India’s growing healthcare affordability gap and how financing is emerging as a critical layer alongside insurance

By Akshay Mehrotra, MD & Group CEO, Fibe

Over the last 10 years, India’s healthcare system, and particularly the health insurance and hospital network in both urban and rural India, has experienced intense growth, and the spread of digital healthcare increased during that time as well. The main challenge in the healthcare system that has affected millions of families across the country is the affordability of healthcare.

The challenge is therefore not necessarily that people can’t access the healthcare they need in this emerging ecosystem, but that people can’t afford treatment. Despite improved insurance penetration, deep structural gaps remain. India’s health insurance industry crossed ₹1.2 lakh crore in premiums in FY25, yet out-of-pocket expenditure still accounts for nearly 40% of healthcare spending. Moreover, recent findings from the National Statistical Office (NSO) further highlight the extent of the affordability challenge. Despite rising insurance penetration, households continue to bear a disproportionately high share of hospitalisation expenses directly. In urban India, nearly 83% of hospitalisation costs are still financed through out-of-pocket spending, while in rural India the figure remains as high as 95%, indicating that insurance coverage alone has not fully translated into financial protection for patients.

Insurance essentially covers only about 2% of total healthcare spending, and the majority of outpatient care spending is still out of pocket. The lack of health insurance has not changed much even with increased health policy coverage, and the result is that in India, extreme healthcare spending and health insurance payouts have increased household savings depletion and caused costs/debt delays. This widening affordability gap is gradually reshaping how healthcare is consumed in India.

Insurance expansion has helped, but coverage gaps persist

India has made progress in increasing health insurance access through government-backed schemes and private insurance products. People are now more aware of coverage especially after the pandemic. This has led to individuals and families buying insurance policies early in life. However, having insurance does not fully solve the problem of healthcare. While insurance coverage in India has expanded in recent years, it still does not eliminate financial burden completely. Insured patients continue to pay nearly 20–30% of treatment costs out of pocket due to exclusions, co-payments, deductibles, and expenses not fully covered under policies.

As a result, patients still spend a lot of their money on healthcare. This is especially hard for middle-income households that have limited savings. Get hit with unexpected medical emergencies. Even people with insurance struggle with expenses like deductibles, co-payments and waiting periods.

They also face exclusions or treatments that exceed policy limits. The financial pressure gets even worse when families must deal with healthcare needs at the same time. This can include care, chronic illnesses or specialised procedures. The gap between insurance coverage and actual medical costs has created a growing need for financial support systems. This gap between insurance coverage and actual medical expenditure has created a growing demand for alternative financial support systems that can make treatment immediately accessible.

Delayed healthcare often leads to bigger financial and medical consequences

The problem of being able to afford healthcare does not just affect how people spend their money at home it also changes how they make decisions about their health. For a long time, many people in India put off getting medical treatment until their symptoms got really bad. They did not get the care they needed to prevent problems or catch them early because they were worried about the cost.

Even the cost of diagnosis itself has become a major barrier. Diagnostic tests, scans, and preventive screenings for conditions such as heart disease, cancer, diabetes, fertility-related issues, or neurological disorders can cost anywhere between a few thousand to several lakhs depending on the complexity of the condition. Because of these high upfront costs, many individuals avoid routine screenings or delay investigations until symptoms become severe and unavoidable. People even delayed getting things like care help to get pregnant or even surgeries because they were not sure how they would pay for it.

This delay-first approach frequently resulted in worsening health conditions, longer recovery periods, and significantly higher treatment costs later. Today, however, consumer behaviour is gradually evolving.

People are taking an active role in making decisions about their healthcare. They have access to information about health online and their lifestyles are changing so they are more likely to get treatment when they need it rather than postponing it indefinitely. Younger consumers, in particular, increasingly view healthcare as an essential long-term investment rather than an emergency-only expense. This behavioural shift is driving demand for structured healthcare financing options that allow patients to manage treatment costs without exhausting savings immediately.

Financing Is emerging as a bridge between treatment and affordability

Healthcare financing is increasingly addressing the gap that exists between insurance coverage and actual patient affordability.

Unlike loans, which can be slow and require a lot of paperwork financing options for healthcare are designed specifically around patient treatment journeys. These options help people break up the cost of treatment into manageable instalments so they can make decisions about their care without having to worry about how they will pay for it all at once. This is especially important for treatments that are either partially covered or not covered at all under insurance plans.

Treatments such as dental surgeries, cosmetic procedures, fertility treatments, bariatric surgery, ophthalmology procedures, advanced diagnostics, and wellness-focused interventions are seeing increased adoption of structured financing options.

The rise of easy monthly payment systems has also reduced the emotional hesitation associated with high upfront medical costs. Instead of postponing procedures for months or years, patients now have the flexibility to undergo treatment while managing expenses over time.

For hospitals and clinics financing options are helping more people get the treatment they need. Patients who might have given up on treatment because of the cost are now more likely to go through with it. This shift is gradually transforming healthcare financing from a niche offering into a mainstream component of patient care.

FinTech is reshaping healthcare accessibility

The rapid development of financial technology in India is playing a big role in making financing for healthcare more scalable and accessible.

Online systems for lending, faster verification and new ways to assess credit are making it easier for people to get financing for treatment. Approvals that used to take days can now happen in a few minutes.

Importantly new FinTech is helping people who do not have traditional jobs or credit histories get access to financing for healthcare. This includes self-employed individuals, gig workers, small business owners, and younger consumers with limited credit history are increasingly entering the formal healthcare financing ecosystem.

Financing and insurance are becoming complementary

An important shift underway in India’s healthcare ecosystem is the growing understanding that insurance and financing are not competing solutions. Instead, they serve complementary roles.

Insurance remains essential for protecting households against major medical emergencies and hospitalisation costs. It provides foundational risk coverage that is critical for long-term financial security. Financing, on the other hand, addresses affordability gaps that insurance cannot fully solve. It provides flexibility, liquidity, and immediate treatment access when out-of-pocket expenses arise.

The Future of healthcare access will depend on Financial Innovation

India’s healthcare sector is entering a phase where affordability will become just as important as medical innovation. World-class treatment availability alone is not enough if patients continue to delay or avoid care because of financial limitations. The next stage of healthcare growth will depend on building systems that make treatment both accessible and financially manageable.

Healthcare financing is emerging as a critical enabler in this transition. By reducing upfront financial stress, enabling treatment planning, and improving access to specialised procedures, financing solutions are helping bridge a long-standing affordability divide.

Ultimately, the future of healthcare access in India may not be defined by insurance alone, but by how effectively insurance, financing, and digital innovation work together to make quality care truly accessible for every household.