Out-of-Pocket Expenditure (OOP)

"One hospitalization away from economic disaster" is a harsh reality faced by millions in India. It is not just a statement but a truth that a single medical emergency can lead to severe financial ruin for most Indian families. Indian households spent over INR 120 billion on healthcare-related expenditures in Nov 2022, estimates based on data from the Centre for Monitoring the Indian Economy’s Consumer Pyramids Household Survey (CMIE-CPHS).

Despite significant strides in economic growth and healthcare infrastructure, this problem persists due to several interconnected factors:

1. Lack of Universal Healthcare

• Inadequate Government Spending: India’s public healthcare spending is relatively low (around 1.5% to 2% of GDP), which leads to a heavy reliance on private healthcare providers. ?

• Private Healthcare Dominance: Due to the inadequacies in the public health sector, people often turn to private hospitals, where the costs are significantly higher, which can lead to devastating financial consequences.

2. High Out-of-Pocket Expenditure (OOP)

Most private hospital operators in India generate the majority of their revenue from out-of-pocket (OOP) payments by patients. In India, the share of OOP expenditure in total healthcare expenses stands at above 60%, that is one of the highest in the world and much higher than the global average of ~20%.

• Medical Costs: In India, around 60% of healthcare expenses are borne by individuals out of their pockets, as opposed to the government or insurance coverage in many developed countries of the world. . In a private hospital, it usually costs?Rs.?18,000 - 90,000 on average?while in public hospitals it is almost Rs.10,000- 22,000. Apart from the medical treatments the bed cost, diagnostic tests, doctors' fees, medicine and other package components make hospitalization extremely expensive.

• Drugs and Diagnostics: Medicines and diagnostic tests contribute a large share to medical bills. The cost of treatments like surgeries or long-term illnesses (e.g., cancer or heart disease) can wipe out years of savings

3. Limited Insurance Penetration

• Low Insurance Coverage: Only around 37% of the population has some form of health insurance. Even those covered often find that their insurance does not cover all costs, leaving them vulnerable to high expenses for specialized treatments, medicines, or post-operative care.
• Insurance Gaps: Many insurance policies come with exclusions, limits on coverage for certain treatments, or caps on hospital room rent, leading families to cover these costs on their own.

4. Catastrophic Health Expenditure

• Impacts on Families: According to studies, nearly 6% of India's population is pushed into poverty each year due to medical expenses. Therefore a health crisis can force a family to sell assets, take high-interest loans, or fall into debt.
• Rural-Urban Divide: Rural areas, where access to quality healthcare is limited, often require people to travel long distances to urban centers, adding travel and accommodation costs on top of the treatment itself.

5. Ayushman Bharat and Other Government Schemes

• Government Initiatives: The Ayushman Bharat (Pradhan Mantri Jan Arogya Yojana) scheme has aimed to provide health insurance to the poorest families, covering hospitalizations. However, challenges remain in implementation, as it excludes a large section with its eligibility criteria and many of those who are included are unaware or unable to benefit fully from such programs.

?Coverage Limits: The medical coverage is also capped, and not all treatments are included, which may leave families exposed to high out-of-pocket expenses for severe or chronic conditions.

?6. Medical Insurance & Financial Security

Approximately 514 million people across India were covered under health insurance schemes in 2023, which merely covers?37%?of the people in the country. Nearly 400 million individuals in India have zero access to health insurance

?7. Medical Loans and Financial Stress

• Borrowing for Healthcare: Many families, especially those in lower-income groups, borrow money from informal lenders at high interest rates. This creates a cycle of debt that can take years to recover from.
• Long-Term Financial Impact: The economic fallout from hospitalization extends beyond the immediate medical bills. There are costs related to ongoing care, rehabilitation, and lost productivity due to extended recovery periods or permanent disabilities.

8. Economic Impact of Ill Health

• Loss of Productivity: A hospitalization can cause an individual or the family breadwinner to lose days or weeks of work, impacting their earnings. In the case of severe illness, it can lead to long-term disability, which further burdens the household.

The latest estimate of ?the Union Health Ministry shows there is a decline in Out of pocket Expenditure from 64.2% in 2013-14 to 39.4% in 2021-22 ?due to an increase in Government Health Expenditure in overall GDP from ?1.13% in 2014-15 to 1.84% in 2021-22.

Path Forward

To tackle this issue, India should introduce comprehensive reforms across multiple fronts:

• Increased Public Healthcare Investment: Strengthening the public healthcare system to ensure affordable, quality care.
• Expanding Insurance Coverage: Boosting insurance penetration with affordable, comprehensive policies that cover a wider range of treatments and hospitals particularly for the senior citizens of the country
• Financial Literacy and Awareness: Educating people about government schemes and insurance options, especially in rural areas.
• Regulation of Private Healthcare Costs: Ensuring that private hospitals are not overcharging and that the government regulates medical prices and insurance claims efficiently.

?In summary, the risk of financial devastation from a medical emergency is a critical concern in India, particularly for its economically vulnerable populations. More inclusive healthcare systems, wider insurance coverage, and stronger government intervention are essential to address this pressing issue.