Who sets the price? India's unregulated private hospitals, out-of-pocket spending, and the case for government-stewarded insurance

India increasingly relies on a large private hospital sector that, despite the Clinical Establishments Act of 2010, operates with little effective price regulation or transparency; charges for the same procedure vary widely, and out-of-pocket payments still cover about two-fifths of health spending. This Perspective argues that the unchecked pricing power of private providers is a central driver of catastrophic health spending, and that the most credible remedy is not blunt price control but stronger governance: enforcing existing regulation while shifting from passive to strategic purchasing through open, competitive, performance-based contracting. It draws on the most visible marker of distortion, the cesarean gap: private facilities perform cesareans in 47% of deliveries against 14% in public facilities, at several times the out-of-pocket cost, a gap that measured clinical risk does not fully explain. Where the state acts as a strategic purchaser, as the Central Government Health Scheme and Ayushman Bharat–PMJAY already do, it can set prices, standardise quality and curb such incentives. The Perspective examines why fragmented, thin insurance leaves a large “missing middle” exposed, how that gap might be closed through a contributory pool, and how extending publicly stewarded, single-price purchasing across the private sector could protect patients. Regulation and purchasing, it argues, are complementary instruments of the same stewardship function.