Surya Thapa, an aide to Prime Minister K.P. Sharma Oli, said all government hospitals would provide testing and treatment to Covid-19 patients for free.
"Those who want fast services and wish to pay can continue to go to private hospitals,” Thapa told Reuters.
Experts say many Covid-19 patients stayed home in isolation rather than pay up to 150,000 Nepali rupees ($1,266.57) in deposits before admission to a hospital.
"This also led to fewer people turning up for testing and less contact tracing, causing a rapid increase in infections,” Rabindra Pandey, a public health expert, told Reuters.
Nepal has so far reported 197,024 coronavirus cases and 1,126 deaths, according to government data. There were 2,571 cases and 18 deaths on Monday.
A Reuters tally showed the average number of daily infections was higher than any of Nepal's regional neighbours except India.
Prime Minister Oli has been criticised for the government's poor handling of the pandemic and for playing down the risks initially.
In June, protesters demanding more tests and better care for the coronavirus clashed with police, who used water cannons to break up the demonstrations.
Nepal, which has poor health infrastructure, says it has testing facilities for 23,000 samples, but on an average fewer than 15,000 tests are conducted daily.
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