: The gap in digital learning infrastructure is currently the biggest challenge the sector is facing. There is an urgent need to adopt technology and have resources available to facilitate e-learning.
  • Lack of research and innovation: there haven’t been much ground-breaking research in the medical field. The education system needs to focus more on increasing the quality of research. Additionally, since the industry-academia partnership is not available, hence innovation also takes a back seat.
  • No. of doctors-Deficiency: The doctor-patient ratio of 1:1655 in India as against WHO norm of 1:1000 clearly shows the deficit of MBBS.
  • Inadequate capacity of the health system: to cater to the healthcare demands of a large population as evident from multiple months waiting for an operation even at large healthcare centers like AIIMS.

(B) Suffering from several Paradoxes

  • Healthcare is a fundamental right, but it is not fundamentally right in India: The expenditure on healthcare is one of the lowest in the world. Though our economy has grown robustly post-liberalization, investment in healthcare has consistently hovered around 1% of the GDP. In the 2020-21 Budget, it was 1.02% of overall expenditure.
  • The sector attracts investments, but delivery remains contentious: India’s healthcare sector has attracted a steady stream of investments. Lack of penetration, inflated billing, opaqueness in diagnosis, and poor quality of service has ensured that most Indians get treated below the standards prescribed by the WHO.
  • Among the cheapest in the world, yet unaffordable for most locally: Healthcare in India is cheap. Yet India has one of the world’s highest rates of out-of-pocket spending in healthcare. Millions in India cannot afford these procedures in their own country.
  • Less health infrastructure, but medical tourism booms: There is a dearth of medical schools and clinicians. Most hospitals in India are overburdened, understaffed, and ill-equipped. However, all this has not prevented the private healthcare sector to establish sophisticated medical tourism facilities on the plank of ‘world-class service at low cost’.

(C) Rising Burden of Non-Communicable Diseases

  • According to the study report ‘India State-Level Disease Burden Initiative’ in 2017 by the Indian Council of Medical Research (ICMR), it is estimated that the proportion of deaths due to Non-Communicable Diseases (NCDs) in India has increased from 37.9% in 1990 to 61.8% in 2016.

(D) Inadequate Mother and Child Healthcare

  • Maternal mortality causes 56,000 deaths every year in India, accounting for 20 percent of maternal deaths around the world.
  • The inadequate healthcare system and lack of healthcare facilities in most regions have elevated the number of maternal mortality cases in India. 

(E) Receding government from the health sector

  • Currently, government hospitals are having only a 30% share of the total number of hospital beds available in India.
  • Also, 70% of new beds added in hospitals are coming from private hospitals rather than government hospitals. This disproportionately impacts poor people more.
  • India’s rich and middle classes have opted out of public health completely, leaving the poor with unconscionably meager services.

How pandemic has further exposed the Healthcare sector in India?

 (1) Poor Infrastructure

  • In the 2019 Global Health Security Index, which measures pandemic preparedness for countries based on their ability to handle the crisis, India ranked 57, lower than the US at 1, the UK at 2, Brazil at 22, and Italy at 31.
  • As per the OECD data available for 2017, India reportedly has only 0.53 beds available per 1,000 people as against 0.87 in Bangladesh, 2.11 in Chile, 1.38 in Mexico, 4.34 in China, and 8.05 in Russia.

(2) Fewer doctors per thousand

  • The WHO mandates that the doctor-to-population ratio should be 1:1,000, while India had a 1:1,404 ratio as of February 2020.
  • In rural areas, this doctor-patient ratio is as low as 1:10,926 doctors as per National Health Profile 2019.

(3) Denial of healthcare by Private hospitals

  • Despite private hospitals accounting for 62 percent of the total hospital beds as well as ICU beds and almost 56 percent of the ventilators, they are handling only around 10 percent of the workload.
  • Private hospitals are reportedly denying treatment to the poor. Cases of overcharging patients are also being reported in private hospitals.

 (4) Negligence for mental healthcare

  • Mental health problems were already a major contributor to the burden of illness in India which usually gets unnoticed.
  • The widespread anxiety due to the lockdown has frustrated the laborers, farmers, and various vulnerable sections to a great extent due to the fear of impoverishment and loss of livelihoods.

Ayushman Bharat- A Game Changer Scheme

  • Ayushman Bharat Scheme was launched in 2018, as a step toward Universal Health Coverage (UHC) and would provide quality health services to eligible patients and protect them from financial hardship.
  • It aims to provide 110 million “poor, deprived rural families” with an annual family health insurance cover of up to Rs 5 lakh in Secondary and tertiary healthcare.

Outcomes of the scheme

Positive outcomes

  • More than 20.8 lakh people from marginalized sections received health treatment worth Rs. 5000 crores in the initial 200 days of the scheme.
  • The portability of the scheme helped several migrant workers access health benefits in the state of migration during COVID times irrespective of their home states.

Negative outcomes

  • One of the primary objectives of this scheme is to decrease the out-of-pocket (OOP) expenditure on health in India. Multiple research studies suggest that insurance schemes for the poor in India have failed to provide the much-needed relief, with OOP figures higher for those using insurance schemes, compared to those who do not. Predominant reasons are shoddy implementation, lack of infrastructure and corruption.
  • As per the latest data available, over 12.5 crore Ayushman cards have been issued and about 1.23 crore people have availed the benefit of this scheme (merely 2 percent of the 50 crore target beneficiaries).
  • In addition, Ayushman beneficiaries are denied benefits they were previously entitled to under other schemes—a pregnant woman below-poverty line beneficiary of AB-PMJAY scheme, going for institutional delivery no longer receives the assistance of Rs 1,500 under Janani Surakhsa Yojana.

Some achievements in the Healthcare sector

  • Out-of-pocket expenditure on healthcare by households has declined by 16 percentage points, from 64.2 per cent to 48.2 per cent in the same period. It was even higher in 2004-2005, at 69.4 per cent. The decreasing share of OOPE signals the declining incidence of financial hardships faced by households while accessing healthcare in India.
  • The increasing share of social security expenditure on health from 6 per cent in 2013-14 to 9.6 per cent of THE in 2018-19, indicates the increasing reach of social security measures in the country. This kind of payment mechanism enables risk protection thus preventing households from incurring catastrophic health expenditure.
  • More than half of the government’s current expenditure (55 per cent) has been on strengthening primary healthcare centers. This not only ensures quality services at the grassroots level but also reduces the chances of ailments requiring secondary or tertiary health care services.
  • Increasing health insurances– Health insurance contributes 20% to the non-life insurance business, making it the 2nd largest portfolio. The gross direct premium income underwritten by health insurance grew 17.16% year on year to reach $6.87 bn in FY20

Models to improve the healthcare system in India

(A) Concept of Family Health Teams: 

  • Instead of passive design of NHM, we need Family Health Teams (FHT) like in Brazil, accountable for the health and wellbeing of a dedicated population, say 2,000 families.

 (B) Move beyond doctor-led systems:

  • India needs to move beyond the doctor-led system. Instead of wasting gynecologists in CHCs midwives (nurses with a BSc degree and two years of training in midwifery) can provide equally good services except surgical, and can be positioned in all CHCs and PHCs.

(C) National Health Service:

  • It is based on the UK’s health model. It is similar to creating an All India Service on the lines IAS and IPS for the healthcare services in India. It would help bring uniformity in structure and services related to healthcare in India.

Other Possible solutions

 (1) Promote Universal health coverage

  • As part of the SDGs, all countries have pledged to deliver universal health coverage (UHC) by 2030.
  • This includes India. But, sadly, nearly 50 percent of the world’s population lacks essential health services.

 (2) Increasing healthcare professionals in numbers

  • Considering the rise in the population, new diseases and infections, India is in dire need of more medical staff and amenities.
  • If India wants to achieve a 1:1,000 ratio, it will need an additional 2.07 million doctors by 2030. For this, the government needs to increase its spending on the health sector.

 (3) Revamping medical education

  • There is a needs to rapidly build medical institutions and increase the number of doctors.
  • It needs to aid attempts at constructing new medical institutes, hospitals, Primary health centers and New AIIMS.

 (4) Helping the downtrodden

  • Rather than dumping them on government hospitals only, the private hospitals should be held accountable to take on their treatment.
  • They can make up for the loss by cross-subsidizing treatments of patients with premium insurance policies.

(5) Enhancing future pandemic preparedness

  • This can be done by strengthening the disease surveillance system, Primary health centers, and the Pharmaceutical industry for rapid production of essential medicines and testing kits.

 (6) Optimum use of technology

  • The COVID-19 crisis has elevated the importance of digital tools and e-health.
  • There is a growing use of mobile apps, online consultations, e-pharmacies, and other tools such as NetMeds, Dhani App and telemedicine.

 (7) Looping-in private players

  • For too long, India has allowed the private health sector to grow, with little regulation.
  • The lack of alignment between the public and private sectors has been exposed to COVID-19 testing and treatment in India.
  • The time is ripe to loop in private players and promote the industrialization of the health sector.

(8) Review of the existing system: 

  • Bringing such a transformative health system will require a comprehensive review of the existing training institutions, standardizing curricula and the qualifying criteria.
  • Improving Federal cooperation in the health sector as health is a state subject.


  • India’s healthcare system is too small for such a large population. There seems to be a long battle ahead. The public healthcare system cannot be improved overnight. 
  • The country needs all hands on deck-both public and private sectors- working together and delivering the best healthcare services for all citizens.
  • Ultimately, the onus of governance always rests with the government, which needs to set standards, invest resources, ensure quality, and strategically purchase services from the private sector, as needed.
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