Analyze the relationship between increased government health expenditure and reduced out-of-pocket costs. What policy measures can further enhance health financing and reduce finan

GS2 Healthcare
Analyze the relationship between increased government health expenditure and reduced out-of-pocket costs. What policy measures can further enhance health financing and reduce financial burdens on households?
  • 10 marks
  • 8 min
  • 150 words
  • Medium

The Hindu

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Introduction

High Out-of-Pocket Expenditure (OOPE) on healthcare pushes millions into poverty annually. Increased government health expenditure improves affordability, expands public healthcare access and reduces dependence on private spending. According to the National Health Accounts (2021-22), India’s OOPE declined from 62.6% (2014-15) to about 39.4%, reflecting the positive impact of public health financing initiatives.

Relationship between Higher Government Health Expenditure and Reduced OOPE

1. Expansion of Public Health Infrastructure

  • Greater public spending strengthens primary and secondary healthcare facilities.
  • Free or subsidised treatment reduces household medical expenses.
  • Example: Ayushman Bharat–Health and Wellness Centres (HWCs) improve access to essential services.

2. Public Health Insurance Coverage

  • Government-funded insurance schemes reduce catastrophic health expenditure.
  • PM-JAY provides coverage up to ₹5 lakh for vulnerable families.

3. Availability of Free Medicines and Diagnostics

  • Schemes like Pradhan Mantri Bhartiya Janaushadhi Pariyojana reduce medicine costs, which form a major share of OOPE.

4. Preventive and Primary Healthcare

  • Increased spending on immunisation, nutrition and sanitation lowers disease burden and long-term treatment costs.
  • The Bhore Committee emphasized preventive healthcare as the foundation of public health.

5. Reduced Dependence on Private Sector

  • Stronger public systems reduce costly private hospitalisation.

Measures to Further Improve Health Financing

1. Increase Public Health Expenditure

  • Raise spending to 2.5% of GDP, as envisaged in the National Health Policy (2017).

2. Strengthen Primary Healthcare

  • Invest in rural health infrastructure, doctors and digital health services.

3. Universal Health Coverage (UHC)

  • Expand insurance coverage and include outpatient care and diagnostics.

4. Regulate Private Healthcare Costs

  • Implement transparent pricing and standard treatment protocols.

5. Innovative Financing Mechanisms

  • Introduce health cess/sin taxes on tobacco and sugary products.
  • Encourage state-specific health financing models.

6. Improve Centre-State Coordination

  • Ensure efficient fund utilisation through cooperative federalism.

Conclusion

Increased public health expenditure directly reduces financial distress by lowering OOPE and improving healthcare access. Achieving equitable and affordable healthcare requires sustained investment, stronger primary care and comprehensive health financing reforms aligned with the goal of Universal Health Coverage and SDG-3.