In September, a Bench of Justices Vikram Nath and Sandeep Mehta, hearing a petition on hospital drug pricing, held up a single example: a cancer medicine supplied to the trade at about ₹2,700 and sold to the patient at a printed price of ₹27,000 — a 10-fold markup. Justice Mehta called it “broad daylight dacoity”; the Court called the wider pattern “carnage”. It was not rhetoric. It accurately described the most reliable route from the middle class into penury in India today: the medical bill.

Illness is now among the country’s largest single causes of impoverishment. A single hospitalisation can erase a family’s savings, mortgage its land, and pull it below the poverty line in a week. A 2018 study by researchers at the Public Health Foundation of India, published in the British Medical Journal, estimated that out-of-pocket health spending pushed roughly 55 million Indians into poverty in a single year — 38 million of them by the cost of medicines alone, and more people than live in most countries on earth. This is not a story of one greedy hospital or one costly drug. It is a structural failure in how a nation of 1.4 billion pays for staying alive — and, in its current form, it is about to get worse rather than better.

The Paradox Of A ‘Falling’ Burden

For a decade, the government had a reassuring headline. According to the National Health Accounts, out-of-pocket expenditure fell steadily from 64.2% of total health spending in 2013-14 to 39.4% in 2021-22, while the government’s share rose to 48%. On paper, the state was finally carrying more of the load.

Look closer, and the comfort dissolves — because that story has just reversed. The most recent National Health Accounts, for 2022-23 and released only in May 2026, show out-of-pocket spending climbing back up to 43.4% of total health expenditure, even as the government’s share slipped from 48% to 43.7% and public health spending fell from 1.84% to 1.48% of GDP. The much-celebrated decline, it turns out, was fragile — propped up by a pandemic-era surge in government outlays. Households are once again being asked to carry more, not less: they still fund well over two-fifths of all health spending - among the worst ratios for any large economy. Prescribed medicines alone account for roughly 16% of the bill, the single biggest item that comes straight out of the patient’s pocket.

Meanwhile, the public purse is not filling the gap it has opened. Union health outlay for 2026-27 is about ₹1.06 lakh crore — still only around 2% of the Budget — while the National Health Policy’s promise of 2.5% of GDP by 2025 has quietly lapsed, unmet and largely unmentioned. The commitment was always modest; even that ambition has now slipped.

Nor does insurance fill the void. Ayushman Bharat was designed for the poorest two-fifths of the population; private and employer cover protects a thin slice at the top. In between sits what the NITI Aayog itself has called the “missing middle” — at least 30% of Indians, some 400 million people, with no financial protection against a health shock at all. They are too well-off to qualify for the scheme and too stretched to afford a premium, and it is precisely they who stand one hospital admission away from the poverty line.

To its credit, the government can point to a real expansion of access. By mid-2026, it reported more than 440 million Ayushman cards issued, about 36,000 empanelled hospitals, treatment worth over ₹1.8 lakh crore, a network of more than 180,000 Ayushman Arogya Mandirs for primary care, and over 18,000 Jan Aushadhi stores selling generic medicines at 50% to 90% below market price. 

The reach is genuine and not to be dismissed. But reach is not the same as protection, and the test of protection is whether a family is shielded from catastrophic costs. On that test, the country is slipping backwards even as the network widens — more cards, more centres, and yet a larger share of the bill landing straight back on the household.

The burden is also profoundly unequal across a federal nation. States such as Uttar Pradesh, Andhra Pradesh, Kerala, and West Bengal still meet more than half their health costs out of pocket; in Uttar Pradesh, Maharashtra, Punjab and others, households spend more per head than their governments do. Bihar’s strikingly low per capita out-of-pocket figure is not a badge of protection but of care foregone — people too poor to spend simply going without. Only three states — Delhi, Odisha, and Rajasthan — meet the policy norm of 8% of their budget on health. The poorest, most populous states, where the need is greatest, protect their people least.

The crisis, then, is not an accident of being a developing country. It is the product of specific, nameable failures — and what can be named can be fixed. 

Ten Fault Lines

1. The frozen public purse. Public health spending has never reached even 2% of GDP — and on the latest count slipped back to 1.48% — even as demand has exploded. 
   
   
2. The out-of-pocket trap. India still funds nearly two of every five health rupees directly from the household, and the absolute amount keeps rising. For the uninsured majority, every serious illness is a solvency test.
   
   
3. The medicine markup machine. Price control under the Drugs (Prices Control) Order (DPCO) covers only a thin list of scheduled drugs; beyond it, the printed MRP is a work of fiction. 
   
   
4. The hollow public hospital. Vacant posts, drug stock-outs, and absent diagnostics drive more than half of all patients to private care that can cost up to seven times as much. 
   
   
5. The captive pharmacy. Private hospitals routinely compel patients to buy medicines and devices from in-house pharmacies at full MRP, blocking cheaper outside purchase — the specific abuse now before the Supreme Court.
   
   
6. Ayushman Bharat’s outpatient blind spot. PM-JAY now covers over 440 million people for hospitalisation — but not the outpatient consultations, tests, and chronic medicines where most health money actually bleeds. 
   
   
7.  The empanelment and claims squeeze. Thin package rates, delayed reimbursements, and uneven private participation hollow out the scheme in practice. Coverage on a card is not the same as care at the counter.
   
   
8. The federal fault line. Big, poor states underspend and carry the heaviest out-of-pocket burden, yet central transfers are not tied to their closing the gap. Health inequality tracks the map of population and poverty.
   
   
9. The regulatory vacuum. No effective ceiling exists on hospital room rents, diagnostic charges, procedure bundling, or non-scheduled drug margins. The Clinical Establishments Act, meant to standardise and display prices, remains largely unenforced.
   
   
10. The insurance reversal. The General Insurance Council has proposed that policyholders bear 10% of admissible hospitalisation costs from 2027 — even under comprehensive cover — while outpatient and non-hospitalisation costs already climb unchecked. It would penalise the very prudence the state asks of its citizens — and break faith with the millions who bought comprehensive cover and paid premiums for decades precisely to be spared such a bill.

Ten Structural Repairs

None of what follows is utopian. Each repair addresses a fault line above, and most already exist somewhere in India as law, policy, or working pilot — waiting only to be taken seriously and scaled nationally.

1. Legislate the money. Convert the 2.5% of GDP target into a binding, time-bound glide path with a statutory floor and shared Centre-state milestones — an obligation Parliament can be held to, not a slogan.
   
   
2. Reform drug pricing at the root. Shift from the MRP illusion to a trade-margin-cap regime across the supply chain, widen the DPCO’s price-controlled list, cap the margins hospitals may add on drugs and diagnostics — as the Court itself invited — and turn the 18,000-plus Jan Aushadhi generic outlets from a parallel option into the default source of affordable medicine.
   
   
3. Break the captive pharmacy. Mandate by law that patients may fill any prescription at any licensed outlet, and prohibit hospitals from forcing in-house purchase as a condition of treatment.
   
   
4. Rebuild the public hospital, don’t bypass it. Fill clinical vacancies, and guarantee free essential drugs and diagnostics on the proven Tamil Nadu and Rajasthan model, which demonstrably cuts out-of-pocket spending where it is implemented.
   
   
5. Extend PM-JAY to outpatient care and medicines. The highest-impact single reform available, because that is where impoverishment actually accrues. Pilot capitated primary care payments through the Ayushman Arogya Mandirs.
   
   
6. Make prices transparent and standard. Enforce the Clinical Establishments Act: standardised, publicly displayed package rates and fully itemised bills, backed by a national price-transparency portal patients can check before admission.
   
   
7. Fix the scheme’s plumbing. Revise PM-JAY package rates to viable levels, guarantee time-bound claim settlement, widen and audit empanelment, and establish an independent mechanism to review wrongful denials.
   
   
8. Forge a states compact. Tie a tranche of Central health transfers to states reaching the 8% budget norm, with targeted top-ups for high-burden, high-population states such as Uttar Pradesh, Bihar, and Madhya Pradesh.
   
   
9. Regulate insurance, don’t let it dump cost. The Insurance Regulatory And Development Authority of India (IRDAI) should reject or recast a blanket co-pay that punishes the fully insured, and instead push standardised products, mandatory outpatient cover, faster settlement and genuine grievance redress — separating real fixes for over-treatment from mere cost-shifting onto the sick.
   
   
10. Primary care first, with teeth for patients. Resource the Ayushman Arogya Mandirs as genuine gatekeepers rather than signboards, and create an empowered healthcare ombudsman and anti-profiteering authority, so that a patient overcharged in broad daylight has somewhere to turn other than the Supreme Court.

Final Nail — And Way Back

The proposed insurance co-pay is the detail that reveals the whole design. A citizen who did everything right — bought comprehensive cover, paid rising premiums year after year — would still be handed a tenth of the hospital bill, precisely when he is least able to argue over it from a hospital bed. 

It is the final nail in a coffin the poor and the middle class have been building, plank by plank, through stagnant public spending, unregulated private billing and a drug market the country’s highest court now likens to robbery.

None of this is inevitable. Thailand, with a fraction of India’s per capita income a generation ago, achieved near universal coverage within a decade by deciding that health was a public obligation rather than a private gamble; its citizens today face a fraction of the financial risk of their Indian counterparts. The gap is not one of wealth but of will. India already spends enough, publicly and privately combined, to protect its people far better than it does — the money simply leaks out through unregulated prices, a hospitalisation-only safety net and a public system starved into irrelevance.

The measure of a developed nation is not only the towers it raises and the rockets it launches, but the families it keeps whole when illness strikes in the night. 

(The writer is a former civil servant. Views are personal)