In an effort to provide greater financial protection from the risk of large medical expenditures, China has gradually added catastrophic medical insurance (CMI) to the various basic insurance schemes. Tongxiang, a rural county in Zhejiang province, China, has had CMI since 2000 for their employee insurance scheme, and since 2014 for their resident insurance scheme.
Compiling and analyzing patient-level panel data over five years, we use a difference-in-difference approach to study the effect of the 2014 introduction of CMI for resident insurance beneficiaries in Tongxiang. In our study design, resident insurance beneficiaries are the treatment group, while employee insurance beneficiaries are the control group.
We find that the availability of CMI significantly increases medical expenditures among resident insurance beneficiaries, including for both inpatient and outpatient spending. Despite the greater financial protection, out-of-pocket expenditures increased, in part because patients accessed treatment more often at higher-level hospitals.
Better financial coverage for catastrophic medical expenditures led to greater access and expenditures, not only for inpatient admissions—the category that most often leads to catastrophic expenditures—but for outpatient visits as well. These patterns of expenditure change with CMI may reflect both enhanced access to a patient's preferred site of care as well as the influence of incentives encouraging more care under fee-for-service payment.