Out-of-Pocket Health Expenditure (OOPE) in India

Syllabus: GS2/Issues Related To Health

Context

• Despite a sharp decline in out-of-pocket expenditure (OOPE) on health in India, closer scrutiny reveals persistent concerns associated with it.

About Out-of-Pocket Expenditure (OOPE)

• It refers to the direct payments individuals make for healthcare services — without reimbursement.
• It includes costs for doctor consultations, medicines and diagnostics, hospitalization and surgeries, transportation and informal care etc.
• In India, OOPE has historically been one of the highest in the world, often pushing families into poverty or debt due to medical expenses.

Recent Trends in OOPE in India

• According to the National Health Accounts (NHA) Estimates, India’s OOPE as a share of Total Health Expenditure has declined from 64% in 2013-14 to 49% in 2017-18, and further down to 39% in 2021-22.

Reasons For Decline in OOPE

• Increased Government Health Expenditure: From 1.13% of GDP in 2014–15 to 1.84% in 2021–22 and 1.9% in FY 2023-24.
  • However, the National Health Policy (NHP) 2017 targets 2.5% of GDP by 2025.
• Ayushman Bharat – PMJAY: Targeting the bottom 40% of India’s population — approximately 55 crore individuals across 12 crore families.
• Free Drugs & Diagnostics Initiatives: Under the National Health Mission, the government rolled out:
  • National Free Drugs Service Initiative;
  • Free Diagnostic Service Initiative.
• Affordable Medicines Programs: Pradhan Mantri Bhartiya Janaushadhi Pariyojana (PMBJP) and AMRIT Pharmacies.
• Infrastructure & Budget Expansion:
  • The Ayushman Bharat Health Infrastructure Mission (PM-ABHIM) strengthens primary and tertiary care systems.
  • The Health Budget increased by 85% from ₹47,353 crore in 2017–18 to ₹87,657 crore in 2024–25.
  • The 15th Finance Commission allocated ₹70,051 crore in grants to local governments for health.

Concerns & Issues Surrounding OOPE

• Dependence on NSS Data: NHA estimates heavily rely on the National Sample Survey (NSS) 75th round (2017-18).
  • Any underreporting of ailments or reduced hospitalisation utilisation would artificially deflate OOPE estimates.
• COVID-19 Blind Spot: The NHA framework fails to capture the massive distress during the pandemic, as no NSS data were collected in this period.
• Consumer Expenditure Survey (CES) 2022-23: It shows OOPE as a share of household consumption expenditure has increased — from 5.5% to 5.9% in rural areas and 6.9% to 7.1% in urban areas between 2011-12 and 2022-23.
• CPHS-CMIE Data: Indicates a ‘V’- shaped trend — steep decline in OOPE during COVID-19, followed by a sharp rise — completely missing from NHA trends.
• National Income Accounts (NIA): It records a steady increase in household health spending as a share of GDP, contradicting NHA’s reported decline.

Way Forward: Solutions to Reduce OOPE

• Strengthening Data Capture:
  • Triangulation of Data Sources: Complement NSS with CES, NFHS, LASI, CMIE, and private sector data.
  • Capturing Crisis Effects: Incorporate pandemic-related shocks and post-pandemic recovery trends.
  • Continuous Monitoring: Develop a more dynamic, multi-source approach for tracking household health expenditure.
• Strengthening Primary Healthcare: Investing in primary health centers, especially in urban and semi-urban areas, can reduce dependence on costly tertiary care.
  • Preventive services and early diagnosis are key to lowering long-term costs.
• Expand Insurance Coverage: Include outpatient services, diagnostics, and essential medicines under public insurance schemes like AB-PMJAY.
• Promote Affordable Medicines: Scale up initiatives like Jan Aushadhi Kendras and AMRIT pharmacies to ensure access to low-cost, quality generics across the country.
• Improve Budget Efficiency: Ensure that health budgets are not only increased but also effectively utilized.
  • Greater transparency and accountability in fund allocation can enhance service delivery and reduce leakages.
• Health Literacy & Behavior Change: Educate citizens on preventive care, rational drug use, and the benefits of public health services.
  • Behavioral change campaigns can reduce unnecessary medical visits and promote healthier lifestyles.

Source: TH