To make Nepal's health insurance system sustainable, accessible and practical, urgent policy and financial reforms are needed. Expanding the tax base is crucial to securing long-term funding
During the COVID-19 pandemic, thousands of Nepalese lost their jobs; among the worst hit were the blue-collar workers, as working remotely was not an option for them. While we had friends and family outside of Nepal tell us how the government of that country was helping them through financial support using social security, we often wondered if our country would step in to help its citizens like that.
Social security is not new in Nepal but is often understood as merely an old-age pension scheme. However, its scope extends far beyond that. It includes financial protection for the poor and vulnerable, ensuring a minimum standard of living. As a socialist-oriented democracy, Nepal has enshrined social security, including free essential health services, as a fundamental constitutional right, aligning with the Universal Declaration of Human Rights.
A robust social security system is more than just financial aid during a crisis; it is a safety net that prevents citizens from falling deeper into poverty.
However, in Nepal, despite health being constitutionally recognised as a fundamental right, citizens still bear 57 per cent of healthcare expenses out of their pocket, pushing an estimated 400,000 to 500,000 families into poverty every year. The lack of financial risk protection means that even a medical emergency can wipe out savings, force families into debt, or deprive them of essentials like food, education and housing.
Health care costs in Nepal remain one of the most significant contributors to financial hardship. In 2017, 10.71 per cent of the population faced catastrophic health expenditures, meaning they spent more than 10 per cent of their income on health care. These expenses create a poverty trap, where families sacrifice basic needs to afford treatment, limiting their ability to improve their financial situation. Without significant reform, this crisis will continue to deepen.
Despite the critical role of health care in a nation's well-being, Nepal's public health sector remains severely underfunded. In the 2081/82 budget, only 4.6 per cent was allocated to health, making it one of the most neglected sectors. The COVID-19 pandemic exposed these gaps, highlighting how an underprepared health system can struggle to respond to emergencies. Strengthening health care requires consistent investment over the years; it cannot be achieved through short-term, reactionary spending.
To address the financial burden of healthcare, Nepal introduced the National Health Insurance Programme (NHIP) in 2015, aiming to ensure universal health coverage (UHC). The programme allows families to enroll by paying Rs 3,500 per year, covering up to Rs 100,000 in medical expenses for a family of five. Senior citizens and people with disabilities receive free coverage.
However, bureaucratic inefficiencies, poor service quality and drug shortages have decreased trust and participation. The government aimed for 100 per cent coverage by 2022, but as of mid-2022, only 21.4 per cent of the population was enrolled, with a 25 per cent dropout rate. Many rural populations struggle to access designated hospitals, face long wait times, and often lack access to essential medicines, forcing them to buy drugs privately.
Nepal's health insurance system faces significant financial sustainability concerns. In FY 2023/24, Rs 10.64 billion claims were made, but Rs 717 million were flagged as fraudulent or excessive. The system is operating at a deficit, raising concerns about its long-term viability.
Dual spending and mismanagement further strain the system, as government hospitals already receive separate budgets for infrastructure and personnel. Yet, they continue to charge the NHIP for services, leading to double spending of public funds.
Additionally, fraud and overbilling remain rampant, with some hospitals inflating treatment costs, adding unnecessary financial strain. A lack of oversight further exacerbates the issue, as the Health Insurance Board lacks autonomy, with the Ministry of Health heavily influencing policies, creating conflicts of interest and weak regulatory enforcement.
Nepal can learn from successful health insurance models in other countries to improve its system. Bhutan's National Health Insurance Scheme provides all citizens with free or highly subsidised health care, integrating traditional medicine and preventive care into its system. Unlike Nepal, Bhutan ensures universal access without financial barriers.
Similarly, Rwanda's Community-Based Health Insurance covers over 90 per cent of the population, offering free medical care to the poorest 25 per cent. Its success stems from mandatory participation and community management, an approach Nepal could replicate. France and Germany operate on a progressive contribution system, where higher-income individuals pay more into the system, ensuring financial sustainability.
To make Nepal's health insurance system sustainable, accessible and practical, urgent policy and financial reforms are needed. Expanding the tax base is crucial to securing long-term funding. Pooling scattered health funds into a centralised system could improve efficiency and reduce waste. Integrating NHIP with other social security programmes would prevent duplication and expand coverage. Encouraging private sector investment could strengthen service delivery. Furthermore, shifting the focus from treatment to prevention by investing in public health measures, such as cleaner environments, parks, sports infrastructure and food safety, could reduce health care costs in the long run.
Nepal's health insurance programme must move beyond short-term fixes and focus on building a system that protects its people and is not just a populous tool. Without urgent reforms, public participation will continue to decline, further undermining the goal of universal health coverage.
Rana is Program Director at The Himalayan Dialogue