Health insurance shields families, yet inequalities still shape India's path toward financial protection and equity

India's healthcare system faces persistent challenges of high out-of-pocket expenditure, catastrophic health spending, and inequitable access to healthcare services. Despite substantial policy reforms including the Ayushman Bharat scheme, comprehensive evidence on the determinants of healthcare utilization and financial protection remains limited. This study examines the socio-economic, demographic, and spatial determinants of healthcare utilization and out-of-pocket expenditure among Indian households, employing advanced econometric techniques to address methodological limitations of previous research. Using data from the 80th Round of the National Sample Survey (N = 1,000,000 households, 4.5 million individuals), the study employs multilevel mixed-effects models, quantile regression, spatial econometric models, and instrumental variable approaches to analyze healthcare utilization, out-of-pocket expenditure, and catastrophic health expenditure. Socio-economic status strongly predicts healthcare outcomes, with higher MPCE associated with increased utilization (OR = 1.579) but also higher out-of-pocket expenditure (β = 0.568). Education shows a gradient effect, with graduates having higher CHE odds (OR = 1.246). Insurance reduces OOPE by 23.5% and CHE odds by 43.2%, with AB-PMJAY providing the strongest protection (OR = 0.634). Significant gender disparities persist, with males having lower OOPE (β =− 0.046). Spatial analysis reveals substantial state-level disparities (Moran's I = 0.346), with southern states outperforming northern and eastern states. NCDs account for 51.23% of morbidity with the highest hospitalization costs. The findings underscore the need for expanding health insurance coverage, addressing socio-economic and spatial inequalities, strengthening NCD prevention, and improving public healthcare quality to achieve universal health coverage in India.