India’s healthcare story often highlights rising insurance coverage as a success. However, the reality on the ground is more complicated. Even as more people are getting insured, they are still paying more out of their own pockets. At the same time, fewer people are using public hospitals, and private healthcare is becoming the default choice. As a result, the system is expanding on paper but becoming more expensive in practice.

Breakdown:

The latest NSS data from 2025 shows a clear trend. Health insurance coverage in India has increased significantly compared to 2017-18, driven largely by government-funded schemes such as PMJAY. Today, around 47.4 percent of rural households and 44.3 percent of urban households are covered by some form of insurance. However, this increase in coverage has not translated into better access or lower costs.

Instead, out-of-pocket expenditure on hospitalisation has more than doubled over the same period. Even in public hospitals, patients are still paying for medicines, diagnostics, and non-medical costs such as transport. As a result, the financial burden remains high despite the presence of insurance.

At the same time, there is a noticeable shift toward private healthcare. A growing number of patients are choosing private hospitals over public institutions for both treatment and childbirth. This shift is important because private healthcare comes at a significantly higher cost. In fact, hospitalisation expenses in private hospitals have increased by 70 percent in rural areas and 80 percent in urban areas.

Another gap is in how insurance schemes are actually being used. While these schemes are designed to support economically weaker sections, a large share of benefits is being accessed by relatively better-off groups. For instance, only a small proportion of the poorest households are using these schemes in urban areas. At the same time, many patients still end up paying additional charges, even when treatment is supposed to be free.

This creates a structural issue. Public funds are effectively supporting private healthcare providers, while patients continue to bear a significant portion of the cost. As a result, the system is neither fully protective nor fully accessible.

Why this matters:

This challenges the assumption that insurance alone can solve healthcare access. Coverage without affordability does not reduce financial stress. At the same time, increasing reliance on private healthcare raises questions about long-term sustainability. If costs continue to rise, both households and government budgets will come under pressure.

The Big Picture:

More broadly, this reflects a deeper issue in India’s healthcare strategy. The current model is heavily focused on insurance-led access, but less on strengthening public healthcare infrastructure. As a result, demand is shifting to private providers, where costs are higher and regulation is limited. Over time, this could widen inequality in access to care, even as overall coverage improves.

The Crunch:

More insurance should mean less financial stress. In India’s case, it is doing the opposite. The system is growing, but it is not protecting the people it was meant to.