Amount spent by Indians out-of-pocket on healthcare continues to grow despite insurance, govt schemes

Mumbai: India’s public health insurance has widened its reach, with Ayushman Bharat alone claiming to cover over 500 million people. Several states have rolled out their own schemes. But despite this expansion, most of Indian healthcare expenditure is met out of pocket.

A new report by Swiss Re shows that India recorded the steepest rise in financial stress from out-of-pocket (OOP) healthcare spending among 12 Asian markets between 2017 and 2024. In this period, reported financial strain rose by 1.3 percentage points in India, even as it fell slightly in China. Households now shoulder nearly 60% of India’s total health expenditure—well above the regional average.

The health protection gap (HPG), which is the difference between what people spend on healthcare and what insurance or the state pays, is larger in India than anywhere else in the region. Despite the rollout of public schemes, insurance coverage remains thin: only about 33% of medical costs are covered, leaving two-thirds paid directly by families. Chronic illnesses and critical conditions account for nearly all of this burden.

Swiss Re estimates the regional HPG rose by 21% over seven years to $258 billion in 2024, with India being the biggest contributor. The insurer notes this estimate excludes “non-treatment” costs—medical care forgone due to affordability or availability. The total cost of such unmet needs across Asia was around $130 billion last year, with more than 80% arising in emerging economies like India.

Government spending does little to offset the problem. The central government’s share in India’s health expenditure is just over 40%, the lowest among the countries surveyed, where most exceed 50%. The result is a heavy reliance on personal savings or borrowing to meet medical expenses, which can devastate household finances.

The country also suffers from a parallel mortality protection gap. In 2024, the region-wide mortality protection shortfall reached $132 billion in premium-equivalent terms, up 35% from 2017. Life insurance penetration in India was just 2.6%, compared to 5.4% in advanced Asian markets.

Consumer demand for cover exists. Sixty percent of Indians surveyed said they intended to buy life insurance in the coming year, and about half showed interest in health-linked savings plans. Yet high prices, poor awareness and a perception of limited value deter actual purchases. Insurers are responding with bundled health and life products, preventive services and newer designs like severity-based policies that align payouts with illness intensity.

But until insurance becomes more affordable and relevant, the protection gap will keep growing—despite the illusion of universal coverage.



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