Health Demand And Health Insurance Reform In Urban China

Health and health care are fascinating subjects not just for health economists, but also for policymakers and the common people. Health care reforms worldwide try to make health care more affordable, expand coverage to all and make the health system sustainable. The reform of health insurance in urban China started three decades ago, which the mixture of social health insurance and medical saving accounts was introduced. It's important to track the changes of medical consumption behavior and health outcomes and evaluate the efficiency of the new system. Price of the pharmaceuticals is regulated by the government in most countries, including China. Direct measurement of price-cost margins would provide some further information which can be utilized in the decision-making concerning the price regulation of pharmaceuticals. The main purpose of this paper is to gain a better understanding of Chinese health care system on the basis of solid empirical evidence.This paper applies the modern quantitative analysis method to investigate the relationship between health insurance and medical consumption behavior as well as health outcomes using household data. This paper presents the evaluation of Urban Employee Medical Insurance reform from the efficiency point of view. The study aslo examines the association between price and marginal cost in pharmaceutical industry and investigate the empirical evidence from firm-level data. The major findings are as follow:1. Estimating the effects of Public Health Insurance on medical expenditure with modified sample selection model.We examine the impacts of public health insurance on total and out-of-pocket medical expenditures among elderly in urban China. Using the latest waves of Chinese Longitudinal Healthy Longevity Survey (CLHLS), we find that the out-of-pocket medical expenditures of insured elderly are 43 percent lower than that of the uninsured elderly; but the total medical expenditures are 28-37 percent higher compared to uninsured.2. Measuring the impacts of Pubic Health Insurance on mortality with survival analysis and propensity score matching method.We address the question of how health insurance affects health. I find significant reduction in all cause mortality associated with health insurance. Based on Cox proportional hazard model, the insured elderly face a hazard 19% lower than the uninsured. According to extended Kaplan-Meier survival curve, the extended mean survival time of the insured elderly is 154 months and is noticeably larger than mean of uninsured,94 months. Those finding suggest that increased medical expenditures significantly and effectively improved the health and longevity of the insured old people. Therefore, the public health insurance policy should make more effort to meet the reasonable medical care demand.3. Evaluating the Urban Employee Medical Insurance reform from the efficiency point of view with difference-in-difference model.We use individual-level medical expenditure data from Chinese Health and Nutrition Survey (CHNS) to study the effects of the health insurance reform in urban China, i.e. the Urban Employment Medical Insurance (UEMI). Using the sample selection model and the difference-in-difference estimator where the uninsured people serve as the control group, we find that:the health insurance reform substantially reduces the moral hazard problem. After the reform, people with UEMI would not change their probabilities of seeing doctors but decrease the outpatient expenses by 31.0-33.5 percent. There is no statistically significant change for inpatient expenditure. Out-of-pocket expenses for both inpatient care and outpatient care do not vary with the reform. Further, the reform did not significantly change the probability of being sick. Therefore, this paper concludes that the UEMI reform reduce the unreasonable medical expenditure by incorporating the demand side incentive.4. Analyzing the Lerner Index of pharmaceutical industry for drug price regulation under the framework of basic health insuranceTo provide some insights for drug price regulation, we estimate the price-cost margin in the China pharmaceutical industry. Using the survey data of Large and Medium size enterprises that China's National Bureau of Statistics (NBS) conducts every year, the estimated Lerner Index in the pharmaceutical industry is 0.521 and statistically significant, which means of the total value added per unit sales, only 48 percent is marginal cost; the rest is earnings from market power. The total welfare loss due to imperfect competition is about 14% of revenues.This applied study on social health insurance in urban China has both theoretic and pratical significant from the following aspects:it will amples and updates the related literature on Chinese health insurance reform; it will foster the better understanding of demand of health and health care and production of health as well as pricng behavior of pharmaceutical industry; it can be utilized in the decision-making concerning the public health policy, such as health insurance reform and price regulation of pharmaceuticals.