Despite Ayushman Bharat covering over 30 crore hospitalisations since 2018, India's out-of-pocket expenditure on health remains near 55% of total health spending — among the highest globally — because the scheme covers inpatient care but not the outpatient drugs, diagnostics, and consultations that account for roughly two-thirds of household medical bills, according to National Health Accounts data.

Here is a number that should stop every policy debate in its tracks: for every hundred rupees India spends on healthcare, fifty-five come not from the government, not from an insurer, but from the patient's own wallet — often borrowed, frequently catastrophic, and disproportionately extracted from the families least able to absorb the blow. According to the National Health Accounts published by the Ministry of Health and Family Welfare, India's out-of-pocket expenditure (OOPE) on health has hovered stubbornly between 48% and 55% for over a decade, placing the country alongside some of the world's most fragile health systems rather than beside the aspirational peers it benchmarks in GDP terms.

The puzzle is not that India lacks ambition. Ayushman Bharat — Pradhan Mantri Jan Arogya Yojana (PM-JAY), launched in September 2018 — is the world's largest government-funded health insurance programme, covering up to ₹5 lakh per family per year for secondary and tertiary hospitalisation. The National Health Authority reports that over 30 crore hospital treatments have been authorised under PM-JAY since inception. That is a staggering administrative achievement. So why hasn't the needle moved on impoverishment?

The answer, as epidemiologists and health economists have been arguing for years, lies in a structural mismatch between what the scheme covers and where the money actually bleeds. The NSSO's latest Health in India survey, corroborated by Lancet-published analyses of household expenditure, shows that roughly 63% of all out-of-pocket health spending in India occurs at the outpatient level — the GP visit for persistent cough, the monthly diabetes medication, the diagnostic blood panel for thyroid monitoring, the dentist for an aching molar. None of these are covered by PM-JAY, which activates only upon hospitalisation.

Think of it this way. The government built the world's largest umbrella, but positioned it to cover the occasional monsoon downpour of a hospital admission. Meanwhile, most Indians are slowly soaked by the daily drizzle of outpatient costs — a drizzle that, over a year, often exceeds the storm. According to a 2023 study published in The BMJ Global Health, chronic diseases — diabetes, hypertension, chronic respiratory illness, mental health conditions — now account for the single largest share of recurring household medical expenditure in India. These are managed in clinics and pharmacies, not in hospital beds. PM-JAY, by design, does not see them.

The consequences are not abstract. The World Health Organization's data on catastrophic health expenditure — defined as medical costs exceeding 10% of household consumption — places India among the top five nations globally in the number of families pushed into poverty each year by health costs. NITI Aayog's own Sustainable Development Goals monitoring dashboard acknowledged that approximately 5-7 crore Indians fall below the poverty line annually because of medical bills, a figure that has remained remarkably resistant to policy intervention.

India Herald's read of what is really driving this impasse is that the architecture of Ayushman Bharat was always more politically legible than epidemiologically complete. Hospital care is visible, dramatic, and photogenic — the surgical success story, the cancer treatment saved. Primary and outpatient care is invisible, daily, and unglamorous. It does not lend itself to inauguration ribbons. Yet it is precisely where the fiscal haemorrhage occurs for the average Indian household. The political incentive structure, in short, funds the spectacular rescue while ignoring the quiet drowning.

This is not a partisan critique. Both UPA-era and NDA-era health policy frameworks have chronically under-invested in primary healthcare infrastructure. India's public health expenditure as a share of GDP stood at approximately 2.1% in 2023-24, according to the Economic Survey — a figure that the National Health Policy 2017 itself targeted to reach 2.5% by 2025. That target has been missed. By comparison, according to World Bank data, Thailand spends 3.8%, Brazil 3.9%, and even Sri Lanka — with a fraction of India's fiscal capacity — allocates around 1.6% from public funds while maintaining OOPE below 40%.

The states that have made visible dents in out-of-pocket spending share a common playbook, and it is instructive. Tamil Nadu and Kerala — states that rank consistently at the top of NITI Aayog's Health Index — invested decades ago in dense networks of primary health centres, community health workers, and publicly provisioned generic medicines. Tamil Nadu's free drug distribution scheme, launched well before PM-JAY, is estimated by the Indian Journal of Public Health to have reduced household drug expenditure by as much as 30% in the state. The lesson is not complicated: when the state provides the daily medications and the nearby clinic visit at no cost, families stop haemorrhaging cash at the pharmacy counter.

The Jan Aushadhi Kendra programme — which now numbers over 12,000 outlets nationally, per the Bureau of Pharma PSUs of India — has attempted this at the national level by selling generic medicines at steep discounts. But distribution remains patchy, awareness low, and the private pharmacy ecosystem so deeply entrenched that most Indians, particularly in urban areas, continue purchasing branded generics at four to ten times the Jan Aushadhi price. A 2024 analysis in the Indian Journal of Pharmacology found that even where Jan Aushadhi stores exist, patient footfall remains below 15% of the local pharmacy market.

What would a genuine correction look like? Health economists at the Public Health Foundation of India and the Institute of Health Metrics and Evaluation (IHME) have repeatedly pointed to three structural interventions that the evidence supports: first, universal outpatient drug coverage — publicly financed free essential medicines at the primary care level, modelled on Tamil Nadu and Rajasthan's free medicine schemes; second, a massive expansion of functional Health and Wellness Centres (the Ayushman Bharat-HWC arm, which is the less celebrated sibling of PM-JAY) with staffed diagnostic capacity and NCD screening; and third, an increase in public health expenditure to at least 3% of GDP, front-loaded toward primary care rather than tertiary hospital construction.

The Health and Wellness Centres deserve particular attention because they represent the government's own answer to the outpatient gap — and yet they remain dramatically under-resourced. The target was 1,50,000 HWCs by 2022. According to Comptroller and Auditor General (CAG) reports and independent assessments by the Centre for Policy Research, a significant proportion of those declared operational lacked the staffing, diagnostic equipment, and drug supply to function meaningfully. A centre that exists on paper but cannot provide a blood glucose test or dispense metformin is not, in any clinical sense, a centre at all.

The forward projection here is sobering but clear. India's epidemiological transition — the shift from infectious disease burden toward chronic, lifestyle-related conditions — is accelerating. The ICMR-INDIAB study estimates that over 10 crore Indians now live with diabetes, with prevalence rising fastest in states with the weakest primary care networks. Every one of those patients needs daily medication, quarterly monitoring, and annual screening — all outpatient activities, all uncovered by PM-JAY, all paid for in cash. Unless the architecture pivots, the out-of-pocket burden will not merely persist; it will intensify as the disease profile shifts toward conditions that require lifelong management rather than one-time hospitalisation.

The reader who came to this piece with the reassurance that Ayushman Bharat solved the healthcare affordability crisis should sit with the dissonance. The scheme is real, its hospital coverage genuine, and its political achievement undeniable. But health is not a hospital event. Health is the daily act of affording the pill, the test, the consultation — the quiet, unglamorous infrastructure that keeps a family from selling its assets to treat what should have been a manageable condition. Until India funds that invisible architecture with the same vigour it reserves for surgical theatres and insurance cards, fifty-five out of every hundred rupees will continue to come from the one source that can least afford it: you.

Key Takeaways

• India's out-of-pocket health expenditure remains near 55% of total health spending — among the highest globally — despite Ayushman Bharat's PM-JAY covering over 30 crore hospitalisations since 2018.
• Approximately 63% of household medical expenditure occurs at the outpatient level — GP visits, medicines, diagnostics — which PM-JAY by design does not cover.
• An estimated 5-7 crore Indians are pushed below the poverty line each year by medical costs, per NITI Aayog's SDG monitoring data.
• India's public health expenditure at roughly 2.1% of GDP missed the National Health Policy 2017's own target of 2.5% by 2025.
• States like Tamil Nadu and Kerala that invested in primary healthcare infrastructure and free generic drug schemes have demonstrably lower out-of-pocket burdens.
• Over 10 crore Indians now live with diabetes — a chronic condition requiring lifelong outpatient management that PM-JAY does not address.

Frequently Asked Questions

What does Ayushman Bharat PM-JAY actually cover?

PM-JAY covers secondary and tertiary hospitalisation costs up to ₹5 lakh per family per year. It does not cover outpatient consultations, daily medicines, or diagnostic tests that do not involve hospital admission — which together constitute roughly 63% of household health spending.

Why is India's out-of-pocket health expenditure so high despite government schemes?

The majority of health expenditure occurs at the outpatient level — chronic disease medications, clinic visits, lab tests — which PM-JAY excludes by design. Additionally, India's public health expenditure at around 2.1% of GDP remains below the government's own target, leaving large gaps in publicly funded primary care.

Which Indian states have successfully reduced out-of-pocket health spending?

Tamil Nadu and Kerala consistently show lower out-of-pocket burdens, attributed to decades of investment in dense primary health centre networks, community health workers, and publicly provisioned generic medicine schemes. Tamil Nadu's free drug distribution programme has been estimated to reduce household drug expenditure by up to 30%.

How many Indians fall into poverty due to medical expenses each year?

According to NITI Aayog's Sustainable Development Goals monitoring dashboard, approximately 5-7 crore Indians are pushed below the poverty line annually due to catastrophic health expenditure.