Abstract Rationale, aims and objectives: Sri Lanka has a well-established government-funded universal health coverage which provides free health care to all citizens. The aim of this qualitative study was to examine the out-of-pocket expenses incurred by patients with cirrhosis during admission to a tertiary care government hospital in Sri Lanka, and the impact such expenses might have on equity of care and patient outcome. Methods This is a qualitative study conducted among patients with cirrhosis admitted to a tertiary-care hospital, their caregivers and physicians. Quota sampling was used until data saturation was achieved. Data was collected through individual interviews and small group discussions using directed and open-ended questions. Thematic framework method was used to analyze data. Out-of-pocket expenses incurred by patients, its impact on equity of patient care and outcome were investigated. Results Costs for laboratory investigations, drugs purchased from the private sector and hired caretakers for hospitalized patients were reported as direct expenses. Loss of work and other sources of income were the primary indirect expenses. The impact of such expenses was higher in patients and families from lower socioeconomic categories, especially among those who were dependent on a daily income. Health care workers actively tried to minimize these out-of-pocket expenses, resulting in choice on investigations, drugs and other interventions often being made by the clinician and occasionally not being discussed with the patient, resulting in poor patient satisfaction. Conclusion This study reveals a substantial direct and indirect economic impact on patients despite being cared for in a government hospital with universal health coverage. The impact was more in patients from lower socioeconomic strata, potentially resulting in inequity in the care provided as well as the health outcomes.