Publication: Can Insurance Increase Financial Risk? The Curious Case of Health Insurance in China
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Published
2008
ISSN
01676296
Date
2012-03-30
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We analyze the effect of insurance on the probability of an individual incurring 'high' annual health expenses using data from three household surveys. All come from China, a country where providers are paid fee-for-service according to a schedule that encourages the overprovision of high-tech care and who are only lightly regulated. We define annual spending as 'high' if it exceeds a threshold of local average income and as 'catastrophic' if it exceeds a threshold of the household's own per capita income. Our estimates allow for different thresholds and for the possible endogeneity of health insurance (we use instrumental variables and fixed effects). Our main results suggest that in all three surveys health insurance increases the risk of high and catastrophic spending. Further analysis suggests that this is due to insurance encouraging people to seek care when sick and to seek care from higher-level providers.
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Publication Can Insurance Increase Financial Risk? The Curious Case of Health Insurance in China(World Bank, Washington, DC, 2005-10)The most basic argument for insurance is that it reduces financial risk. But since insurance opens up new opportunities for consuming expensive high-technology care which permits health improvements that are valued by the insured, and because in many settings the provider is able and has an incentive to exploit the informational advantage he has over the patient, it is not immediately obvious that insurance will in practice reduce financial risk. The authors analyze the effect of insurance on the probability of an individual incurring "high" annual health expenses using data from three household surveys-one a cross-section survey, the other two panel surveys. All come from China, a country where providers have until recently largely been paid fee-for-service (often according to a schedule that encourages the overprovision of high-technology care and the underprovision of basic care) and who are only lightly regulated. The authors define annual spending as "high" if it exceeds 5 percent of average income in the sample and as "catastrophic" if it exceeds 10 percent of the household's own per capita income. The estimates of the effect of insurance on financial risk allow for the possible endogeneity of health insurance in the panel datasets by allowing for a time-invariant fixed effect capturing unobserved risk that may be correlated with insurance status, and in the cross-section dataset by using instrumental variables, where availability of and eligibility for health insurance are used as instruments. The results suggest that during the 1990s China's government and labor insurance schemes increased financial risk associated with household health care spending, but that the rural cooperative medical scheme significantly reduced financial risk in some areas but increased it in others (though not significantly). From the results, it appears that China's new health insurance schemes (private schemes, including coverage of schoolchildren) have also increased the risk of high levels of out-of-pocket spending on health. Where the authors find evidence of health insurance increasing the risk of "high" out-of-pocket expenses, the marginal effect is of the order of 15-20 percent; in the case of "catastrophic" expenses, it is even larger.Publication Extending Health Insurance to the Rural Population : An Impact Evaluation of China's New Cooperative Medical Scheme(2009)In 2003, China launched a heavily subsidized voluntary health insurance program for rural residents. We combine differences-in-differences with matching methods to obtain impact estimates, using data collected from program administrators, health facilities and households. The scheme has increased outpatient and inpatient utilization, and has reduced the cost of deliveries. But it has not reduced out-of-pocket expenses per outpatient visit or inpatient spell. Out-of-pocket payments overall have not been reduced. We find heterogeneity across income groups and implementing counties. The program has increased ownership of expensive equipment among central township health centers but has had no impact on cost per case.Publication Extending Health Insurance to the Rural Population : An Impact Evaluation of China's New Cooperative Medical Scheme(World Bank, Washington, DC, 2007-03)In 2003, after over 20 years of minimal health insurance coverage in rural areas, China launched a heavily subsidized voluntary health insurance program for rural residents. The authors use program and household survey data, as well as health facility census data, to analyze factors affecting enrollment into the program and to estimate its impact on households and health facilities. They obtain estimates by combining differences-in-differences with matching methods. The authors find some evidence of lower enrollment rates among poor households, holding other factors constant, and higher enrollment rates among households with chronically sick members. The household and facility data point to the scheme significantly increasing both outpatient and inpatient utilization (by 20-30 percent), but they find no impact on utilization in the poorest decile. For the sample as a whole, the authors find no statistically significant effects on average out-of-pocket spending, but they do find some-albeit weak-evidence of increased catastrophic health spending. For the poorest decile, by contrast, they find that the scheme increased average out-of-pocket spending but reduced the incidence of catastrophic health spending. They find evidence that the program has increased ownership of expensive equipment among central township health centers but had no impact on cost per case.Publication Reforming China's Rural Health System(World Bank, 2009)This book began in 2003 during the initial formulations of China's 11th five-year plan, which covers the period 2006-10. During the entire period, the rural health Analytic and Advisory Activities (AAA) team analyzed the sector and debated reform options with government officials and scholars. It is helped the government in its extensive reform efforts over the past few years. The publication can serve two important functions: to provide an analytical framework for thinking about what happened in China's rural health system and why, and to present a global perspective on the options for further strengthening the sector. China is well on its way to achieving a modern, equitable, and well-functioning rural health sector, but this is not an easy task for any country. This book can provide a useful reference for policy makers in the next phase of health reform and beyond.Publication Health Service Delivery in China : A Literature Review(World Bank, Washington, DC, 2006-08)The authors report the results of a review of the Chinese-language and English-language literatures on service delivery in China, asking how well China's health care providers perform, what determines their performance, and how the government can improve it. They find current performance leaves room for improvement in terms of quality, responsiveness to patients, efficiency, cost escalation, and equity. The literature suggests that these problems will not be solved by simply shifting ownership to the private sector, or by simply encouraging providers-public and private-to compete with one another for individual patients. In contrast, substantial improvements could be (and in some places have already been) made by changing the way providers are paid-shifting away from fee-for-service and the distorted price schedule toward prospective payments. Active purchasing by insurers could further improve outcomes.
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