India’s healthcare system has made huge strides in technology and treatment, but one massive piece still lags: how we pay for it.
Despite being one of the world’s fastest-growing economies, India still spends just 1.3% of its GDP on public healthcare — far lower than global standards, and even behind most other BRICS nations.
As a result, millions of Indians are still paying out-of-pocket for care, often draining their savings or going into debt just to afford basic treatment.
But here’s the good news: a wave of fintech innovation is stepping up to help tackle this problem. Blume Ventures’ report, “Healthcare Financing in India: Bluprint,” authored by Udayan Pandey, examines India’s evolving healthcare financing landscape.
It analyses market trends, expert insights and real-world impact on patients and the healthcare system. The report explores how these new financing tools and models could reshape the way Indians access and afford healthcare.
Here’s a simple breakdown of what’s going wrong and what could go very right.
The problem: A system under pressure
Let’s start with the big challenges the report highlights:
Not enough public funding and rising costs
A persistent funding shortage affects the healthcare system throughout India. The rapidly expanding Indian economy has one of the world’s least substantial public health expenditures.
Government healthcare spending in India is stuck at a mere 1.3% of GDP. This is far below the government’s target of 2.5% of GDP allocation for healthcare.
Crippling out-of-pocket costs
Over 50% of Indian households end up spending more than 10% of their annual income on healthcare. Between 2004 and 2014, 55 million people were pushed into poverty just by medical bills.
And with chronic illnesses like diabetes, hypertension, and heart disease on the rise, the financial burden is only getting heavier.
The report says investments of at least $156 billion annually will be needed by 2034 to achieve the UN healthcare SDGs in India, emphasising the immediate necessity for action.
The urban-rural divide in healthcare access
Healthcare infrastructure is highly uneven. Most hospital beds exist in seven states—Delhi, Maharashtra, Tamil Nadu, Karnataka, Andhra Pradesh, Gujarat, and West Bengal. This leaves rural areas significantly underserved.
Although 65% of India lives in villages, only 25% of specialists work in rural areas. This mismatch creates a massive supply-demand gap across rural communities nationwide.
However, it also opens up room for innovation, like single-specialty hospitals targeting underserved markets. This could be a profitable prospect for private investors as it represents about 20% of India’s total healthcare sector.
India’s Fintech revolution: A Smart and Scalable fix
The high level of fintech adoption in India (87%) exceeds the worldwide average rate (64%), creating novel opportunities to simplify healthcare financing.
Government initiatives like the Jan Dhan Yojana and India Stack have established the foundation principles for digital inclusion to create an environment ripe for innovation.
Let’s look at how fintech is already transforming the healthcare space:
Digital lending: Expanding credit access
Alternative credit scoring uses psychometrics (behaviour analysis) and transaction history, enabling loans for those without formal credit.
Point-of-care lending services like Aarogya Finance provide instant medical loans at hospitals for patients who need immediate treatment.
Peer-to-peer (P2P) lending platforms connect borrowers directly with lenders, bypassing traditional banks.
Crowdfunding: Community-driven support
Platforms like Ketto and Milaap allow patients to raise funds online for emergencies.
Some communities are turning to mutual aid models, pooling contributions and distributing funds when a member faces a medical crisis.
Insurtech: Microinsurance and pay-per-use models
Microinsurance (premiums as low as ₹10/month) makes coverage accessible for low-income groups.
Outcome-based insurance even offers refunds to patients if treatment fails.
Digital savings and health wallets
Dedicated medical savings accounts help individuals set aside funds for future medical needs.
Tools like e-RUPI vouchers enable cashless, purpose-specific payments for healthcare.
Embedded finance: Seamless integration into healthcare
Imagine getting a loan or insurance offer right inside your telemedicine app or pharmacy checkout — that’s embedded finance. India Stack’s open APIs allow that.
Even Buy Now, Pay Later (BNPL) models are popping up for hospital bills, easing the upfront burden for patients.
Addressing the “Holy Trinity”: Hospitals, patients, and lenders
The “Healthcare Financing in India: Bluprint” report stresses that any long-term solution has to work for everyone involved:
- Hospitals benefit from improved financial operations, enhanced cash flow management, better patient payment systems and fewer unpaid bills.
- Patients experience wider access to funding, decreased payment responsibility and financial management education.
- Lenders can maximise underwriting by expanding their customer base using data-driven insights to develop stronger underwriting models.
Blended finance: A novel approach
The report presents one standout idea—Blended finance. It’s where public money, private investment, and philanthropy come together to fund healthcare. By reducing investor risk, these models can unlock much-needed capital for essential health services.
This approach doesn’t just fund hospitals, it ensures services reach even the most underserved populations.
Experts agree that this funding model has substantial power to close financial gaps while ensuring equal health services reach everyone.
What’s the real-world impact on patients and the healthcare ecosystem?
According to the report “Healthcare Financing in India: Bluprint”, here are the implications of the healthcare financing evolution:
For Patients: Reducing Financial Catastrophe
– Lower out-of-pocket costs through flexible payment options.
– Increased access to credit, even for informal workers.
– Preventive savings tools help families plan for medical expenses.
For Hospitals and Providers: Improving Cash Flow
– Faster reimbursements via AI-powered claims processing.
– Embedded financing attracts more patients and reduces unpaid bills.
– Revenue cycle management (RCM) tools minimise administrative losses.
Key Takeaways and what comes next
Drawing from the analysis presented in Blume Ventures’ “Healthcare Financing in India: Bluprint” report, here’s what India must focus on next:
- Targeted financial products to enhance public healthcare funding and curb expenses paid directly by patients.
- Develop strategic infrastructure and smart financial products for the “missing middle,” people who aren’t poor enough for aid but not rich enough to pay easily. Private investments may help improve access to medical services in underprivileged areas.
- Integrate fintech into healthcare delivery to achieve maximum affordability, improved efficiency, and broader accessibility.
- Promote blended finance adoption to attract private capital that scales sustainable healthcare initiatives.
- Reform policies for financial inclusion and streamlined healthcare funding procedures.
The road ahead: Bold moves, big potential
To truly transform healthcare financing in India, the country needs a massive boost in public spending, wider adoption of fintech, and smart policies that empower patients without burying them in paperwork.
Boosting financial literacy will also be key — people can only benefit from these tools if they understand and trust them.
The goal is simple but critical: No Indian should be pushed into poverty by a medical bill. With the right mix of innovation, investment, and collaboration, that goal is well within reach.
The bottom line
The system is far from perfect. But with fintech driving real change and new financing models on the table, India has a unique chance to make healthcare affordable and accessible for all. The time for action is now.
-By Alkama Sohail and the AHT team
