How healthcare bills are taking a toll on India’s economic sector

Healthcare expenses are becoming a significant burden on India's economy, affecting households and the larger economic framework. With rising costs in medical care, many families are pushed into poverty, and this ripple effect is felt across the nation’s economic sector.

Rising healthcare costs: A growing concern

The cost of healthcare in India continues to escalate. According to data from the National Health Accounts (NHA) 2020-21, the average out-of-pocket expenditure (OOPE) for healthcare in India stands at 55.3% of total health expenditure. Although slightly reduced from earlier years, this figure remains one of the highest in the world, indicating that households are directly bearing a large portion of healthcare expenses.

The Consumer Price Index (CPI) for healthcare has shown an upward trend post-2020, further exacerbating the affordability of healthcare services. Between 2020 and 2023, the healthcare component of CPI increased by approximately 8.2% annually, outpacing the overall inflation rate. This trend highlights the increasing financial burden on families seeking medical care.

Impact on household finances

The high OOPE continues to lead to catastrophic health expenditures for many families. The World Health Organization (WHO) defines catastrophic health expenditure as any health spending that exceeds 10% of a household’s total income. As per the latest report by the National Sample Survey Office (NSSO) in 2021-22, about 18% of households experienced catastrophic health expenditure, pushing millions into poverty.

This financial strain reduces disposable income, limiting families' ability to spend on other essential goods and services, further slowing down economic growth. The reduced purchasing power leads to lower demand in various sectors, creating a domino effect that stifles overall economic progress.

The Economic Burden on the Government

Government expenditure on healthcare remains inadequate. According to the Ministry of Health and Family Welfare, public health expenditure in India was 1.35% of GDP in 2021-22, still far below the global average of 6%. 

The economic impact is not just limited to households; it extends to the broader economy. High healthcare costs can lead to decreased productivity as individuals and families cut back on work to manage health issues. This, in turn, affects the overall economic output of the country.

Government Initiatives and the Way Forward

Recognizing the strain that healthcare costs are placing on the economy, the Indian government has launched several initiatives aimed at reducing the financial burden on families. The Ayushman Bharat scheme, launched in 2018, continues to expand its reach. As of 2023, the scheme has benefited over 50 million people, according to government data, and has the potential to alleviate some of the economic pressures caused by healthcare costs.

However, for substantial change, there needs to be a significant increase in public health expenditure. The government’s target of raising public health spending to 2.5% of GDP by 2025 is a step in the right direction. If achieved, this could reduce the out-of-pocket expenses for families and ease the economic burden on the nation.

Conclusion

Healthcare costs are indeed taking a heavy toll on India’s economic sector, affecting both household finances and the broader economy. While government initiatives like Ayushman Bharat are providing some relief, a more significant increase in public health spending is essential.As public health spending increases, platforms like Affordplan Swasth will be crucial in further enhancing healthcare accessibility. By providing cashback on every healthcare expenditure—whether it's for pharmacy, lab tests, OPD/IPD visits, or even surgeries—along with offering no-cost EMI insurance and interest-free loans, Affordplan Swasth helps families manage healthcare expenses more effectively. This support, combined with broader public health initiatives, will contribute to a more resilient economic landscape and improved health outcomes for all.