Can the Middle Class Keep Up with Rising Medical Inflation in Pakistan?
Over the past decade, Pakistan’s healthcare landscape has undergone a significant transformation, characterized by rapidly increasing medical costs, evolving insurance markets, and mounting pressure on household incomes. Although inflation across sectors has remained a persistent concern, recent figures indicate that overall inflation in Pakistan was approximately 5.6% year-on-year in December 2025, suggesting a degree of macroeconomic stabilization. However, this apparent moderation conceals a critical divergence, as healthcare costs continue to rise at a faster and more sustained pace than general inflation. This growing gap between health insurance premiums and purchasing power raises an important question: can middle-income households in Pakistan maintain access to quality healthcare amid escalating costs? The issue extends beyond economics, reflecting deeper structural challenges that influence productivity, poverty risks, and long-term development outcomes.
Medical inflation in Pakistan has been driven by a combination of systemic inefficiencies and changing patterns of demand. The cost of healthcare services, including diagnostic procedures, medicines, and consultations, has risen considerably in recent years. For instance, data from the Pakistan Bureau of Statistics indicates that medical test fees have increased by more than 15% year-on-year, with additional monthly fluctuations observed during 2025. These increases are indicative of broader pressures such as currency depreciation, which raises the cost of imported pharmaceuticals, and the growing reliance on advanced medical technologies that, while improving quality, also elevate expenses. At the same time, the country’s epidemiological transition toward chronic diseases has increased the need for long-term treatment, further intensifying cost pressures.
Despite rising demand, Pakistan’s healthcare system remains under-resourced relative to its population needs. Public health expenditure accounts for roughly 1% of GDP, which is significantly lower than the regional average of approximately 3.1%. In absolute terms, government spending on health reached around PKR 924.9 billion in FY2024, reflecting a modest increase from the previous year. However, this expansion has not been sufficient to address systemic gaps, resulting in overcrowded public facilities and limitations in service quality. Consequently, a large proportion of the population, particularly the middle class, increasingly relies on private healthcare providers, which are considerably more expensive. This shift has contributed to rising out-of-pocket expenditures and greater dependence on private insurance. The upward trajectory of medical costs has directly influenced health insurance premiums. Insurance providers adjust pricing based on claim patterns and treatment expenses, meaning that higher healthcare costs inevitably lead to more expensive insurance plans. This creates a reinforcing cycle in which rising treatment costs increase claims, leading to higher premiums and reduced affordability. In Pakistan, where insurance penetration remains relatively low, this effect is amplified. A smaller insured population limits risk pooling, resulting in higher per-person costs and further restricting access to insurance coverage.
The implications for middle-class households are reflected in changing healthcare behaviors. Empirical evidence from urban centers such as Karachi highlights the extent of financial strain. A significant proportion of households report reducing doctor visits, shortening prescribed treatments, delaying hospitalizations, and postponing medical care due to cost considerations. These patterns suggest that rising healthcare expenses are not merely a financial inconvenience but a substantial barrier to accessing essential services. Even households that are not classified as poor are increasingly vulnerable to financial stress due to medical expenditures, illustrating the growing risk of healthcare-induced economic hardship.
The relationship between purchasing power and premium growth further underscores this imbalance. Although headline inflation has moderated in certain periods, income growth has not kept pace with rising costs in the healthcare sector. Purchasing power has been eroded by currency depreciation, stagnant wages, and broader economic uncertainty. As a result, households are allocating a larger share of their income to healthcare-related expenses, including insurance premiums. This trend reflects a real decline in affordability, as the cost of maintaining adequate health coverage continues to rise relative to income levels.
Healthcare spending differs from other forms of consumption because it is largely unavoidable. When faced with rising premiums, households cannot simply eliminate healthcare expenditures. Instead, they adopt coping strategies that often involve trade-offs. Some opt for lower coverage plans, exposing themselves to greater financial risk in the event of serious illness. Others choose to forgo insurance entirely, relying on out-of-pocket payments or delaying treatment. These responses weaken the effectiveness of insurance as a risk-sharing mechanism and increase the likelihood of financial instability. The widening gap between premiums and purchasing power is rooted in structural challenges within Pakistan’s healthcare system. Limited public healthcare provision remains a central issue, as underfunded facilities struggle to meet demand, pushing patients toward costlier private services. Low insurance penetration further constrains the effectiveness of risk pooling, keeping premiums high. The prevalence of informal employment adds another layer of complexity, as many workers lack access to employer-sponsored insurance and must finance coverage independently. Additionally, the absence of comprehensive price regulation in the private healthcare sector allows providers to charge high fees, which contribute to rising insurance claims and, ultimately, higher premiums.
A notable paradox emerges from this situation: as healthcare becomes more expensive, the need for insurance increases, yet affordability declines. Insurance is intended to provide financial protection, but rising premiums risk excluding those who require it most. This challenge is particularly pronounced for middle-income households, which do not qualify for government assistance yet struggle to afford private insurance comfortably. As a result, the middle class faces a dual burden of high out-of-pocket expenses and increasing insurance costs, placing significant strain on household finances. Addressing this imbalance requires a comprehensive policy approach. Greater investment in public healthcare infrastructure is essential to reduce dependence on expensive private providers and improve service accessibility. Expanding social health protection programs can enhance financial security for a broader segment of the population, including the middle class. Strengthening regulatory oversight of private healthcare pricing is also important to control cost escalation. At the same time, innovation within the insurance sector can improve affordability through more flexible and inclusive coverage models. Encouraging preventive healthcare practices can further reduce long-term costs by lowering the incidence and severity of chronic diseases.
Looking ahead, the outlook for healthcare affordability in Pakistan will depend on the interaction between economic conditions, policy responses, and healthcare system reforms. Medical inflation is likely to remain elevated due to technological advancements, demographic shifts, and increasing disease burdens. At the same time, economic volatility may constrain income growth, further weakening purchasing power. If these trends continue, the gap between premiums and purchasing power may widen, leading to greater reliance on out-of-pocket spending and an increased risk of financial hardship among middle-income households.
Therefore, overall assessment come out with the fact that the divergence between health insurance premiums and purchasing power presents a serious challenge for Pakistan’s middle class. While overall inflation has shown signs of easing, healthcare costs continue to rise at a pace that outstrips income growth. This imbalance is gradually reducing affordability and forcing households to adjust their healthcare decisions in ways that may compromise long-term well-being. Without targeted reforms aimed at strengthening public healthcare systems, expanding insurance coverage, and managing costs, this pressure is likely to intensify. Ensuring that healthcare remains both accessible and financially sustainable for the middle class is essential not only for social stability but also for the country’s broader economic development.
The author is is MD IRP /Faculty department of H&SS- Bahria University Karachi