ABSTRACT
Health policy discussions in India have primarily centred around the low level of public health financing, ignoring that total health expenditure in India is at par with many other countries with similar economic development. India spends 3.7% of its gross domestic product (GDP) on healthcare, but the health outcomes are not commensurate with spending. We argue that simply increasing public health spending will not improve health outcomes unless inefficiencies in the existing health financing arrangements, public as well as private, are addressed. Using economic reasoning, we identify several allocative and technical inefficiencies in existing health financing arrangements. We argue that increasing resource allocation in the present pattern of financing may even worsen the situation. We give recommendations to correct inefficiencies in current health financing arrangements before more allocations are made to improve the performance of the health financing system.