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Healthcare in India: The Challenge of Demography

March 27, 2019
This is Part 1 of a two article series on healthcare reform in India. This article explores the unique factors that drive healthcare reform in India. Part 2 analyzes India’s flagship healthcare reform, Ayushman Bharat, which is also known as “Modicare.”

Over the past three decades, providing access to healthcare has become – and will continue to be – an increasingly important goal for the Government of India. From 1990 to 2016, the number of Indians living with diabetes and the percentage of deaths in India due to heart disease have both doubled.[1][2] In combating such health issues, India’s approach to improving healthcare coverage differs from that of other nations due to its demographic composition: India has the world’s largest rural population and the world’s largest population in poverty.[3][4] The unique demographic challenges that India’s government faces shape its healthcare policies.

The Indian Healthcare System

India has both private and public healthcare systems, which are regulated at the federal and state levels. The public healthcare delivery system is primarily operated by state governments and financed by taxes.[5][6] Civil servants, military, and railway employees are enrolled in a mandatory health insurance program.[7] Private sector healthcare in India is not well regulated but comprises about 80% of outpatient care and 60% of inpatient care across the country.[8] Private sector healthcare in India is mostly financed by out-of-pocket (OOP) payments – healthcare costs that a patient incurs and are not covered by insurance.[9]

The demographic composition of India’s large population poses a challenge for the country’s healthcare system. About 70% of India’s population lives in rural areas, making it harder for these people to access care compared to those who live in urban areas. For example, while 84% of the 23,582 government hospitals in India – as of 2017 – are in rural areas, these rural hospitals only hold 39% of total government beds.[10] As such, India’s significantly larger rural population has less access to inpatient facilities and care. In fact, a 2012 McKinsey report on healthcare in India found that “the urban rich access healthcare at a rate that is double that of the rural poor and 50 percent more than the national average.”[11] Increasing access to care in rural areas is notably difficult due to the lack of infrastructure and medical professionals. In fact, India has a significant shortage of trained physicians nationwide as the WHO recommends a physician to population ratio of at least 1:1000, but India has a ratio of only 1:1674.[12] In order to improve the national healthcare system, any further national healthcare policy in India must address these large disparities between rural and urban populations.

For the 300 million Indian citizens who live below the poverty line, ordinary healthcare costs are prohibitively expensive.[13] From 2000 to 2015, total national healthcare expenditure in India consistently averaged around 4% of GDP each year, of which government expenditures comprised only around 1% of GDP.[14] By way of comparison, total healthcare expenditures in the US increased from 13.3 to 17.8% of GDP over the same time frame.[15] Consequently, the Ministry of Health and Family Welfare estimates that the low government expenditure on healthcare leads to high out-of-pocket expenses. In fact, these out-of-pocket expenses push 7% of the population into poverty each year.[16] From 2000 to 2015, OOP payments in India have averaged around 69% of total healthcare expenditures.[17] Over the same period, OOP payments comprised 10-20% of US national healthcare expenditures.[18] The high financial burden of healthcare – coupled with low government spending – necessitates a national policy to alleviate the high impact of OOP costs for those in poverty.

Image: 70% of India's population lives in rural areas, Source: Government of IndiaImage: 70% of India's population lives in rural areas, Source: Government of India

Addressing Challenges with Healthcare Reform

In 2008, the Government of India implemented the Rashtriya Swasthya Bima Yojana (RSBY), a government-sponsored health insurance program that provides access to healthcare for all those living below the poverty line, in order to meet India’s demographic challenges.[19] The program provides up to 30,000 rupees per family in financial coverage for inpatient expenses in more than 8,000 enrolled hospitals across the country.[20] In states that have adopted RSBY, the state government oversees healthcare delivery and contracts insurance companies to provide financial coverage and connect enrollees to providers.[21] By 2014, however, more than half of those who live in poverty were not enrolled in the program due to the lack of government oversight in the enrollment process and no mandate for insurance companies to encourage enrollment.[22] For example, due to insufficient government oversight, some of the contracted insurance companies enrolled families that were actually not below the poverty line.[23] Unlike the United States’ Medicare, which automatically enrolls most US citizens over 65, RSBY does not automatically enroll those below the poverty line.[24] The lack of government involvement in the RSBY enrollment process has prevented impoverished families from receiving the coverage that RSBY sought to provide. In addition, several studies have shown that RSBY has been ineffective in reducing the financial burden of OOP costs for beneficiaries. In India, outpatient care is the largest contributor to OOP spending.[25] RSBY, however, only provided financial coverage for inpatient care, so it did not affect the large share of outpatient OOP costs. In fact, RSBY did not change the frequency or amount of OOP costs attributed to inpatient care.[26] Consequently, some state governments chose not to adopt RSBY and instead offered comprehensive statewide healthcare schemes to address demographic issues at the state government level.[27]

In 2005, the Government of India launched the National Rural Health Mission (NRHM) to increase access to healthcare for India’s significant rural population by setting national public health standards and improving healthcare infrastructure. To address the shortage of healthcare professionals – especially in rural areas – NRHM added 140,000 paramedics, doctors, specialists, and alternative medicine practitioners to the national healthcare system.[28] By 2015, the National Health Mission – which subsumed the National Rural Health Mission and the analogous National Urban Health Mission – had made significant improvements to hospital infrastructure across the country.[29] For example, in 2005, there was one hospital bed for every 2,336 people, and after ten years of expanding hospital infrastructure, there was one for every 1,883 people in India.[30] This increase in infrastructure, however, mainly added more hospital beds to urban areas, exacerbating the disparity in access to inpatient care between rural and urban areas.[31]


The challenges of India’s demography coupled with the current status of its healthcare system have shaped the government’s approach to designing healthcare policies, as seen in the launch of programs like RSBY and NRHM. In striving for universal healthcare coverage, the Government of India will have to consider the impact of poorer infrastructure in rural areas and high out-of-pocket costs – issues that previous healthcare policies have failed to substantially improve. Part 2 of this series analyzes the potential of Ayushman Bharat, India’s new flagship healthcare reform, in India’s quest to improve access to care.

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   [5]http://documents.worldbank.org/curated/en/644241468042840697/pdf/722380PUB0EPI008029020120Box367926B.pdf, pp. 22

   [6]http://documents.worldbank.org/curated/en/644241468042840697/pdf/722380PUB0EPI008029020120Box367926B.pdf, pp. 20

   [7]http://documents.worldbank.org/curated/en/644241468042840697/pdf/722380PUB0EPI008029020120Box367926B.pdf, pp. 23



   [10]http://www.cbhidghs.nic.in/WriteReadData/l892s/Before%20Chapter1.pdf, pp. 15

   [11]https://www.mckinsey.com/~/media/McKinsey/Featured%20Insights/India/India%20Healthcare%20Inspiring%20possibilities%20challenging%20journey/India%20Healthcare_Inspiring%20Possibilities_Challenging%20Journey.ashx, pp. 22




   [15]https://www.cdc.gov/nchs/data/hus/hus16.pdf, pp. 314




   [19]http://documents.worldbank.org/curated/en/644241468042840697/pdf/722380PUB0EPI008029020120Box367926B.pdf, pp. 297-300


   [21]https://www.researchgate.net/publication/316146558_Targeting_and_Effects_of_Rashtriya_Swasthya_Bima_Yojana_on_Access_to_Care_and_Financial_Protection?enrichId=rgreq-85d6bf8ed05e4b20602216b8ab97c582-XXX&enrichSource=Y292ZXJQYWdlOzMxNjE0NjU1ODtBUzo0ODM0NjEzODAyMTg4ODBAMTQ5MjI3NzU4MzUwNw%3D%3D&el=1_x_3&_esc=publicationCoverPdf, pp. 69

   [22]https://www.researchgate.net/publication/316146558_Targeting_and_Effects_of_Rashtriya_Swasthya_Bima_Yojana_on_Access_to_Care_and_Financial_Protection?enrichId=rgreq-85d6bf8ed05e4b20602216b8ab97c582-XXX&enrichSource=Y292ZXJQYWdlOzMxNjE0NjU1ODtBUzo0ODM0NjEzODAyMTg4ODBAMTQ5MjI3NzU4MzUwNw%3D%3D&el=1_x_3&_esc=publicationCoverPdf, pp. 68




   [26]https://www.ncbi.nlm.nih.gov/pmc/articles/PMC5408909/, pp. 83

   [27]https://www.ncbi.nlm.nih.gov/pmc/articles/PMC5408909/, pp. 83

   [28]https://www.researchgate.net/publication/283986277_Success_and_Constraints_of_the_National_Rural_Health_Mission_Is_there_a_Need_for_Course_Correction_for_India’s_Move_towards_Universal_Health_Coverage, pp. 126

   [29]https://www.sciencedirect.com/science/article/pii/S0140673615009551, pp. 2425

   [30]https://www.sciencedirect.com/science/article/pii/S0140673615009551, pp. 2425

   [31]https://www.sciencedirect.com/science/article/pii/S0140673615009551, pp. 2425


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