New Delhi – A newly released Ministry of Health report has revealed a stark shift in India’s health financing landscape, with out-of-pocket (OOP) expenditure on healthcare rising sharply while the government’s share of total health spending declined by 11% during the fiscal year 2022-23. The findings, drawn from the National Health Accounts (NHA) estimates, underscore persistent financial strain on households and raise questions about the country’s progress toward universal health coverage.
Key Findings from the Ministry Report
According to the Ministry of Health and Family Welfare’s latest NHA report, out-of-pocket spending as a percentage of total health expenditure increased by 4.2 percentage points in FY23 compared to the previous fiscal year. This means Indian households are now bearing a larger burden of medical costs directly, without insurance or government reimbursement. The report attributes the rise to increased utilization of private healthcare services, particularly for non-communicable diseases, diagnostics, and outpatient care.
Conversely, the government’s share of total health expenditure—including central and state spending—fell from 41.2% in FY22 to 30.1% in FY23, a decline of 11 percentage points. This reduction is notable given the government’s stated goal of increasing public health spending to 2.5% of GDP under the National Health Policy 2017. In FY23, public health expenditure stood at approximately 1.8% of GDP.
Implications for Households and Equity
Health economists warn that the rise in out-of-pocket spending could push more families into poverty. Out-of-pocket payments are considered the most inequitable form of health financing because they are not linked to ability to pay. A 2023 World Bank study estimated that nearly 55 million Indians fall into poverty each year due to healthcare costs. The new NHA data suggests this trend may be worsening.
Dr. Alok Sharma, a public health policy researcher at the Centre for Health Analytics, commented: “When government spending contracts, households fill the gap. This is particularly dangerous for low-income groups, who are already vulnerable to catastrophic health expenditures. The decline in government share is a setback for financial risk protection.”
Declining Government Share: Structural or Temporary?
The Ministry report did not specify the exact reasons for the 11% drop in government health spending. However, analysts point to several contributing factors: fiscal consolidation pressures, lower-than-budgeted allocations to health schemes such as Ayushman Bharat, and a relative slowdown in state-level health spending after the pandemic-driven surge in FY21 and FY22. The report also noted that total health expenditure in nominal terms grew by only 6.8% in FY23, lagging behind the overall economic growth rate.
State governments, which account for roughly two-thirds of public health spending, showed uneven performance. Some states increased allocations, while others cut back, leading to an overall decline.
Comparison with Previous Years
The trend contrasts sharply with the pandemic years of FY20–22, when government health spending rose significantly due to emergency COVID-19 response measures. In FY21, the government share reached a high of 41.8%. The FY23 data signals a return to pre-pandemic levels, when OOP spending was already high. In FY19, for instance, OOP expenditure accounted for 47.3% of total health spending.
The current report shows OOP spending at 49.7% in FY23, up from 45.4% in FY22. This is still lower than the 62.6% recorded in FY14, indicating some long-term progress, but the reversal is concerning.
Policy Response and Way Forward
The Ministry report comes as the government prepares to launch the next phase of Ayushman Bharat Pradhan Mantri Jan Arogya Yojana (AB-PMJAY), which provides free hospitalization coverage to 500 million beneficiaries. However, the scheme primarily covers inpatient care, leaving outpatient and primary care largely uninsured—a gap that the OOP surge likely reflects.
Health experts urge the government to strengthen public health infrastructure, expand insurance coverage to outpatient services, and increase overall budgetary allocation. Dr. Sharma added, “India needs sustained, predictable public investment in health. The FY23 data is a wake-up call that incremental progress is not enough.”
Conclusion
The Ministry’s National Health Accounts report for FY23 paints a sobering picture of India’s health financing. While the decline in government expenditure may be partly cyclical, it has already shifted a heavier financial burden onto households. Without renewed fiscal commitment and targeted policy interventions, the goal of affordable, equitable healthcare remains distant. As the country moves toward a post-pandemic normal, ensuring that health spending does not become a driver of impoverishment must remain a national priority.