The medical poverty trap is real

Beyond universal coverage, India needs health care facilities that deliver timely, reliable and quality care, not merely exist

The latest findings from the National Sample Survey’s 80th Round, covering January-December 2025, raise uncomfortable questions about the accessibility and affordability of medical services in India. The survey highlights two important trends: A substantial rise in reported morbidity across the country and continued reliance on private health care providers. More importantly, treatment at private facilities imposes a significantly higher financial burden on patients than treatment at public hospitals.

 

Rising morbidity: The proportion of people reporting an ailment during the preceding 15 days increased considerably in the 80th Round compared with the 75th Round (July 2017-June 2018). In rural India, it nearly doubled, rising from 6.8 per cent to 12.2 per cent, while in urban India, it increased from 9.1 per cent to 14.9 per cent. At first glance, this increase might appear entirely negative. However, higher reported morbidity does not necessarily mean that Indians have suddenly become less healthy. It could also reflect an ageing population and greater health awareness, allowing illnesses to be reported more frequently.

 

Private providers dominate: According to the latest NSS estimates, 65.4 per cent of treated non-hospitalised ailments in rural India were managed by private providers. In urban India, the figure was 74.8 per cent. The state-level differences are particularly noteworthy. In rural Odisha, 60.9 per cent of treated ailments were handled by government-run facilities. Tamil Nadu and Chhattisgarh also recorded public health care utilisation above 50 per cent. By contrast, public health care accounted for only 15.8 per cent of treated ailments in rural Punjab and less than one-fourth in several other states. This tells us that public health care utilisation is not simply a function of income or geography. It is not simply a matter of consumer preference — it is a verdict on availability, waiting times, perceived quality and the uneven reach of public facilities. This has major implications for household finances, as treatment in private hospitals requires substantially higher out-of-pocket expenditure.

 

Enormous cost difference: For a treated non-hospitalised ailment, the average out-of-pocket expenditure in India was ₹304 in rural government facilities and ₹257 in urban government facilities. The corresponding expenditure at private hospitals was ₹1,541 and ₹1,343. These gaps also vary widely across states. In urban areas, treatment at a government hospital cost ₹47 in Tamil Nadu but ₹830 in Bihar; at a private hospital, it ranged from ₹834 in Kerala to ₹3,509 in Bihar. The cost of falling ill depends not only on the provider but on the state — a second layer of inequality.

 

High cost of hospitalisation: In-patient treatment is far more punishing. The average out-of-pocket expenditure per hospitalisation, excluding childbirth, was ₹31,484 in rural India and ₹38,688 in urban India. But the average expenditure in private hospitals was ₹47,710 in rural areas and ₹54,999 in urban areas, compared with only ₹6,905 and ₹6,032, respectively, in government hospitals.  A family facing a large medical bill has limited choices. It may borrow money, postpone other essential expenditures, or sell productive assets. For households already living close to the poverty line, a serious illness can, therefore, become an economic shock from which recovery is difficult. This is the so-called medical poverty trap: Illness reduces a household’s economic security, while economic insecurity, in turn, makes it harder to obtain timely and quality health care. This risk is greatest in economically weaker states such as Bihar and Uttar Pradesh, which depend heavily on private care despite lower household incomes.This creates a fundamental policy contradiction. The households that can least afford expensive medical treatment are often the households most dependent on providers who charge considerably more than public facilities.

 

Insurance is not enough: This is where schemes such as Ayushman Bharat have an important role in improving financial protection. But an insurance card cannot compensate for the absence of a functioning public-health facility nearby. Nor can insurance by itself ensure the availability of medicines, diagnostic services, doctors, and quality primary care. Health care financing and health care delivery must, therefore, be considered together. Health insurance and financing schemes, meanwhile, have expanded. Coverage rose from 14.1 per cent in 2017-18 to 47.4 per cent in 2025 in rural areas; and from 19.1 per cent to 44.3 per cent in urban areas. While this is a substantial change, the reported out-of-pocket medical expenditure remains high. This does not mean that insurance has failed; it means that nominal coverage is not the same as effective financial protection.

 

Ayushman Bharat and other schemes can reduce catastrophic expenditure only if eligible households know how to use them, if hospitals are available and empanelled, and if covered services match actual needs. The survey’s numbers, therefore, point to a broader problem. India has expanded the architecture of health financing faster than it has repaired the everyday capacity of public care.

 

Way forward: India needs to strengthen public health care at every level, from Ayushman Arogya Mandirs to district hospitals, so that facilities deliver timely, quality care rather than merely exist. The aim is not to eliminate private health care, but to make the choice between public and private genuine. Universal coverage must mean that seeking treatment does not threaten a family’s economic survival. Absent this, the private sector will remain the default provider and households will remain the default financiers.

The writers are, respectively, assistant professors at Sardar Patel Institute of Economic and Social Research, and the Institute of Rural Management Anand