IMAGE: WORLD BANK PHOTO COLLECTION
ON THE morning of January 15th Tribhuvan University Teaching Hospital, Nepal’s most prestigious public hospital, plans to do something radical. It will stop accepting the government’s health-insurance card. For a decade that card has been the state’s badge of social progress, waved proudly in speeches and budget statements as proof that Nepal was inching towards universal health coverage. From mid-January it will be useless at the country’s leading referral hospital, turned away at the registration desk along with the patient holding it.
The proximate cause is money, or rather the lack of it. The Health Insurance Board, which runs the national scheme, owes hospitals some Rs10.5bn. Tribhuvan University Teaching Hospital alone is owed about Rs400m. Its administrators say that barely half the claims they submit are approved, and that the rest are rejected for reasons that tend to seem absurd. For two years the hospital has papered over the gap with its own funds. It can no longer do so: suppliers have gone unpaid for months, and doctors are grumbling. From January 15th enough is enough.
This is not a dispute between one hospital and one ministry. It is the point at which a decade-long experiment in social insurance runs headlong into the cold maths of the public purse. More than 10m Nepalis are enrolled in the National Health Insurance Programme. In theory they are entitled to care worth up to Rs100,000 a year for a family of five, and up to Rs200,000 for larger households or critical illnesses. In reality, however, the scheme is insolvent. It is paying yesterday’s bills with today’s budget, and leaving tomorrow’s bills to pile up unanswered.
Nepal’s health insurance was born with lofty ambitions and small means. It was piloted in 2016 in three districts, selling itself as a way to pool risk in a country where illness still pushes families into debt. Uptake was slow at first. Many people had never heard of insurance, and those who had tended to associate it with mistrust and paperwork. The National Health Insurance Act of 2017 gave the scheme legal muscle and political backing. Gagan Thapa (of the Nepali Congress), then health minister, cast it as a pillar of a new social contract: premiums for those who could pay; subsidies for those who could not; and a gradual march towards universal coverage.
Expansion happened fast. By 2021 the scheme covered all 77 districts. Premiums rose from Rs2,500 to Rs3,500 a year for a family of five while the benefit ceiling doubled to Rs100,000. Enrolment surged, then sagged. Many families dropped out after discovering that the first point of service, usually a poorly staffed local clinic, could not provide more than basic care. Others paid the premium but still ended up paying out of pocket at private hospitals when referrals broke down or claims were rejected.
The scheme looks far less sturdy once the numbers are tallied. Each year the Health Insurance Board collects around Rs3bn to Rs3.5bn in premiums. The federal government contributes another Rs7.5bn to Rs10bn in subsidies. Against that stands a torrent of claims worth about Rs2bn a month, or Rs24bn a year. Even in a good year the gap is vast. In a bad one it becomes paralysing.
This year’s budget shows how the problem compounds. The government allocated Rs10bn to the board for the 2025–26 fiscal year. By mid-year every rupee had been spent settling unpaid claims from the previous year, which themselves totalled around Rs12bn. Since April last year the scheme has effectively been running on fumes, accumulating fresh liabilities with no cash to meet them. Officials describe it as a debt snowball.
Hospitals feel the cold first. In Dharan, the B.P. Koirala Institute of Health Sciences, eastern Nepal’s main referral centre, is owed about Rs340m. Nearly half of its 3,000 daily patients arrive through the insurance system. Delayed reimbursements have begun to affect salaries and allowances. Managers have warned that remaining in the scheme much longer risks institutional bankruptcy. Smaller hospitals are in even worse shape. In the far-western province of Sudurpashchim, Bayalpata Hospital has suspended insurance services altogether, leaving patients from Achham and Bajura to pay full charges or travel hundreds of kilometres for care.
The design of the scheme makes these tensions almost inevitable. The Health Insurance Board reviews claims manually. About 30,000 to 50,000 arrive a day. Staff can process perhaps 7,000. A backlog of roughly 9m claims has built up, waiting to be checked line by line. Between a fifth and a quarter are rejected. Some are clearly improper. Others fall foul of technicalities: a missing Nepal Medical Council registration number on a prescription, a diagnostic test that does not exactly match the written order, a charge that surpasses the board’s fixed “facility bag” rate.
Those facility bags, meant to simplify billing by bundling treatments into standard packages, have become a flashpoint. Big teaching hospitals argue that the rates tend to be below their actual costs, especially for specialised procedures that rely on imported equipment and drugs. A recent order from the board told hospitals to claim whichever rate is lower, their own or the board’s. From the board’s perspective this curbs overcharging. From the hospitals’ it locks in losses. High-volume tests priced a few dozen rupees below cost may look trivial on paper; multiplied thousands of times, they hollow out a balance sheet.
Officials in the health ministry defend the scrutiny. Manual checks, they argue, are a crude but necessary defence against fraud in a system without reliable digital identity or automated verification. Private medical colleges, in particular, are accused of padding claims with unnecessary tests or phantom treatments. India’s Aadhaar-linked health schemes, which tie benefits to biometric identity, are usually cited admiringly. Nepal has no such infrastructure. The result is a system that mistrusts providers and exhausts itself trying to prove that mistrust justified.
The political economy around the scheme makes reform harder. The Ministry of Finance, facing its own constraints and having imposed a broad budget squeeze, has baulked at releasing the extra Rs17.5bn the board says it needs just to clear arrears. Former Health Minister Pradip Paudel has warned publicly that the scheme may “close on its own” if its funding model does not change. Doctors’ associations, distracted by battles over consumer-court rulings on negligence, have offered little sustained pressure on the insurance issue itself. Patients, scattered and unorganised, feel the impact most acutely and least visibly.
The crisis has arrived during a period of apparent macroeconomic comfort. Remittances are flooding in (foreign-exchange reserves are at a record $22.13bn, sufficient to fund almost two years of imports). Yet the social infrastructure those flows are meant to support is cracking. Health spending still comes more than half from households’ pockets. Around one in ten Nepalis suffers “catastrophic” health expenditure a year, forcing them to sell land or pull children out of school to pay medical bills. The insurance scheme was meant to push that figure down towards the levels recommended by the World Health Organisation. Its failure would push it the other way.
Faced with this, the health ministry has floated a radical overhaul. The centrepiece is a shift from a largely voluntary, subsidy-heavy model to mandatory contributions. Under the proposal, 1% to 2% of salaries would be deducted from formal-sector workers, matched by employers, and channelled into a unified health fund. Fragmented schemes run by the Social Security Fund, the Employees Provident Fund and other bodies would be folded in. In theory this would create a steady, non-budgetary revenue stream and cover most of the scheme’s costs.
On paper the logic is sound. Many countries fund health insurance through payroll contributions. Switzerland’s mandatory system and Britain’s tax-funded National Health Service are usually invoked as reference points, though Nepal’s tax base is far smaller and its labour market far more informal. The same reform package also promises more generous benefits, with coverage for critical illnesses rising to Rs500,000, and a progressive premium scale that would see wealthier families pay several times the current rate.
The danger is sequencing. Asking workers and employers to contribute more to a scheme that cannot pay its existing bills is politically perilous. Hospitals that have been waiting months for reimbursement are unlikely to trust fresh promises without cash in hand. Clearing the Rs10.5bn backlog is the precondition for any deeper reform. Without it providers will continue to drift away, leaving the scheme to function only in under-resourced public facilities and draining it of meaning.
Technology could help, if deployed well. Automating claims processing would cut delays and lessen arbitrary rejections. Linking patients to a secure digital identity would curb abuse without punishing the compliant. These are not futuristic ideas. They are already standard elsewhere in South Asia. But they need upfront investment and institutional focus, both scarce in a system firefighting from one budget cycle to the next.
There is also a lesson in the scheme’s trajectory. Nepal expanded coverage rapidly, a political success measured in enrolment figures and district maps shaded reassuringly green. It did so without building the fiscal and administrative support needed to sustain that coverage. Benefits rose faster than revenues. Trust between purchaser and provider sagged. The very visibility of the programme made its weaknesses harder to ignore.
When Tribhuvan University Teaching Hospital turns away insurance cardholders this week, it will be tempting to treat the moment as a bureaucratic spat, soon smoothed over with a hurried cash release. It may yet be. But the bigger reckoning will stay. Universal health coverage lives on claims processed, bills settled, services delivered without drama. When those transactions stall, the promise withers fast.
Nepal still has choices. It can narrow benefits to match revenues or broaden revenues to match benefits. It can invest in systems that trust data rather than paperwork. It can decide whether health insurance is a residual welfare scheme or a core part of the social state. What it cannot do is continue as it is, rolling yesterday’s debts into tomorrow’s budgets and hoping hospitals will keep the lights on out of civic duty.
In the meantime the insurance card in a patient’s wallet still looks official enough. Soon it may feel lighter too, its weight reduced to that of a promise made too cheaply and redeemed too late. ■
