The study examines the effect of income and education of the household on its health expenditure, based on primary data collected from Jajpur district of Orissa. Multi-stage random sampling method is adopted to select households (HHs), i.e., sampling unit. The descriptive statistics shows that per capita income and per capita health expenditure are Rs.9, 820.02 and Rs.870.10 respectively per annum. The mean education is 0.94. In rural Orissa, an average person spends around nine per cent of his/her income on health expenditure from his own pocket. To find out the impact of income and education on health expenditure, a linear regression model is fitted as PHE = 70.001 + 0.62PHI + 0.03EDN with R2 value 0.39 which indicates that, a rupee increase income brings about 62 Paise increase health expenditure of a person and an educated person on an average spends three paise more in a rupee than the uneducated person on health expenditure in rural area. This shows that income has greater positive effect on health expenditure than education. To improve the health status of the people, extreme poverty and hunger should be eradicated which is the first goal of the Millennium Development Goals (MDGs). The health planners and administrators should be involved in the planning process of the government to reduce poverty and adopt policies for more equitable distribution of income. They can also recommend to have a specific health tax (an earmarked or so-called hypothecated tax) devoted to health care. Again spending more on health services does not necessarily buy better health. It needs an efficient management and use of resources. The principle of equality for opportunity for access to services on the basis of need and equal risk, irrespective of ability to pay should be followed.