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As per the World Bank Poverty and Inequality Platform (2021), approximately 12.92% of India’s population was below the poverty line in 2018, based on the international poverty line of $2.15 per day (PPP 2017). According to the National Health Authority (NHA) Estimates for 2018–19, the out-of-pocket health expenditure (OOPHE) share of total health expenditure (THE) was reported as 48.2% for the entire population, a decline from 64.2% in 2013–14. Thus, OOPHE is a major reason pushing households into poverty. Therefore, we seek to estimate the impact of OOPHE on poverty in India. We use data from the nationally representative survey on Household Social Consumption Health (2017–2018) and estimate poverty gap at the household level before and after making the OOPHE. Further, binary logit model was used for predicting the effects of various factors on the incidence of poverty. We find that the duration of hospitalization, household size, usage of private healthcare, out of pocket health expenditure, income, aged people in the family and caste are the significant determinants of impoverishment. Also, the implementation of various healthcare schemes and public health initiatives have not been substantial as they are found to be limited, and a significant proportion of the population is left with no health coverage. Findings stress on the need for the expansion of public health insurance coverage for safeguarding households against falling into poverty.