Navigating Nepal's health financing system: A road to universal health coverage amid epidemiological and demographic transitions.

BACKGROUND

Nepal has been undergoing demographic and epidemiological transitions, marked by an increasing burden of non-communicable diseases (NCDs) and injuries. These transitions have led to financial implications, including rising out-of-pocket (OOP) expenses. This study reviews and synthesizes evidence on the status, issues and challenges in health financing system, policies, and programs to achieve universal health coverage (UHC) in Nepal.

METHODS

We conducted a scoping review of literature on Nepal's health financing system, policies, and programs. A search strategy was developed using keywords related to two core concepts: health financing and universal health coverage. Grey literature was identified from the web pages of relevant ministries and organizations. A total of 148 studies/policy documents published in Nepali and English up to 31 December 2024 were included. Policies and content related to the health financing system were reviewed to understand the status, issues and challenges of health financing functions, and UHC . A framework-guided deductive content analysis approach was employed, and findings were interpreted using the three UHC components: service coverage, population coverage, and financial coverage.

RESULTS

Nepal's health policy documents prioritize financial protection for low-income people and target groups through social health protection programs/schemes. However, multiple social health protection schemes coexist with fragmented risk pooling and low efficiency in health financing. OOP expenditure is high at 54.2%, with 10% of the population facing catastrophic health expenditures. Injuries and chronic morbidities contribute significantly to this burden, with 70% of injury-related and 62% of NCD-related expenses borne through OOP payments. Despite efforts to improve financial risk protection, the National Health Insurance Program (NHIP) suffers from low population coverage (28%), low renewal rate (54%), and financial sustainability issues (as provider payments exceed revenue collection). The UHC service coverage index, though improving, was only 54 out of 100 in 2021 reflecting limited health system capacity and insufficient readiness to address health challenges, including those posed by shifting demographics and the growing burden of NCDs. Nepal's total health expenditure remains around 2% of GDP, with persistent inefficiencies in resource allocation, fiscal decentralization, and budget absorption.

CONCLUSIONS

Nepal's health financing policies align with UHC goals, yet critical gaps remain in multiple dimensions . Issues such as inefficiencies, underfunding, and fragmented social health protection schemes limit equitable access to quality health care. Therefore, comprehensive structural reforms-spanning legal, institutional, and policy frameworks-are urgently needed. Key reforms  include: (1) merging or harmonizing existing social health protection schemes for efficient pooling and purchasing; (2) enhancing domestic health financing through increased health funding (≥5% of GDP) via payroll contributions, progressive taxation, and earmarked sin taxes; (3) reforming NHIP to mandatory enrollment starting from formal sector, subsidizing premium for informal sector and free coverage for disadvantaged groups, alongside strengthening policy implementation including accrediting of health facilities, ensuring service quality, prioritising and expanding coverage packages with strategic purchasing from all public and private health facilities; and (4) equitable public financing to ensure needs-based allocation across government levels that respond to demographic and epidemiological patterns. Further research is needed to assess hybrid tax and premium based insurance models, strategic purchasing optimization, and digital health innovations for financial sustainability.