India has nearly tripled health insurance coverage over the past seven years, according to data from the National Sample Survey’s (NSS) 80th Round. Yet the average household spends more out of pocket on medical care.
This is because insurance is built almost entirely around hospitalisation, leaving routine outpatient visits, medicines, and non-medical costs such as transport and lodging unprotected. While coverage protects people from one-time costs during hospitalisation, millions with chronic disease who require regular outpatient care or procedures continue to spend increasing amounts.
As a result, nearly half of India’s current health expenditure—that is, total expenditure excluding capital spending such as on buildings and equipment—is borne by families, according to the National Health Accounts (NHA) 2022-23. This is up from 45.1% the previous year.
The sixth National Family Health Survey (NFHS-6, 2023-24) shows that 60% households now have at least one person covered under some form of health insurance. Andhra Pradesh (91.9%) and Chhattisgarh (90.5%) have the highest coverage while Bihar (21.1%) and Uttar Pradesh (37.2%) have among the lowest. Broadly, rural India has higher coverage. For instance, 86% households in rural Odisha have at least one person with health insurance compared to 65.2% in urban areas.
Nearly three in five rural hospitalisations and almost two in three in urban areas happen in private hospitals, where average out-of-pocket costs can go up to Rs 55,000 per stay, against about Rs 6,900 in government hospitals.
Even the poorest households spend an average of Rs 25,000 per hospitalisation, an amount that can exceed a family's monthly income and push them into debt, asset sales or reduced spending on food and education.
The unsolved problem
“Insurance coverage has increased, but not uniformly across states,” said Gourang Mohapatra, Odisha convener of Jan Swasthya Abhiyan, a nationwide coalition of health, civil society and grassroots organisations. “One major issue is that beneficiary lists are still based on the Socio-Economic Caste Census 2011 data. Until a fresh census is conducted, many poor households remain excluded from insurance schemes despite being eligible.”
The houselisting exercise for the next census is currently under way and population enumeration is scheduled for February 2027.
“Publicly funded insurance schemes are largely targeted at below-poverty-line populations. These beneficiaries are often poorly informed about their entitlements,” said Ravi Duggal, a Mumbai-based public health researcher and activist. “When they go to hospitals, they are told certain treatments or medicines are excluded, and they end up paying from their own pockets,”
“There are studies showing that states with well-utilised insurance schemes—like Tamil Nadu—still report high out-of-pocket expenditure. So there does not appear to be a direct correlation between insurance coverage and declining OOPE,” Duggal said.
Among BRICS members, only Egypt has a higher OOPE than India, data show.
“India continues to have one of the highest out-of-pocket expenditures in the world as a proportion of total health spending,” said Indranil Mukhopadhyay, professor of public health and policy at the Jindal School of Government and Public Policy. “More worrying is that OOPE has continued to increase, particularly for hospitalisation but also for outpatient care.”
Mukhopadhyay also held insurance schemes such as Pradhan Mantri Jan Arogya Yojana (PMJAY) responsible for the rising OOPE. “The scheme encourages people to seek care in the private sector, where costs are much higher. Care that is supposed to be “cashless” often ends up involving substantial out-of-pocket payments. Much of this increase is driven by private-sector healthcare costs, which have risen over the last five years.”
PMJAY provides for cashless health insurance coverage of up to Rs 5 lakh per family per year for secondary and tertiary hospitalisation. As of June 10, 2026, India had more than 440 million Ayushman cards, and data show that nearly 109 million hospital admissions have been authorised with claims to the tune of Rs 1.5 lakh crore since 2018.
Another major factor is the rising cost of medicines, especially for outpatient care, Mukhopadhyay explained. The NSS report classifies expenditure as medical—doctors’/surgeons’ fee, medicines, diagnostics, appliances, blood etc.—and non-medical, which includes transport, food, lodging and other costs.
“Unlike hospitalisation, which may be a one-time event occurring once every few years, chronic illnesses require continuous spending on daily medicines, regular doctor consultations, and periodic diagnostic tests,” Mukhopadhyay added.
"Transportation itself can become a major burden, especially when patients must travel long distances for treatment. Ambulance coverage is usually limited, and patients often rely on private transport," said Duggal. "Families also incur costs when attendants need to stay near hospitals for extended periods. Non-medical costs appear to be increasing because fuel prices and other living costs have risen.”
“Non-medical costs are a significant component of healthcare expenditure, particularly for patients with chronic illnesses and those requiring long-term treatment,” said Mukhopadhyay. “For conditions such as cancer and other chronic diseases that necessitate repeated visits to specialists, households incur recurring expenses on transportation, accommodation, food, and caregiver support.”
A rise of chronic diseases and awareness about them improves as more patients are seeking care in the private sector which in turn leads to the financial burden of chronic care, he pointed out.
In-patient care costliest for kidney disease, cancer
"While discussions of catastrophic health expenditure typically focus on large, one-time hospitalisation costs, chronic illnesses impose a sustained financial strain that can gradually erode household resources and push families into poverty over time," says Mukhopadhyay.
In rural India, kidney failure emerged as the costliest ailment, with average expenditure reaching Rs 1.21 lakh per hospitalisation in private hospitals and Rs 76,004 across all facilities. Cancer treatment was also among the most expensive, costing an average of Rs 87,339 in private hospitals and Rs 62,588 across all providers.
“Kidney disease is becoming an increasingly costly health burden, driven by the rising prevalence of diabetes, delayed screening and diagnosis, and environmental factors such as pesticide exposure and contaminated groundwater,” said Mohapatra. “Because it requires long-term, recurring treatment including dialysis and regular monitoring, treatment costs are particularly high in private hospitals, and the disease has become widespread in several districts of Odisha.”
"Patients requiring dialysis may need treatment two or three times a week over long periods. In private hospitals, dialysis can cost around Rs 5,000 per session," Mukhopadhyay said, noting that inadequate public dialysis infrastructure forces many patients to rely on more expensive private providers.
In urban areas, cancer overtook all other conditions, with average hospitalisation costs of Rs 1.47 lakh in private hospitals and Rs 1.04 lakh across all facilities.
Treatment in private hospitals was consistently more expensive than in public hospitals, often by a factor of five to ten. For instance, rural kidney failure treatment cost Rs 18,124 in public hospitals compared with Rs 1.21 lakh in private hospitals, while urban cancer treatment averaged Rs 21,802 in public facilities against Rs 1.47 lakh in private hospitals.
Cancer drug costs—particularly for patented medicines and immunotherapy—are the single biggest driver of treatment expenses, according to Mukhopadhyay. Many such drugs are not subsidised even in public hospitals, keeping out-of-pocket spending high. While consultations and procedures may be subsidised in public hospitals, patients often have to purchase medicines themselves.
Urban hospitalisation dearer
Urban private hospitalisation is more expensive for households than in rural areas, but public hospitals see the opposite trend.
Urban public hospitals often have better in-house availability of specialists, diagnostics, medicines, blood banks, imaging facilities and referral support, according to Sudheer Kumar Shukla, lead for urban primary healthcare at the Health Systems Transformation Platform. "When these services are available within the public facility, the patient is less likely to purchase them outside," he said.
Rural facilities, by contrast, may refer patients elsewhere for tests, medicines or specialist consultations, increasing household expenditure.
"Urban residents usually have greater access to private hospitals, specialists, diagnostic centres and pharmacies. This increases healthcare-seeking and diagnostic intensity, but it also raises the cost of treatment," said Shukla. "Urban patients may consult specialists earlier, undergo more investigations, and use branded medicines or private laboratories more often."
For outpatient care, average spending per treated spell of ailment is similar for both urban and rural areas (Rs 884 vs Rs 847). Further, half of all outpatient visits to public facilities involve no out-of-pocket spending.
"Urban primary healthcare has remained more fragmented. Unlike rural areas, where the sub-centre–primary health centre–community health centre–district hospital chain is more clearly defined, urban areas often have a mixed and uneven network of municipal facilities, state hospitals, dispensaries, urban primary health centres, private clinics and charitable providers," Shukla said. "This weakens the role of public primary care and pushes many households towards private outpatient care."
Charitable hospitals are more expensive in urban areas, while private hospitals see higher spending in rural areas. Experts like Shukla caution that such differences may reflect referral patterns, delayed care-seeking, transport burdens and more severe cases reaching private facilities in rural areas.
The NSSO data show that OOPE on hospitalisation rises with household consumption levels, particularly in urban India. Overall, wealthier urban households are more likely to access expensive private hospitals, specialist care and advanced diagnostics.
For instance, the poorest 20% households—with monthly expenditure of about Rs 12,000-18,000, spend about Rs 25,000 out of pocket per hospitalisation. For these households, even the median figure—the maximum cost for half of all hospitalisations—of Rs 9,000-10,000 can be a “serious economic shock”, said Shukla. “It may exceed normal monthly consumption and force the family to borrow, sell assets, delay debt repayment, or cut back on food, education and other essential needs."
"The larger message is that healthcare affordability in India is no longer only a question of poverty. The poor remain the most vulnerable in relative terms, but rising hospitalisation costs are increasingly exposing middle-income households as well," said Shukla.
IndiaSpend has sought comments from the National Health Authority and the Director General of Health Services. We will update this story when we receive a response.
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