ECONOMICS OF HEALTHCARE: Why costs keep rising?

Unravelling the Rising Costs of Healthcare: A Deep Dive into India’s Economic Dilemma

"Why does healthcare feel like a luxury?" The rising costs of medical treatment have turned even basic care into a financial burden. Did you know that India spends only 1.9% of its GDP on healthcare? This means most families end up paying from their pockets for medical care—a reality that hits hard when health emergencies strike.

So, what’s really behind these skyrocketing costs? Let’s break it down.

Low public health funding forces Indian families to bear crippling medical costs

India’s per capita health expenditure stands at just ₹6,221.14, one of the lowest globally. Despite government spending on healthcare rising to 1.9% of GDP, individuals bear a significant portion of costs. Out-of-pocket expenses make up around 50% of total healthcare spending, forcing families to rely on their savings for medical treatments, often leading to severe financial stress.

Health Schemes Fall Short

Government schemes like Ayushman Bharat Pradhan Mantri Jan Arogya Yojana (AB PM-JAY) offer

health coverage of up to 5 lakhs rupees per year to economically vulnerable families which cover

only a small proportion of the population.

Medical insurance schemes such as “Arogyasri” are misused by private hospitals by creating false

records and fake patients to claim compensation from the government for the treatment they claim to have provided through this program.

Healthcare remains a significant expense for people who don’t meet the eligibility criteria of such schemes.

Rising Healthcare Costs amid Growing Investments

Have you ever wondered why healthcare prices keep rising despite the increasing spending by the governments and organizations? There are several factors behind this rise:

1. Underfunded Public Healthcare- Even though the Indian government has increased its spending on healthcare, public healthcare is still underfunded and is not enough to meet the rising demand as a result, people are forced to seek treatment from private providers, which increases the cost of healthcare and the health inequalities. Moreover, the lack of investment contributes to the lack of innovation in the industry.

2. Increasing Disease Burden- India faces a growing burden of both communicable and non-communicable diseases. As many people fall sick, the demand for healthcare increases. In terms of insurance, it increases the risk of insuring the average person, so the insurance companies raise their premiums to cover these higher risks, and the cost is passed down to individuals.

3. Expensive Healthcare Technology- While R&D, innovation, and advancements in technology offer improved care, it also increases the cost of healthcare. New technologies like robotic surgeries, high-tech diagnostic machines, and specialized treatments, come at a high cost and hence, increase the cost of medical procedures.

4. High Drug Prices- India’s pharmaceutical industry is one of the largest in the world, yet the cost of new and specialized medicines is very high. Patients with life-threatening conditions have to spend large amounts on medicines that drive up the cost of healthcare.

As healthcare prices rise due to these factors, a significant portion of the population not having

insurance has to bear these costs on their own, highlighting the problem of growing out-of-pocket expenses.

When people spend a large portion of their income on healthcare, it leaves them with fewer resources for other essential needs, pushing them into a vicious cycle of financial instability, due to which, many individuals avoid seeking medical care altogether, which can lead to the worsening of health conditions and might even be more expensive to treat later.

Essential Steps for Improvement

To address the rising healthcare costs, enough stress should be given to providing more affordable insurance plans, ensuring that people don’t have to cover a percentage of healthcare costs out of their capacity.

By increasing the expenditure on public healthcare facilities, the government aims to reduce the need for individuals to turn to expensive private hospitals, making healthcare more affordable for them.

Furthermore, encouraging preventive care such as health screenings and promoting a healthier lifestyle can reduce long-term costs as preventive measures can detect illnesses early, preventing them from becoming severe and costly to treat.

Healthcare shouldn’t feel like a privilege — it is a right everyone deserves. By tackling the reasons behind rising medical costs, healthcare can be made more affordable and accessible.