NSS 2025 data shows rising out-of-pocket medical costs despite higher insurance coverage. Learn why you need a comprehensive financial plan beyond just insurance

Dreamiens Editorial Team · 6 min read

Nearly half of India is now insured. On paper, that is a milestone worth acknowledging. But a closer reading of the latest National Sample Survey (NSS 80th Round), released by the Ministry of Statistics in 2025, reveals a more uncomfortable truth: coverage has expanded significantly, yet out-of-pocket medical expenses continue to climb – and for millions of families, a single hospitalisation remains a financial emergency.

The data deserves careful attention. So does what it means for how you plan.

What the Numbers Actually Show
The survey, based on responses from approximately 1.4 lakh households across India between January and December 2025, found that health insurance coverage has risen dramatically over the past seven years.

In 2017-18, just 14.1% of rural residents and 19.1% of urban residents held any form of health insurance. By 2025, those figures had climbed to 47.4% in rural areas and 44.3% in urban areas – a near-tripling of coverage in less than a decade.

Government-sponsored schemes drove much of this growth. Coverage under state and central programmes rose from 13% (rural) and 9% (urban) in 2017-18 to 45.5% and 31.8% respectively in 2025. The Ayushman Bharat – Pradhan Mantri Jan Arogya Yojana (AB-PMJAY), launched in September 2018, has enrolled nearly 12 crore families and offers annual hospitalisation cover of up to ₹5 lakh per household.

The GST reduction on individual and family health insurance premiums – from 18% to zero, effective September 2025 – added further momentum to private insurance uptake.
By any measure, India’s insurance landscape looks very different from where it stood seven years ago.

The Number That Should Give You Pause
Here is what the headline coverage figure does not tell you.
Despite the broader insurance net, the average out-of-pocket expenditure (OOPE) per hospitalisation remains deeply significant – and varies sharply depending on where you seek care:

Public hospitals: ₹6,631 per hospitalisation
Charitable / NGO-run hospitals: ₹39,530
Private hospitals (including government-empanelled ones): ₹50,508

The overall average OOPE across all facility types topped ₹34,000 per hospitalisation.
The chart below breaks down what this spending actually goes toward – package components, doctor and surgeon fees, medicines, diagnostic tests, bed charges, and other costs – with urban households consistently bearing higher costs than their rural counterparts.

What this tells us is straightforward: having insurance coverage does not mean being financially protected from medical costs. Coverage gaps, sub-limits, co-payments, non-empanelled hospitals, and treatments outside policy scope all create exposure that the insured person ends up absorbing directly.

Why Coverage Growth Hasn’t Solved the Problem
Experts who reviewed the NSS findings offered a pointed perspective.
Indranil of OP Jindal University noted that the coverage increase is driven largely by government health assurance schemes rather than direct private insurance. While these schemes have expanded access – particularly for lower-income households – they operate within a different framework than comprehensive private insurance and carry their own limitations.

Mohan Rao, former professor at the Centre of Social Medicine and Community Health at Jawaharlal Nehru University, raised a structural concern: that schemes like AB-PMJAY have effectively subsidised private healthcare provision, sometimes at the cost of strengthening public health infrastructure. The implication is that rising insurance coverage can, paradoxically, fuel the very cost inflation it is meant to cushion against.

The NSS data supports this indirectly. Private hospitals empanelled under government schemes still show out-of-pocket costs of over ₹50,000 per hospitalisation. Being enrolled in a scheme does not mean zero financial exposure.

What This Means for Your Financial Plan
At Dreamiens Wealth Management, we work with clients across income brackets and life stages. One of the most consistent patterns we observe is that healthcare costs are routinely underestimated in long-term financial planning – both in terms of frequency and magnitude.

A few considerations worth building into your thinking:
Your existing cover may not be enough. Many employer-provided group policies and government scheme benefits carry limits, exclusions, and network restrictions that only become apparent during a claim. The ₹5 lakh AB-PMJAY cap, for instance, may not stretch across a critical illness, cancer treatment, or extended ICU stay in a metro hospital.

Medical inflation outpaces general inflation. Healthcare costs in India have historically risen faster than the broader price level. A hospitalisation that costs ₹3 lakh today may cost significantly more a decade from now. Your insurance coverage needs to keep pace – not just exist.

Out-of-pocket costs compound into larger financial disruptions. The NSS data captures average costs. Serious or chronic illness episodes can run into multiples of these figures. Without a dedicated health emergency corpus, families often liquidate long-term savings, take on high-cost loans, or defer other financial goals.

Coverage is a floor, not a ceiling. Government schemes and basic employer policies provide a starting point. A comprehensive, individually held health insurance policy – sized to your city, family profile, and risk tolerance – is a different category of protection.

Planning Around Healthcare Risk
The question is not whether you have insurance. The question is whether your overall financial plan accounts for what insurance does not cover.

A sound healthcare financial strategy typically involves three layers working together: a base insurance policy with adequate sum insured, a super top-up or critical illness rider for catastrophic coverage, and a liquid health reserve for the gap costs that fall outside any policy – diagnostics, medicines, post-hospitalisation care, and the informal costs that never appear in claim forms.
The NSS findings are a useful prompt for a conversation that many households delay until it becomes urgent. Healthcare is not a risk that resolves itself with time. It grows with age, and so does its financial weight.

If you haven’t reviewed your health cover – or mapped it against your broader financial plan – this data offers a clear reason to do so.

Dreamiens Wealth Management helps individuals and families build financial plans that account for real-world risks, including healthcare. To discuss your coverage and planning needs, reach out to our advisory team.

Source: National Sample Survey (NSS) 80th Round, Ministry of Statistics and Programme Implementation (MoSPI), 2025.

Key Takeaways
Health insurance coverage in India rose from 14-19% in 2017-18 to 44-47% in 2025, driven primarily by government schemes. Despite this, out-of-pocket hospitalisation costs remain high – averaging over ₹34,000 overall and exceeding ₹50,000 in private hospitals. Coverage expansion has not eliminated financial exposure; comprehensive planning, adequate sum insured, and a dedicated health reserve remain essential components of a complete financial plan.