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Paying Out of One’s Own Pocket: How the Poor in India Are Facing Hardship to Treat Their Kids

Paying Out of One’s Own Pocket: How the Poor in India Are Facing Hardship to Treat Their Kids
Paying Out of One’s Own Pocket: How the Poor in India Are Facing Hardship to Treat Their Kids
Ranganadham Srinadh and Jeetendra Yadav


It is an unfortunate reality for many poor households in India that the cost of treating their children has to borne by them. In the absence of access to free treatment, many end up paying out of their own pockets to meet healthcare expenses. Desperation leads to rash and hasty measures—such as borrowing money or selling property and assets—plunging such people deeper into financial hardship.

In a study undertaken by the authors, the unit-level data from the seventy-fifth round of the (2017–18) National Sample Survey (NSS) was used for analyzing 4564 hospitalized children, in the age group of 0–4 years, in the last one year preceding the survey period.

More than two-fifth (42%) of the children were between the age of one and two years and 67% were male. According to the monthly per capita expenditure (MPCE)—an indicator of household economic well-being—more than half (53%) of the households in the sample were considered ‘rich’, while 29% was ‘poor’. About 68% of the households was based in rural areas. Unsurprisingly, a majority of the households (62%) opted for the private sector for the treatment of their children.

While out-of-pocket expenditure or OOPE is any direct outlay by households—including gratuities and in-kind payments to health practitioners and suppliers of pharmaceuticals, therapeutic appliances, and other goods and services whose primary intent is to contribute to the restoration or enhancement of the health status of individuals or population groups—a household is considered to have experienced financial hardship if they reported financing healthcare out-of-pocket expenditure using any of the following four mutually exclusive options: (i) sold assets or borrowed money, (ii) asked a relative or friend to pay, (iii) experienced a catastrophic level of OOPE which is defined as household health spending exceeding 10% of household consumption expenditure, and (iv) did not seek care in avoidance of unaffordable OOPE.


The mean out-of-pocket expenditure for India is estimated to be Rs 14,660. It was higher (Rs 21,564) for children less than a year old. The mean total OOPE (Rs 14,864) was higher among male children as compared to females.  

Among the states, Haryana spent more (Rs 27,071) on the mean OOPE on hospitalized care. This was followed by Goa (Rs 26,423), Telangana (Rs 24,088), Punjab (Rs 22,249), and Lakshadweep (Rs 22,168). However, some states and union territories such as the Andaman and Nicobar Islands (Rs 1,488), Tripura (Rs 3868), and Meghalaya (Rs 4,091) spent less as compared to the ones mentioned above. On the other hand, due to high OOPE, nearly two-fifth (39%) of the households in Tamil Nadu were heavily burdened financially.

More than half of the children (57%) had been hospitalized due to various infections. Although fewer children had been hospitalized with eye-related diseases, the mean OOPE for the same was second highest (Rs 30,759) after cardio-vascular diseases.

Under broad types of diseases, 74% of the children were hospitalized with communicable diseases and 18% with non-communicable ones. However, the mean OOPE on non-communicable diseases was more (Rs 25,291) than communicable diseases.

Urban households spent a smaller proportion of their household expenditure on hospitalized care for children as compared to their rural counterparts.  


Around 18 percent of the respondents either borrowed money (13%) from others or sold their physical assets (0.26%) or contributions from friends, relatives (2%) and other sources (2%) to meet the hospital expenses.

About thirteen households out of every 100 experienced financial hardships. It was surprising to note that households belonging to the ‘middle’ (OR: 1.607; p-value 0.022) category were more likely to experience financial hardships than those in the ‘rich’ and ‘poor’ categories, and it is statistically significant. The burden of financial hardship decreases for children residing in urban areas as compared to those in rural areas.

High OOPE is a major barrier to quality healthcare services and access to appropriate and affordable medicine. Over-reliance on direct payments when people need care is a key barrier to achieving universal health coverage. Evidence on OOPE for care-seeking of illnesses among under five children and financing mechanism to mitigate such spending are essential for designing effective interventions to ensure universal health coverage.

Frontline workers—ASHA, anganwadi workers and ancillary nurse midwives—need to proactively reach out to households whose children require assistance. A robust monitoring system is also required at the block, district, and state levels to track the key performance indicators set for children’s health.

Increase in coverage of health insurance will definitely reduce OOPE. Findings from this study will help policymakers to identify target groups and thereby design effective health financing programmes. A comprehensive health coverage called Ayushmaan Bharat, a flagship scheme of the Government of India was launched in 2018. In the future, the scheme may expect to cover a larger section of the population and further reduce household out-of-pocket expenditure while availing in-patient care.

The top five out-of-pocket expenditures include 43% on pharmacies, 28.5% on private general hospitals, 7.42% on government general hospitals, 6.8% on medical and diagnostics and 6.26% on providers of patient transportation and emergency rescue (Source: NSSO and NFHS data). Based on the above, existing pricing mechanisms of essential medicines should be revised and made more cost-effective. To support the government’s goal of Universal Health Coverage by 2030, geographic imbalances as well as expanded health financing options should be explored such as government payments, incentives, and/or health insurance. Finally, the results suggest that improving physical access and quality of care (particularly availability of drugs) in public facilities would likely reduce the incidence of hardship financing, especially among the poorest.


*Ranganadham Srinadh is Research Assistant, NITI Aayog, and Jeetendra Yadav is Technical Officer (B), National Institute of Medical Statistics (NIMS), ICMR. Views expressed are personal.