Background Economic development of any country requires accumulation of both physical capital and human capital. India is a developing country with a high prevalence of infectious and other diseases, and where the available resources are unevenly distributed among different regions. The majority of citizens has very limited access to quality health care and exhibits poor health indicators. Further, there are massive inequalities in access to health care: while the rich avail most of modern and expensive health services, the poor, especially in rural areas, do not get even rudimentary health care.

Methods The present study has been conducted in Shivamogga district, covering all seven taluks of the district, giving equal weightage to each. The study has chosen 500 households as sample size, covering both rural and urban areas. Proportionate stratified random sampling technique has been used. Representative samples were drawn from the households with different educational background, status and age groups. The study tried to analyse the expenditure incurred on healthcare services by the beneficiaries in public and private hospitals. The study used statistical tools like percentage, ratio, mean, standard deviation, co-efficient of variation and ranking technique to analyse the issues in the utilisation of healthcare services.

Findings The study has covered annual health expenditure, expenditure made by the people for their ailment in public and private hospitals, medical care coverage, and – for people under different health insurance schemes – out-of-pocket expenditure on health in Shivamogga district.

We found that 21.2% of households are spending more than INR 10,000 per year on health. Awareness about the various health insurance schemes is found in 66.6%. Only 36.4% have any medical care coverage. Of the insured, 77.45 are under the Yeshasvini scheme, 8.25% under RSBY, 2,75% under Star Health insurance and 1.62% under ESI.

In urban areas, the ratio between average expenditure for inpatient services per illness episode in public and private hospitals is 1:2.62. For outpatient service it is 1:2.1.

In rural areas, the ratio between average expenditure for inpatient services per illness episode in public and private hospitals is 1:2.32. For outpatient service it is 1:2.1.

Source of health expenditure in urban and rural area shows that 5.72% comes from insurance, 6.04% from government, whereas the remaining 88.24% is borne by the households..

Conclusion India has achieved significant improvement in health indicators but still has miles to go. Our analysis clearly underscores the need for a quantum jump in public investment for health, accompanied by a wide range of reforms at all levels. This can be achieved only through strong political will, commitment and awareness – the latter based on dissemination of information on health issues.

No competing interest.