The implications of expanding government-sponsored health insurance schemes in India are analysed from a fiscal perspective. The experiences of two of the earliest and largest GSHI schemes of the country implemented in Andhra Pradesh and Tamil Nadu are examined. The results suggest that the expansion of the GSHI schemes may skew expenditure away from primary and secondary care towards tertiary care if the fiscal space is limited. A competitive public health system may help in containing costs and the corresponding fiscal burden. The effectiveness of public spending through such schemes is ambiguous.
