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Abstract
Health sector is one of the crucial sectors in any economy. The issue of financing health care has assumed greater significance particularly in the developing world, mainly because of the inability of the government in providing the service. It is well known that health expenditure in India is dominated by private spending. In view of the fact that currently India’s government spends just 1.4 percent of the country’s GDP on health, while household health expenditure is estimated to be 2.72 percent of the GDP, a critical gap is found to be existing in the health sector of the country. Despite of large positive externalities associated with health spending, which make it a clear merit good, public spending on the health sector has been quite inadequate. Greater reliance on private delivery of health infrastructure and health services means under provision by private agents as there will be denial of adequate access by the poor thereby affecting social welfare.The identification of India’s health care crisis due to lack of accessibility by the people has proven to be a major burden for the government.Recognizing this, considerations have been made by the government in providing the servicethrough government provided health insurance schemes.Thus, the strategy being set for the country’s health care is in the form of state provided insurance-based mechanism which has led to the inception of public funding for the purchase of private health care, implemented through insurance. Here, in this paper, an attempthas been made to give insights on the different issues and obstacles of the government while providing health care through insurance-based system.