Age Structural Transition and Health Care Financing in India

Health financing in India is a critical issue in the wake of rapid demographic and epidemiological transition, low per capita pubic heath spending and rising health care cost. However, there are few studies that examine the role of changing age structure on health spending in India. The aim of this paper is to examine the effect of population growth and age structural transition on household health spending in India and states. It segregates the increased health expenditure due to changing age structure, increased hospitalization and medical cost (real) using decomposition analysis and projects future cost of medical care. The unit data from 52(25) and 60(25) rounds of National Sample Survey, Census of India 2001 and 2011 and Population Projection of Expert Committee 2001-26 are used in the analyses. Results suggest that the real cost of inpatient care has increased over time for all age groups. During 1995-2004, the changing age structure accounts 22% increase in real cost of hospitalization. The shift in age structure alone would lead to an increase of 47% in hospitalization cost, 43% in outpatient cost by 2021 and an increase of 63% in hospitalization cost and 58% of outpatient cost by 2026 at 2004 prices.