India’s persistently high out-of-pocket health expenditure continues to push people into poverty

High expenditure on health is impoverishing 55 million Indians annually, says WHO  

By Taran Deol
Published: Thursday 22 September 2022

Household’s out-of-pocket expenditure (OOPE) on healthcare has always been a major contributor to India’s total health expenditure. 

While the figure has improved over the years to 48.21 per cent in 2018-2019 from 69.4 per cent in 2004-2005, according to the National Health Accounts, it still remains high. This runs a severe risk of pushing people into poverty. 

High OOPE on health is impoverishing some 55 million Indians annually, with over 17 per cent households incurring catastrophic levels of health expenditures every year, a World Health Organization (WHO) report from March 2022 estimated.

Indian households spent Rs 2,87,573 crore on healthcare services, accounting for a major chunk of the total health expenditure. In comparison, the country’s Current Health Expenditure is Rs 5,40,246 crore, where the government has contributed Rs 2,42,219 crore. This includes capital expenditure.

While the proportion of OOPE on health has decreased over the years, it remains much higher than the global average of 18.1 per cent as of 2019, according to the World Bank. 

State-wise disparities persist. Uttar Pradesh (71.3 per cent of the total health expenditure), Kerala (68.6 per cent), Jharkhand (63.9 per cent), Andhra Pradesh (63.2 per cent), Bihar (53.5 per cent), Madhya Pradesh (55.7 per cent), Odisha (53.2 per cent), Punjab (65.5 per cent) and West Bengal (68.7 per cent) have a greater OOPE on health than the national average.

Kerala’s feature in this list, however, is likely a function of higher health-seeking behaviour of the residents, argued health economist Rijo John.

Government spending on health in the southern state is the second highest in India — Rs 2,479 per capita. The state is second only to Himachal Pradesh (Rs 3,604). 

The larger figures for India, however, point to one reality — health is not a priority for the government. India risks a future of widening inequities, hindered progress towards universal health coverage as well as increased morbidities and associated mortalities, as it is highly likely that the poor and vulnerable may forgo treatment due to higher cost of care, Pratheeba J, health financing specialist with the Health Systems Transformation Platform, told Down To Earth (DTE). 

India was among the 10 worst performing countries in terms of prioritising health in government budgets, at both state and central levels, according to the Economic Survey of India 2021.

OOP spending on health services in India has important implications for poverty levels and trends in India, the WHO report noted. “Existing literature for India shows that OOP payments not only impoverish a large number of households, but also deepen poverty among already poor households.”

There is precedent for the link between poverty and OOPE on health in available literature, John told DTE, adding: 

Many Indian households resort to distress selling of assets in times of hospitalisation which leads to increased incidence of poverty. Those at the margin, occupying the lower quintile, are most vulnerable.

Over the years, high OOPE on health has increased the share of population in India living below the poverty line, the United Nations health organisation noted. It rose by 4.2 percentage points in 1993–1994, 4.8 percentage points in 2004–2005 and 4.5 percentage points in 2011–2012, it added.

In absolute figures, this translates into 26 million people in 1993–1994 and about 55 million in 2011–2012, according to WHO. 

But that is not all. Studies have shown poor people in India’s poorest states were the most affected.

A paper published in BMC Public Health in July 2019 found despite people living in states with high levels of poverty availing public health services more than their financially better-off counterparts, they incur more costs. 

Mean OOPE per episode of hospitalisation was lowest in Tamil Nadu, a fiscally stronger state, and highest in Bihar.

“Low public health investment, poor public health infrastructures, non-availability of medicines and diagnosis tests and user fees are the main reasons for the high inter-state variations of OOPE in India,” the study argued. Providing free medicines, surgery and diagnostic tests in public health centres may reduce India’s medical poverty, it concluded.

Increasing public spending to 2.5-3 per cent of the gross domestic product (GDP) can significantly bring down OOPE to 30 per cent of overall healthcare spend from 65 per cent, the Economic Survey report noted. 

Currently, India spends barely 2 per cent of its GDP on health. “The government has recognised the need for greater resources in the poorer states and bridged this gap by additional funding through Finance Commission grants and the National Health Mission,” said Pratheeba J.

States need to improve their absorptive capacity such that the available resources are utilised efficiently, she added.

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