Welfare Effects Of Ncms Coverage:Empirical Studies In Six Counties Of Shandong And Ningxia, China

BackgroundSocial health insurance schemes are being developed in many low-and middle income countries with the aim of contributing towards the achievement of universal coverage. One of the largest of such initiatives is the implementation, since2003, of a health insurance scheme for the rural population, namely the New Rural Cooperative Medical Scheme (NCMS) by the Chinese government. As a voluntary and heavily subsidized scheme, the NCMS has seen an extremely rapid growth in population coverage in comparison to most new schemes in developing countries, covering3%of the rural population in2003to97.4%in2011. In2011, the government subsidy per enrollee reached200RMB, and the effective reimbursement rate for inpatient care was43.7%.During this period from its inception in2003to2011, health care utilization and economic burden due to diseases increased significantly in rural areas. According to the2003,2008, and2011National Health Services Survey (NHSS), the utilization rates of outpatient services were13.9%,15.2%and15.3%respectively, and hospitalization admission rates were3.4%,6.8%and8.4%. There were13.6%,15.1%and13.8%of households who had catastrophic health expenses in2003,2008, and2011, and the proportions of health expenditure as a share of total household expenditure were12.1%,12.6%and13.3%.The literature to date has mainly used the uneven rollout of NCMS across counties as a way of identifying its effects on health services utilization and financial protection, and less focus on the effect on household consumption. Few studies so far have exploited the heterogeneity in scheme features to identify its effect. However, these effects heavily depend on the NCMS generosity, which also influences consumption behavior of the rural population. The health services utilizationis largely affected by its prices, both of which will indirectly affect the consumption of the rural residents. All these aspects represent the level of residents' welfare. The existing literatures only evaluate the effect of the NCMS on one of these aspects, which can not be used to estimate its impact on the general welfare of the rural population. Therefore, to evaluate the overall impact of NCMS on the welfare of the residents, and to identify the optimal coinsurance rate are the key problems that need to be addressed in the NCMS research.To formalize a theoretical model on the welfare effects of a social health insurance based on consumer behavior, will be of great value in theory. Evaluating the overall impact of the NCMS on the welfare of the rural population will be helpful to confirm the optimal coinsurance rate according to consumer utility maximization, both of which will make great contributions to NCMS and universal coverage in China.ObjectivesThe overall objective of this study is to conduct both theoretical and empirical study on the impact of the NCMS coverage to the consumer welfare, offering policy recommendations by changing the NCMS design to maximize the residents' welfare. Specifically, our research objectives include:to formalize a model about the welfare effects of NCMS coverage in theory; to conduct empirical research to evaluate the overall impact of the NCMS coverage on health services utilization, prices and household consumption of the rural residents, and reveal how the NCMS affects the consumer welfare in rural China; to analyze how the welfare effects of NCMS differ by household income level; to explore the role of the residents'knowledge on the NCMS policy in the welfare effects.DataThe data derive from the project "Bringing health care to the vulnerable:Developing equitable and sustainable rural health insurance in China and Vietnam (RHINCAV)" that was funded by the European Commission. A repeated cross-section household survey was conducted in Shandong and Ningxia Province in2006and2008. In2006, within each county,18villages spread across3townships were selected to participate in the survey. About60households were randomly selected per village in Shandong, and about50in Ningxia, resulting in a total sample of6,137households (22,636individuals). In2008, a slightly smaller sample of households (30in both provinces) was drawn from the same villages, leading to a sample size of3,288households (13,058individuals). In our analysis, we only use adult individuals aged16or older and enrolled with NCMS, which amounts to a total sample size of26,310individuals (16,294in2006and10,016in2008). Note that the data is a panel at the village level, but not at the individual level.MethodsIn this study, the theoretical model about the comprehensive welfare effects of NCMS is constructed based on the welfare effects of health insurance and precautionary saving theory. Furthermore, it is decomposed into the utilization effect and price effect for health service consumption, and consumption effect for non-medical consumption.Our empirical strategy for identifying the welfare effect of NCMS coverage basically relies on a pooled regression analysis with coinsurance rates as our main variables of interests. Since the data is the panel at village level, a village-level fixed effects model is adopted to evaluate the welfare effects of NCMS. Outcomes related to health service utilization are modeled using the conditional logit model. Generalized Linear Models are used for the continuous outcomes, such as health service price, medical expenses and non-medical consumption expenditure.As the key variable, NCMS coverage degree depends on the copayment, reimbursement rate, and ceiling. All of them vary with the health service providers and total medical expenditure. We use instrumental variables (â…£) and standardization approaches to construct the summary measures of NCMS coverage, combining all three dimensions, which is independent of the utilization behavior of the relevant populations. Besides the NCMS coinsurance rates, the household income groups, knowledge on NCMS policy, and their interaction with coinsurance rates, are also included in these empirical models.Results(1) The effect of NCMS coverage on health care utilization:after controlling for other variables, a one percentage point increase in NCMS coverage raises the probability of using inpatient care by0.32percentage points. The admission probability for residents in the20%low-income group is3.17percentage points lower than the high income group. However, with the NCMS coverage increasing by a percentage point, the increase of the hospitalization probability for low-income group was significantly0.11percentage points more than the high-income group. The residents'knowledge on NCMS policy does not influence the utilization increasing effect of NCMS. Compared with the family saving accounts, social pooling account for outpatient can significantly increase the probability of using outpatient care, but reduce the probability of hospitalization. In addition, the presence of other, mostly private health insurance cover raises the probability of using inpatient care by3.74percentage points, or the equivalent of a15percentage point's rise in NCMS coverage. It also extends the hospital stay by1.30days, but gives no significant effect on the use of outpatient services.(2) The price effect of NCMS coverage on health services:In the case of other conditions remaining unchanged, with a1%increase of NCMS coverage, the total costs and out-of-pocket expenses per inpatient spell would show an increase of0.72%and0.34%respectively, leading to the share of OOP in total expense decreasing by0.37%. The increase of hospital cost can be decomposed as follows:inpatient reimbursement rate increased by1%, length of stay increased by0.46%, and the average daily cost of hospitalization increased by0.70%. There are no significant differences on the hospital costs, out-of-pocket expenses and its share to total cost per admission between the residents of low-income group and high-income group, and the price increasing effects are also not related to the income groups. Although patients, who are familiar about NCMS reimbursement level, spend about10%of the average hospitalization costs more than those who do not know, these price increasing effect of NCMS coverage becomes weaker to some degree when patient know about the NCMS policy. Social pooling account can increase average total outpatient costs by8RMB, reducing OOP expenses by22RMB, and thus significantly reduce the OOP share by6.24%compared with family saving accounts.(3) The overall impact of NCMS coverage on household medical expenses:Using household medical expenses as an comprehensive measure of the utilization effect and price effect of NCMS coverage, inpatient reimbursement rate increased by1%, the proportions of health expenditure as a share of total household expenditure would increase by0.73percentage points, and the probability of borrowing or selling assets due to illness would increase by0.23percentage points.(4) The consumption effect of NCMS coverage:on average, an increase of1%in NCMS coverage stimulates non-healthcare related consumption by0.24percent and decrease savings by27RMB per capita, though the results are insignificant; and increases cultural and education spending per capita by12RMB, significant at the1%significance level. The NCMS effect on non-healthcare related consumption is much stronger by0.67%among low-income families than high-income families because of a1%increase in scheme coverage, but the consumption effect is insignificant among the high-income families. And a1%increase in scheme coverage will reduce savings per capita by more than68RMB among low-income families than high-income families. Although there was no significant difference of household consumption or savings between residents who know about the NCMS policy and those who do not know, a1%increase in NCMS coverage bring more increase in non-healthcare related consumption among residents who know about the NCMS policy by0.11percent than among those who do not know, but reduce savings per capita less by30RMB.Conclusions and policy inplicationsAs a social health insurance for the rural population, NCMS affects health services consumption, which is the objective requirements of the health insurance system; as a measure to deal with the risk of large medical expenses, NCMS affects the current consumption level of rural residents by reducing the family's future uncertainties, reflecting the subjective feelings of rural residents. More generous NCMS increase the utilization and prices of health services, thereby increasing total medical expenses, and it also increases non-healthcare related consumption. Overall, the price effects, which influence both the health care utilization effects and household consumption effects, are the key to the welfare improvement of residents by NCMS. The rising generosity of NCMS will improve the health care utilization and consumption level of low-income residents much more than the high-income group, thereby improving the equity of the rural residents' welfare level. The knowledge on NCMS policy, weakening the price increasing effect and significantly improving the consumption stimulating effects due to a more generous scheme, plays an important role in the process of the welfare effects.The following policy implications can be drawn and proposed based on this study:(1) The evaluation of NCMS should be done based on both the impact of NCMS on the residents health consumption and non-healthcare related consumption;(2) the optimal level of NCMS compensation should be to maximize residents' welfare effects, including the effects on health care consumption and non-medical consumption;(3) The price effect is the key to the welfare effects of NCMS. When increasing coverage, the policy should take measures to determine the prices of health care;(4) the coinsurance rate should be declined to improve both the medical consumption and non-medical consumption level of low-income residents;(5) to make sure that rural residents know about the NCMS policy and trust it, residents' trust in this scheme can be crucial to the welfare improvement effect of the scheme.Innovation and limitationsWe conducted both a theoretical and an empirical study on the welfare effects of NCMS coverage in China for the first time. The research experience and findings are helpful to lay a foundation for further study and provide recommendations for NCMS design.The innovation of this study:(1) This is the first time to model the comprehensive welfare effects of social health insurance, combining the welfare effects with the precautionary saving theory, and further decompose the welfare effects into health care utilization effects, price effects, quality effects and consumption effect;(2) It is the first time to conduct an comprehensive evaluation focused on the effects of China's NCMS on the welfare level of residents;(3) We analyze how the knowledge and trust in NCMS help to achieve the goal of welfare improvement by NCMS. The limitations of the research:(1) It is only an impact evaluation of NCMS on the resident's welfare, and the quality effects has not yet been estimated. So further research should be to determine the optimal coinsurance rate, based on the welfare and utility maximum;(2) In this study, data was from2006and2008. However, in2009China unveiled its health-care reform plan, including a reformation of the NCMS payment system and establishing the essential drugs system, which form the new incentive mechanism for residents and health care providers. Further research is needed to measure the welfare effects of this scheme in the new regulatory environment, especially the price effect.