Health Financing Schemes and Insurance Programmes

Health financing and insurance mechanisms in India are structured to protect households from catastrophic health expenditure and move toward Universal Health Coverage (UHC). High Out-of-Pocket Expenditure (OOPE) has historically forced millions of households into poverty each year. The government uses tax-funded schemes, social health insurance, and demand-side financing models to restructure health financing. These interventions target primary, secondary, and tertiary care to create a financial safety net for vulnerable populations.

Landscape of Health Financing in India

Health expenditure in India comprises public health spending, out-of-pocket expenditure, private voluntary health insurance, and social security funds. According to National Health Accounts (NHA) estimates, the share of Out-of-Pocket Expenditure in total health expenditure has declined from over 62% in 2014-15 to below 40% in recent years due to increased government health spending and expanded social protection schemes. The National Health Policy (NHP) 2017 targets increasing government health expenditure to 2.5% of Gross Domestic Product (GDP).

Key Components of India’s Health Expenditure

• Public Health Expenditure: Direct funding by Central and State governments for health infrastructure, salaries, and supply chains.
• Out-of-Pocket Expenditure (OOPE): Direct payments made by individuals at the point of care, primarily for outpatient medicines and diagnostics.
• Social Health Insurance: Risk-pooling mechanisms funded through mandatory contributions from employers and employees.
• Tax-Financed Health Protection: Fully government-subsidized health assurance schemes targeting low-income families.

Primary Social Health Insurance Frameworks

Social health insurance schemes provide statutory health coverage to formal sector workers in government and corporate organizations.

Employees’ State Insurance Scheme (ESIS)

• Enactment and Statutory Authority: Established under the Employees’ State Insurance Act, 1948.
• Governing Body: Managed by the Employees’ State Insurance Corporation (ESIC), an autonomous body under the Ministry of Labour and Employment.
• Target Audience: Formal sector employees working in non-seasonal factories, shops, and establishments earning up to ₹21,000 per month (₹25,000 for persons with disabilities).
• Funding Architecture: Contribution-based mechanism where employers contribute 3.25% and employees contribute 0.75% of the total wage bill.
• Benefits Provided: Comprehensive medical care alongside cash benefits for sickness, maternity, temporary or permanent disablement, and dependent pension.

Central Government Health Scheme (CGHS)

• Inception Year: Launched in 1954 under the Ministry of Health and Family Welfare.
• Coverage Scope: Serves Central Government employees, pensioners, sitting and former Members of Parliament, freedom fighters, and select autonomous body staff.
• Delivery Mechanism: Provides outpatient care through CGHS wellness centres and inpatient treatment through empanelled private and government hospitals.

Flagship Demand-Side Health Protection Schemes

Government-funded health insurance schemes focus on secondary and tertiary care hospitalization, bridging financial gaps for unorganized and low-income populations.

Pradhan Mantri Jan Arogya Yojana (PM-JAY)

• Administrative Body: Implemented by the National Health Authority (NHA) at the central level and State Health Agencies (SHAs) at the state level.
• Financial Cover: Provides ₹5 lakh per family per year for secondary and tertiary care hospitalization.
• Target Demographic: Bottom 40% of the population identified through Socio-Economic Caste Census (SECC) 2011 deprivation criteria and occupational categories.
• Senior Citizen Expansion: Covers all senior citizens aged 70 years and above, providing an exclusive top-up cover of ₹5 lakh per year regardless of income status.
• Key Features: Entirely cashless and paperless at point of service, with no caps on family size or age, covering pre-existing conditions from day one.

Ayushman Bharat Health Infrastructure Mission (PM-ABHIM)

• Launch and Budget: Launched in October 2021 with an outlay of ₹64,180 crore over five years.
• Core Mandate: Fills critical gaps in health infrastructure, surveillance systems, and health research across primary, secondary, and tertiary levels.
• Infrastructure Focus: Establishes critical care hospital blocks, urban health and wellness centres, and public health units at district levels.

Micro-Insurance and Supply-Side Financing Mechanisms

Complementary initiatives focus on reducing medicine costs, funding specialized health conditions, and offering low-cost micro-insurance.

Financial Comparison of Primary Health Protection Models

Essential Facts

• National Health Policy 2017 targets increasing government health spending to 2.5% of India’s GDP.
• Out-of-Pocket Expenditure (OOPE) accounts for the largest share of private health expenditure in India, driven largely by outpatient drug purchases.
• PM-JAY is the world’s largest government-funded health assurance scheme, covering over 12 crore poor and vulnerable families.
• Senior citizens aged 70 years and above receive a distinct ₹5 lakh top-up cover under PM-JAY irrespective of socio-economic status.
• National Health Authority (NHA) is the apex body responsible for implementing PM-JAY and the Ayushman Bharat Digital Mission (ABDM).
• Employees’ State Insurance Act of 1948 was the first major social security legislation enacted in post-independence India.
• Rashtriya Arogya Nidhi provides direct financial aid to BPL patients seeking specialized treatment in government super-specialty hospitals.
• Public-Private Partnership (PPP) framework under the PM National Dialysis Programme provides free hemodialysis to BPL patients at the district level.