Out-of-Pocket Expenditure (OOPE) and Catastrophic Health Expenditure

Out-of-pocket expenditure (OOPE) on health is the money a family pays from its own pocket at the moment it gets treatment: doctor's fees, medicines, tests and hospital bills. It does not include money that is paid by the government, by an employer or by an insurance company. When this payment becomes very large compared with what a family can afford, it is called catastrophic health expenditure. High OOPE is one of the biggest reasons Indian families fall into debt or poverty.

Why does it matter?

Illness does not come with a warning. A family may save for years for a house or a child's education, and then a single cancer treatment can wipe out those savings. To pay, families often borrow at high interest, sell land or gold, or stop treatment halfway. So OOPE is not just a health number.

It is also a poverty number. A country where people pay most of their health bills from their own pocket is a country where illness keeps pushing people back into poverty.

How is health spending divided?

Think of the total money a country spends on health as one big plate. It is filled from three main sources:

• Government health expenditure (GHE): money spent by the Union, state and local governments, for example on government hospitals, free medicines and schemes like Ayushman Bharat.
• Pre-paid private schemes: money paid in advance, such as health insurance premiums or employer health schemes.
• Out-of-pocket expenditure: money paid directly by the patient at the time of treatment.

The smaller the share of OOPE, the better a country protects its people from health shocks.

How is OOPE measured in India?

India measures it through the National Health Accounts (NHA). The NHA is like a yearly "balance sheet" of the country's health spending: who paid, how much, and on what. The National Health Systems Resource Centre (NHSRC) was made the National Health Accounts Technical Secretariat (NHATS) by the Union Health Ministry in 2014. The NHA follows a global method called the System of Health Accounts 2011 (SHA 2011), so India's numbers can be compared with other countries.

The series starts from the year 2013-14. Household surveys by the National Sample Survey (NSS) also collect data on what families spend when they fall ill.

What do the numbers show?

As of the 10th edition of the NHA (released in May 2026, covering 2022-23):

• OOPE was 43.4% of total health expenditure in 2022-23, down from 64.2% in 2013-14.
• This was a rise from 39.4% in 2021-22, the first increase after about a decade of decline.
• Government health expenditure was 43.7% of total health expenditure in 2022-23 (up from 28.6% in 2013-14, with a peak of 48% in 2021-22).
• Government health expenditure was about 1.48% of GDP in 2022-23 (on the new GDP base year).

So while families now pay a smaller share than ten years ago, they still pay roughly two of every five rupees spent on health in India.

What does "catastrophic" mean exactly?

The World Health Organization (WHO) and the World Bank track this under Sustainable Development Goal (SDG) indicator 3.8.2. A household faces catastrophic spending when its health payments are more than 10% or 25% of its total household spending (or income). For example, if a family spends ₹2 lakh a year in total and ₹30,000 of it goes on treatment, that is 15%, which crosses the 10% line.

Insurance premiums and amounts later paid back by insurance are not counted. The WHO also tracks impoverishing health spending: when paying for treatment pushes a family below the poverty line.

What do families spend most on?

Medicines are the single largest part of OOPE in India, especially for outpatient care (visits where the patient is not admitted). One study of 2017-18 NSS data found medicines made up about 60% of outpatient OOPE and about 29% of inpatient OOPE. This is why cheaper medicines directly reduce OOPE, even for people who have insurance, because many insurance schemes mainly cover hospital admission and not medicines bought outside.

What has India done to reduce OOPE?

• National Health Policy (NHP), 2017: set a goal to raise public health spending to 2.5% of GDP by 2025 and to cut catastrophic household health spending by 25% from its level then, by 2025.
• Fifteenth Finance Commission: recommended that states raise health spending to more than 8% of their budgets by 2022, and repeated the 2.5%-of-GDP goal for 2025.
• Ayushman Bharat Pradhan Mantri Jan Arogya Yojana (PM-JAY): launched in September 2018, it gives a health cover of ₹5 lakh per family per year for hospital care to poor and vulnerable families. Since October 2024, all citizens aged 70 and above are covered regardless of income, through the Ayushman Vay Vandana card.
• Pradhan Mantri Bhartiya Janaushadhi Pariyojana (PMBJP): started in 2008 as the Jan Aushadhi Scheme and relaunched in 2016. It sells quality generic medicines at low prices through Jan Aushadhi Kendras. As of 30 June 2026, about 20,149 Kendras were working, with a target of 25,000 by March 2027.
• Price control on medicines: the DPCO, 2013 and the NPPA, including ceiling prices for essential medicines and trade margin caps on costly medicines like cancer drugs.

Commonly confused concepts

• OOPE vs total health expenditure: OOPE is only the part paid directly by patients. Total health expenditure includes government, insurance and OOPE together.
• OOPE vs catastrophic health expenditure: OOPE is any direct payment, even ₹50 for a tablet. Catastrophic spending is only when that payment crosses 10% or 25% of household spending.
• Catastrophic vs impoverishing spending: Catastrophic is about the size of the bill compared with the budget. Impoverishing is about the result: the family drops below the poverty line because of the bill.
• Total health expenditure vs current health expenditure: Total includes capital spending (like building new hospitals). Current health expenditure leaves out such capital spending. So the same OOPE amount gives a higher percentage when divided by current health expenditure.
• Health insurance premium vs OOPE: A premium is paid in advance and is counted as pre-paid spending, not OOPE.

Issues, criticism and the way forward

• Low public spending: Government health spending is still well below the 2.5%-of-GDP goal set for 2025. When the government spends less, families fill the gap from their pockets, as the 2022-23 rise in OOPE suggests.
• Insurance covers hospital stays, not medicines: PM-JAY mainly pays for hospital admission. Outpatient visits and medicines, the biggest OOPE items, are often not covered.
• Weak public hospitals and primary care: Shortage of doctors, medicines and equipment in government facilities pushes people to private providers, where costs are higher.
• Costly treatments like cancer: Newer cancer medicines can cost lakhs of rupees, and treatment lasts for months. Even middle-class families can face catastrophic spending.
• Way forward suggested by policy documents and experts: raise public spending as the NHP 2017 recommends; strengthen primary care through Ayushman Arogya Mandirs (health and wellness centres); offer free essential medicines and tests in government facilities; widen insurance to cover outpatient care and medicines; and keep controlling medicine prices through generic medicines and price regulation.

Concepts to Know

• Gross Domestic Product (GDP): The total value of all goods and services produced in a country in a year. "1.48% of GDP" means the government spends about ₹1.48 on health for every ₹100 the economy produces.
• Outpatient vs inpatient care: Outpatient care is when you visit a doctor and go home the same day. Inpatient care is when you are admitted to a hospital bed.
• Generic medicine: A cheaper copy of a medicine whose patent has ended. It has the same active ingredient, strength and effect as the branded one.
• Sustainable Development Goals (SDGs): 17 global goals adopted by the United Nations in 2015, to be reached by 2030. Goal 3 is about good health; target 3.8 is about Universal Health Coverage.
• Universal Health Coverage (UHC): A situation where everyone can get the health care they need without facing money problems because of it.