India’s health financing relies heavily on direct out-of-pocket expenditure (OOPE) by households. Recent government data suggest a decline in OOPE as a share of total health spending. However, multiple independent surveys and economic accounts challenge this narrative. This article examines the complexities and contradictions in OOPE trends in India’s health sector.
Current Context of Health Financing in India
In India, most health expenses are paid directly by families. When illness strikes, households use savings, borrow money, or sell assets. Poor families often forgo treatment or fall deeper into poverty. Children may leave school and women work longer hours to cope. Government reports show a decline in OOPE from 64% in 2013-14 to 39% in 2021-22 of total health expenditure. This decline is linked to policy efforts to reduce financial burden on families.
Data Sources and Methodology of OOPE Estimates
The National Health Account (NHA) compiles OOPE data mainly from the National Sample Survey (NSS). It also uses National Family Health Surveys and private medicine sales data. The NSS 75th round (2017-18) is the latest health survey forming the basis of recent NHA estimates. For years after 2017-18, OOPE figures are extrapolated adjusting for inflation. This reliance on one primary data source may limit accuracy.
Contradictions in OOPE Trends
Other large surveys show different trends. The Consumer Expenditure Survey (CES) 2022-23 reveals OOPE as a proportion of household consumption is rising, not falling. The Longitudinal Ageing Study in India (LASI) reports high hospitalisation rates among the elderly, contradicting NSS data. The Centre for Monitoring Indian Economy’s Consumer Pyramids Household Survey (CMIE-CPHS) shows a sharp drop in OOPE during COVID-19 followed by a steep rise, which NHA data miss entirely.
Comparison with National Income Accounts
National Income Accounts (NIA) estimate household health spending as part of private final consumption. Unlike NHA, NIA data show a steady increase in health expenditure share of GDP. Even when insurance premiums are included with OOPE, NHA estimates show a decline while NIA figures rise. This suggests NHA estimates may underestimate the true financial burden on households.
Limitations and Need for Data Integration
NHA’s heavy dependence on NSS data limits its scope. NSS morbidity rounds may underreport ailments and hospital use. Rising medicine prices and health care costs contradict the reported OOPE decline. Multiple data sources must be integrated for realistic health expenditure estimates. A more cautious approach is needed before drawing policy conclusions from current NHA figures.
Implications for Health Policy
Accurate measurement of OOPE is crucial to design effective health financing policies. Underestimating OOPE risks ignoring the financial distress faced by millions. Policymakers must use diverse data and improve survey methods. This will help ensure health care is affordable and accessible for all sections of society.
Questions for UPSC:
- Discuss the impact of out-of-pocket health expenditure on poverty and social inequality in India. How can health financing reforms address these challenges?
- Critically examine the role of National Sample Survey and other data sources in shaping India’s health policy. What are the limitations of relying on a single survey for policy decisions?
- Explain the significance of National Health Accounts and National Income Accounts in measuring health expenditure. With suitable examples, discuss the discrepancies between these data sources and their implications.
- Comment on the effects of rising medicine prices and health care costs on household budgets in India. Discuss how government interventions can mitigate the financial burden on vulnerable populations.
