ROHTAK (Haryana), India – When 22-year-old Sunita* rushed her father to a private hospital in for a cardiac emergency earlier this month, she expected her government health insurance scheme, Ayushman Bharat–Pradhan Mantri Jan Arogya Yojana (known as PM-JAY), which promises to cover hospital expenses up to ₹5 lakh (around $5,725) per family, would spare her family from crushing debt.

Instead, she was told that the hospital in Haryana State had stopped admitting scheme patients over months of unpaid dues from the government. The facility is one of 650 private hospitals across Haryana that have suspended all PM-JAY services in protest over ₹490 crore ($59 million) in pending reimbursements. 

According to the Haryana Health Department, the unpaid dues date back at least six to nine months. The abrupt halt has cut off up to 18 million low-income residents from private-sector surgeries, dialysis, cancer care and other critical treatments.

Sunita’s family, who earn barely ₹10,000 ($114) a month from farm labour, had to admit her father to a smaller facility with limited cardiac services. 

“We had no choice but to borrow money,” she said. The bill ran into several thousand lakhs, “an amount my father or any of my relatives had never seen together in our lives.”

National promise under pressure

 The suspension in Haryana is the latest stress fracture in India’s flagship public health insurance programme, launched in by President Narendra Modi 2018 to provide cashless secondary and tertiary care to the poorest 40% of the population. Nationally, the scheme claims to cover more than 500 million people, with over 25,000 member hospitals.

It also comes as a recent Swiss Re Institute report warns that India faces one of the world’s largest health protection gaps, with out-of-pocket expenses accounting for over half of total health spending. 

The report cautions that without reliable public health financing, millions could fall into poverty due to medical costs  directly undermining the government’s universal health coverage goals. 

A recent Indian study found that nearly 28% of households incurred “catastrophic expenditure” on inpatient healthcare alone in 2024. This is defined as health spending that is over 10% of household’s capacity to pay. 

Haryana’s deadlock with private hospitals highlights a deeper problem: while PM-JAY has been touted as the world’s largest government-funded health insurance scheme, its rollout across states has been uneven, plagued by delayed reimbursements, under-enrolment of private providers, and allegations of fraud.

And the cracks are not limited to Haryana. In Jammu and Kashmir, where healthcare infrastructure is weaker and private hospitals are fewer, delayed claim settlements and restrictive empanelment rules have left many patients travelling hundreds of kilometres for treatment, sometimes across state lines.

The region has fewer than 130 empanelled private hospitals compared to Haryana’s 650.

Months of unsuccessful negotiations

In Haryana, the private hospitals and representative bodies began their refusal to accept members with the government insurance scheme in early August after months of unsuccessful negotiations with the state health department over pending dues, the Indian Medical Association (Haryana) told the Hindustan Times. 

Hospitals say they cannot sustain payroll, utilities, medicine purchases and consumables when reimbursements are delayed for six to nine months.

Dr Suresh Kumar, a doctor based in Haryana, said private facilities could no longer sustain operations without timely reimbursements. 

“We have to pay salaries, electricity bills, buy medicines and consumables — all on time,” he told Health Policy Watch. “If the government delays payments for six to nine months, we simply cannot function.”

Hospital administrators also argue that  the national Health Benefit Package (HBP) rates for procedures under AB-PMJAY are often outdated and may not match rising input costs. 

The Health Benefit Package documents list package prices for procedures, while the audits show that actual costs for complex surgeries frequently exceed package rates in many private hospitals, creating a shortfall for providers

The state health agency, however, has accused some hospitals of inflating bills and submitting dubious claims. Officials say they are conducting audits to weed out fraud before releasing payments, which has contributed to the delays.

Patients in limbo

While the standoff drags on, patients are bearing the brunt.

Ramphal*, a 56-year-old construction worker in the Rohtak district, had postponed a hernia surgery for three months because the nearest government hospital has a waiting list and private options are off-limits. 

“The pain is constant,” he said. “But without Ayushman, I can’t afford the operation.”

For Sunita’s father, the consequences were immediate and severe. The smaller hospital where he was admitted lacked advanced cardiac care, forcing a risky makeshift treatment. The family borrowed from relatives and neighbours, sinking into debt that could take years to repay.

Public hospitals, meanwhile, are reporting a surge in patient load since the suspension, with longer wait times and overstretched staff.

Parallel crisis in Jammu and Kashmir

In Jammu and Kashmir, the AB-PMJAY rollout has faced its own hurdles – even without a mass suspension.

The region, which joined the scheme in December 2018, has only a limited number of empanelled private hospitals, most in the Kashmir Valley.

The majority of private clinics are not part of the programme, citing cumbersome empanel procedures and low reimbursement rates.

Patients in rural districts often travel to Srinagar or even to Punjab for eligible treatments. Delayed claim settlements — sometimes taking more than six months — discourage providers from participating.

 Dr Parvez Ahmad, who runs a mid-sized poly-clinic in Baramulla, said the uncertainty has forced private hospitals  to limit the number of Ayushman patients. 

“The paperwork is heavy, the payments are slow, and the rates don’t match actual costs,” he said. “We want to help poor patients, but we can’t run at a loss.”

For patients like 45-year-old Naseema from Kupwara, the gaps in coverage are stark. She was diagnosed with breast cancer last year but had to travel over 100 km to Srinagar for surgery under PM-JAY, a trip that drained her savings and left her physically exhausted.

Fragility of public-private model

Health economists say the twin crises in Haryana and Jammu and Kashmir illustrate the fragility of India’s public-private partnership model in healthcare.

“PM-JAY is heavily dependent on private hospitals, but the government’s purchasing power is undermined when reimbursements are delayed,” said public health expert Dr Indu Bhushan. “Without a predictable payment system and periodic rate revisions, private participation will keep shrinking.”

The Swiss Re Institute’s analysis echoes these concerns, warning that India’s heavy reliance on out-of-pocket payments – currently about 50% of total health expenditure – risks reversing poverty reduction gains. It estimates that the health protection gap could reach $200 billion by 2033 if current trends continue.

In Haryana, the government has promised to clear dues by October and review package rates, but private hospitals remain sceptical. In Jammu and Kashmir, officials say they are working to streamline empanelment and speed up claims processing, but no concrete timeline has been announced.

High stakes for Universal Health Coverage

India’s 2017 National Health Policy sets a target of reducing catastrophic health expenditure to 25% of households by 2025. But reality suggests that, without structural fixes to schemes like AB-PMJAY, that goal may be out of reach. 

According to a 2024 meta-analysis, the pooled incidence of catastrophic health expenditure stands at 30% of Indian households – 5% higher than the 25% policy target.

Moreover, a 2024 study of inpatient healthcare found that 28% of households incurred catastrophic health expenditure. 

On average, inpatient care accounted for 11% of monthly household consumption, underscoring how deeply hospital costs strain family budgets.

While government spending on health is gradually rising, out-of-pocket payments remain stubbornly high. 

Recent National Health Accounts data shows that government health expenditure rose from 1.13% to 1.84% of GDP between 2014–15 and 2021–22, but still leaves households shouldering a significant burden.

Together, these figures paint a stark picture: the policy target of reducing catastrophic burden to 25% by 2025 is not being met, and public financing remains limited despite slow gains.  This means that households are still paying a major share of healthcare costs themselves, raising serious concerns about the financial protection that the scheme offers.

For Sunita’s family, the lofty targets mean little compared to the daily reality of debt and uncertainty. “If Ayushman doesn’t work, where will poor people go?” she asked.

As the impasse in Haryana continues and patients in Jammu and Kashmir remain underserved, the larger question looms: can India’s flagship health insurance programme truly deliver universal health coverage, or will it remain a patchwork safety net that frays when it is needed most?

*Patients asked for their surnames not to be used.

Image Credits: PMO India, Disha Shetty.