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Background: Out of eight commonly agreed Millennium Development Goals (MDG), six are related to the attainment of Universal Health Coverage (UHC) throughout the globe. This universalization of health status suggests policies to narrow the gap in access and benefit sharing between different socially and economically underprivileged classes with that of the better placed ones and a consequent expansion of subsidized healthcare appears to be a common feature for most of the developing nations. The National Health Policy in India (2002) suggests expansion of market-based care for the affording class and subsidized care for the deserving class of the society. So, the benefit distribution of this limited public support in health sector is important to examine to study the welfare consequences of the policy. This paper examines the nature of utilization to inpatient care by different socio-economic groups across regions and gender in West Bengal (WB), India. The benefit incidence of public subsidies across these socio-economic groups has also been verified for different types of services like medicines, diagnostics and professional care etc. Methods: National Sample Survey Organization (NSSO) has collected information on all hospitalized cases (60th round, 2004) with a recall period of 365 days from the sampled households through stratified random sampling technique. The data has been used to assess utilization of healthcare services during hospitalization and the distribution of public subsidies among the patients of different socio-economic background; a Benefit Incidence Analysis (BIA) has also been carried out. Results: Analysis shows that though the rate of utilization of public hospitals is quite high, other complementary services like medicine, doctor and diagnostic tests are mostly purchased from private market. This leads to high Out-of-Pocket (OOP) expenditure. Moreover, BIA reveals that the public subsidies are mostly enjoyed by the relatively better placed patients, both socially and economically. The worse situation is observed for gender related inequality in access and benefit from public subsidies in the state. Conclusion: Focused policies are required to ensure proper distribution of public subsidies to arrest high OOP expenditure. Drastic change in policy targeting is needed to secure equity without compromising efficiency. [ABSTRACT FROM AUTHOR]