High disease burden among the elderly often lead to higher demand and use of healthcare. Higher use of healthcare is associated with high out-of-pocket (OOP) payment and financial catastrophe. Though studies have examined the variations and determinants of OOP payment, there is a dearth of studies showing whether OOP payment results in good health. This study examined the association of OOP payment and self-rated health (SRH) among the elderly in India. Data from the 75th round of NSS data (2017–2018) is used in the analyses. Descriptive statistics and ordered logistic regression were employed in this study. The odds of experiencing poor perceived health is significantly higher among those incurring high OOP payment compared to those spending low OOP payment. This association remains almost similar after controlling for socioeconomic covariates, ailments, and states/union territories (AOR: 1.29; CI 95%: 1.14, 1.46). Age and sex of the elderly significantly diminished their SRH; further, strong educational gradient was also observed. Those elderly suffering from respiratory and psychological and neurological disorders and who had high OOP payment had a higher proportion of poor perceived health. The lack of effective implementation of social support schemes substantially escalates OOP payment, negatively influencing the perceived health of the elderly in India.