Rising health inflation: Why 2025 became the wake-up year for Indian families

When the hospital bill arrived, it didn’t look alarming at first.

₹1.2 lakh for the room.

₹80,000 for investigations and medicines.

₹2.4 lakh for procedures and specialist fees.

For the Mehta family, it was only on the third day of hospitalisation that reality set in. Their ₹5-lakh health insurance cover bought years ago with confidence was already exhausted. The diagnosis was unexpected, the care was necessary, and the financial anxiety arrived before recovery did.

When Healthcare Inflation Stopped Being Abstract

For years, medical inflation was something we read about as an uncomfortable statistic buried in reports. Hospital costs rose across the board. Not just for complex surgeries, but for everyday healthcare touchpoints like room rents, diagnostics, specialist consultations, post-operative care. What families underestimated was how these costs stack up during a single hospital stay.

India’s medical inflation is currently estimated at around 14% annually, far outpacing general inflation. The drivers are clear: advanced medical technology, higher operational costs for hospitals, and growing demand for specialised care. The result? A health insurance cover that felt “comfortable” five years ago suddenly started feeling fragile

Why Adequate on Paper Didn’t Mean Adequate in Practice

Most Indian families don’t neglect health insurance. They buy it. They renew it. Then they forget it. A ₹5 lakh or ₹10 lakh cover often becomes a mental milestone, something that signals responsibility. But healthcare doesn’t respect milestones. It responds to city of residence, hospital choice, treatment complexity, and length of stay.

In 2025, many families discovered that:

● One major hospitalisation could consume most of their annual cover

● Room rent limits quietly pushed them into higher out-of-pocket expenses

● Co-payments and sub-limits kicked in when they least expected them

The problem wasn’t lack of insurance. It was insurance that hadn’t evolved with reality.

The Bigger Risk India Is Still Carrying

Despite rising awareness, India continues to rely heavily on personal savings during medical emergencies. According to National Health Accounts, Government of India nearly half of healthcare expenses in the country are still paid out of pocket, even today. This is why under-insurance hurts more than no insurance. It creates a false sense of safety until the moment it collapses.

Families in 2025 didn’t just face medical emergencies. They faced forced financial decisions:

● Breaking long-term investments

● Dipping into emergency funds meant for something else

● Borrowing at precisely the wrong moment

Why Upgrading Health Cover Is No Longer a Lifestyle Choice

There was a time when increasing health insurance felt optional, something to revisit after a promotion, a move, or a life event. Upgrading health cover today isn’t about being pessimistic. It’s about acknowledging that:

● Healthcare costs are compounding, not stabilising

● Treatments are improving, but not getting cheaper

● Recovery often involves longer stays and follow-up care

A higher sum insured doesn’t guarantee better health outcomes. But it protects families from making financial compromises during vulnerable moments.

The Health Insurance Reality Check

Before renewing or upgrading, families should be asking sharper questions:

● Is my sum insured aligned with today’s hospital costs in my city?

● Does my policy restrict room rent or specific treatments?

● Could one claim exhaust my family floater for the year?

● Am I relying too heavily on employer cover that may not travel with me?

● Would a top-up or super top-up significantly improve protection at a lower cost?

These aren’t upgrade questions. They are risk-management questions.

What 2025 Ultimately Taught Us

Health insurance was never meant to be a static purchase. 2025 exposed what happens when protection doesn’t keep pace with progress. The real value of adequate health cover isn’t just claim settlement. It’s the ability to focus on recovery without counting costs, to make medical decisions without financial panic, and to emerge from a health crisis without long-term damage to family finances. For many Indian families, that realisation came late but it came clearly.

(Views are personal; the author is Joint Chairman and MD at BajajCapital Ltd)