Rising Healthcare Costs and Insurance in India

India’s healthcare sector is currently facing challenge with soaring costs. Since the COVID-19 pandemic, healthcare cost inflation has surged, reaching 14% last year. This is notably higher than the general inflation rate, which remains in single digits. Experts warn that this trend is unsustainable and a market correction is necessary.

Healthcare Cost Inflation

Healthcare costs in India have escalated dramatically. The Insurance Brokers Association of India reports that health insurance claims now account for 90% of premium receipts. The health insurance segment has captured one-third of the insurance market. It is growing at an annual rate of 19% to 21%.

Factors Contributing to Rising Costs

Several factors contribute to rising healthcare costs. There is a concentration of specialised doctors in the private sector. Government hospitals are overcrowded, leading to long wait times. Additionally, having health insurance encourages people to spend more on healthcare. Increased demand and better availability of healthcare services also drive costs up.

Hospitalisation and Claim Trends

A recent analysis revealed a 12.8% increase in hospitalisation in 2023-2024. The average claim size rose from ₹62,548 to ₹70,558. Costs for common medical procedures have also risen . For example, angioplasty costs have increased from ₹1-1.5 lakh in 2018 to ₹2-3 lakh . Kidney transplant costs have doubled from ₹5-8 lakh to ₹10-15 lakh.

Impact on Citizens

Ordinary citizens are feeling the strain of rising health insurance premiums. Senior citizens have reported a staggering 450% increase in premiums over three years. Many argue that quality healthcare is now a privilege rather than a right. Experts are calling for regulations to cap premiums and standardise hospital costs.

Suggestions for Stabilising the Market

To address escalating costs, experts suggest that consumers should consider health insurance for chronic diseases and surgeries only. This approach may help stabilise the market. More players in the insurance industry are introducing fixed premiums and benefits schemes to attract customers.

Vulnerable Populations and Financial Protection

The NITI Aayog report marks that portion of India’s population lacks financial protection against health-related expenditures. Approximately 30% of the population, or about 40 crore individuals, are identified as the “missing middle.” These individuals are at risk of catastrophic spending without adequate health insurance.

Regulatory Challenges and Interventions

Activists are advocating for better regulation of hospital charges. The absence of a robust public health infrastructure forces individuals to rely on private healthcare. The lack of effective regulation exposes many to potential exploitation by private hospitals. The government has yet to implement existing legislations effectively.

Questions for UPSC:

1. Critically analyse the impact of rising healthcare costs on the Indian economy and society.
2. What are the challenges faced by the Indian healthcare system in regulating private healthcare costs?
3. Explain the concept of catastrophic health expenditure and its implications for the Indian population.
4. What measures can be implemented to improve financial protection against health expenses for vulnerable groups in India?

Answer Hints:

1. Critically analyse the impact of rising healthcare costs on the Indian economy and society.

1. Healthcare cost inflation is at 14%, outpacing general inflation, leading to financial strain on households.
2. Increased health insurance premiums make healthcare less accessible, particularly for low and middle-income families.
3. Rising costs contribute to a cycle of debt, pushing many into poverty due to unexpected health expenses.
4. Healthcare becoming a privilege impacts societal equity, with access to quality care dependent on financial capability.
5. Long-term economic growth may be hindered as a healthier workforce becomes less achievable amidst rising healthcare costs.

2. What are the challenges faced by the Indian healthcare system in regulating private healthcare costs?

1. Overcrowding in government hospitals leads to increased reliance on private healthcare, driving up demand and costs.
2. The concentration of specialized doctors in the private sector limits competition, allowing for higher pricing.
3. Lack of effective regulation and enforcement of existing laws like the Clinical Establishment Act creates loopholes for exploitation.
4. Insufficient public health infrastructure forces patients to seek costly private care, exacerbating the issue.
5. Healthcare costs are not standardized, leading to wide variations in pricing for similar services across different facilities.

3. Explain the concept of catastrophic health expenditure and its implications for the Indian population.

1. Catastrophic health expenditure occurs when health expenses exceed a certain threshold of a household’s income, leading to financial distress.
2. Approximately 30% of India’s population, or 40 crore individuals, lack any financial protection, making them vulnerable to such expenditures.
3. High out-of-pocket expenses can push families into poverty, affecting overall economic stability and social equity.
4. Catastrophic spending often leads to delayed or foregone healthcare, worsening health outcomes and increasing long-term costs.
5. The absence of risk-pooling mechanisms in health insurance exacerbates the impact of catastrophic expenditures on the population.

4. What measures can be implemented to improve financial protection against health expenses for vulnerable groups in India?

1. Implementing universal health coverage to ensure all citizens have access to essential healthcare services without financial hardship.
2. Enhancing public health infrastructure to reduce reliance on private healthcare and lower overall costs.
3. Regulating health insurance premiums to prevent excessive increases, ensuring affordability for all demographics.
4. Promoting awareness and education about health insurance options to empower individuals in making informed choices.
5. Encouraging the development of community-based health insurance schemes to provide financial protection for low-income groups.