From Coverage to Care: The Next Challenge in India's Health Insurance Revolution

For decades, India's healthcare debate was dominated by a troubling reality: falling ill often meant falling into poverty. A heart attack, a cancer diagnosis, or a major surgery could wipe out years of savings, forcing families into debt and economic distress. Against this backdrop, the latest findings from the National Family Health Survey (NFHS-6) offer an encouraging signal. The proportion of households covered by a health insurance or health financing scheme has risen from 41% in NFHS-5 (2019-21) to 60.2% in 2023-24. In a country of India's scale and diversity, such a jump represents one of the most significant expansions of financial protection in recent memory.

At the heart of this transformation is the Ayushman Bharat-Pradhan Mantri Jan Arogya Yojana (PM-JAY), launched in 2018 to protect vulnerable households from catastrophic healthcare expenditure. The scheme today covers nearly 55 crore people and has emerged as the world's largest publicly funded health assurance programme. More than 40 crore Ayushman cards have been issued, over 11.69 crore hospital admissions authorised, and treatment worth more than ₹1.6 lakh crore delivered through a vast network of empanelled hospitals.

These achievements are particularly significant in a country where healthcare costs have historically been borne largely by households themselves. For years, out-of-pocket expenditure (OOPE) accounted for over 60% of total health spending, among the highest levels globally. Medical emergencies routinely pushed families into debt, forcing many to delay or forgo treatment. Recent National Health Accounts estimates suggest that OOPE has fallen substantially, while several studies indicate that PM-JAY beneficiaries incur lower hospitalization costs and face a reduced risk of catastrophic health expenditure. Women account for nearly half of all admissions under the scheme, and rural households have seen notable gains in insurance coverage, highlighting its potential to improve equity in access to healthcare.

Yet the rise in insurance coverage should not be mistaken for the achievement of universal health coverage.

Insurance coverage and healthcare access are not synonymous. A health card does not automatically translate into treatment, nor does enrollment guarantee financial security. Across several States, utilization rates remain uneven despite high levels of enrollment. Many beneficiaries remain unaware of their entitlements, empanelled facilities, or portability provisions. Administrative hurdles and local capacity constraints continue to limit the scheme's effectiveness.

More importantly, PM-JAY primarily covers hospitalization, while a substantial share of healthcare spending in India arises from outpatient consultations, medicines, diagnostics, and chronic disease management. For patients suffering from diabetes, hypertension, cardiovascular diseases, or cancer, recurring medical expenses often impose a greater burden than hospitalization itself. As non-communicable diseases now account for nearly two-thirds of deaths in India, this limitation becomes increasingly important.

This points to a larger challenge. Financial protection against hospital expenses is valuable, but genuine universal health coverage requires strong primary healthcare systems capable of preventing illness, detecting diseases early, and managing chronic conditions effectively. Without sustained investment in primary care, insurance risks becoming a mechanism for financing illness rather than promoting health.

International experience offers a useful lesson. Countries such as Thailand and South Korea achieved universal health coverage not through insurance expansion alone but through simultaneous investments in public hospitals, healthcare personnel, preventive services, and primary healthcare systems. Insurance was only one pillar of a broader health architecture.

India today faces what may be called the Ayushman paradox: insurance coverage is expanding faster than healthcare capacity. An insurance card can purchase treatment only where hospitals, doctors, nurses, medicines, and diagnostics are available. While enrollment can be expanded quickly, healthcare infrastructure requires years of investment. In many rural and underserved regions, beneficiaries possess insurance cards but continue to struggle with access to quality healthcare.

The challenge is compounded by significant interstate disparities. Some States have leveraged stronger public health systems and integrated insurance models to achieve high utilization and better outcomes. Others continue to face shortages of healthcare workers and medical facilities. Since health remains primarily a State subject, the future success of PM-JAY will depend as much on strengthening State health systems as on central funding.

The growing role of private hospitals under PM-JAY adds another layer of complexity. Private participation has expanded access to specialised care, but concerns regarding claim inflation, unnecessary procedures, and uneven quality standards persist. Effective regulation is therefore essential to ensure that public funds generate genuine health outcomes rather than merely subsidising private profits.

These concerns gained prominence following a performance audit by the Comptroller and Auditor General (CAG). The audit revealed that more than 7.49 lakh beneficiaries were linked to a single mobile number, while another 1.39 lakh beneficiaries shared another common number, exposing weaknesses in beneficiary verification systems. It also identified duplicate records, treatment claims raised after beneficiaries had been officially recorded as deceased, and questionable claim settlements by empanelled hospitals. While such findings do not diminish the broader achievements of PM-JAY, they highlight vulnerabilities that can undermine public trust and fiscal sustainability if left unaddressed.

Another unresolved challenge is India's healthcare "missing middle" millions of lower-middle-class households who neither qualify for publicly funded insurance nor possess adequate financial resources to absorb major medical shocks. Private insurance often remains unaffordable or inadequate for this segment. Without innovative contributory insurance models, India's path towards universal health coverage will remain incomplete.

Ultimately, the sustainability of India's healthcare ambitions depends on public investment. Although public health expenditure has risen in recent years and is approaching 2% of GDP, it remains below the National Health Policy target of 2.5%. Insurance expansion must therefore be accompanied by greater investment in district hospitals, primary healthcare centres, healthcare workers, digital health systems, and preventive care.

The NFHS-6 findings are both an achievement and a reminder. They demonstrate that India has made significant progress in expanding financial protection and reducing healthcare-related vulnerability. But the next phase of reform must move beyond enrolment figures and insurance cards.

Universal health coverage is not achieved when citizens are insured. It is achieved when they can access timely, affordable, and quality healthcare regardless of income, geography, or social status. The real success of India's health insurance revolution will not be measured by the number of cards issued, but by whether every citizen can seek medical care without fearing either disease or destitution. India has laid a strong foundation; the challenge now is to build the healthcare system that can stand upon it.