The Impact Of Medical Expenditure And Its Uncertainty On Consumption

The people in China face persistent,volatile out-of-pocket medical expenditures that increase substantially those years.According to the China Statistical Yearbook 2019,over the period 2013-2018,the rate of medical expenditure to disposable income(per capita consumption expenditure)in China have increased dramatically: from 5.0%(6.9%)in2013 to 6.0%(8.5%)in 2018.These facts show that the burden on people inevitable rise,and suggests that out-of-pocket medical expenditures may be important driving of cutting down consumption.The greater uncertainty is significantly associated with higher savings(Mody et al.,2012).Markets to insure risk are often limited or do not exist.Markets to insure risk are often limited or do not exist.The main way to self-insure against risk is to accumulate a buffer stock of wealth,thus the current consumption also be cut down accordingly.Because of the medical expenditure uncertainty,people will take a more cautious consume behavior,such as reducing the current non-medical consumption expenditures to cope with the future’s medical expenditures,which could lead to a high saving rate.But high saving rate is not conducive to the economic development of China.While expanding domestic demand and promoting consumption is urgently needed to enhance the ability of resisting international economic risks and promoting the coordinated development of economy and society.Under the Chinese new economic development situation,to rely on consumption growth is the sustainable development pattern.Under the above background,do medical expenditure and its uncertainty,and the level of medical insurance affect people’s consumption? If they do,and how to influence the consumption? This paper first elaborated the background and significance,content and innovation,and reviews the related literature.Then establish a life cycle model,and the simulated moment estimator and CFPS data is used to estimate model parameters,and then on the basis of life cycle model,we can know that the change of medical expenditure can affect people’s consumption behavior or not.After quantitating the relationship between medical expenditure and medical insurance,for cutting medical expenditure more effectively,we calculate the medical expenditure risk by adjacent age state Markov transition matrix.Some advice for how to reduce medical expenditure are also proposed.The marginal contribution of this paper is mainly reflected in: first,this paper estimates a life cycle model included medical expenditure uncertainty and income uncertainty,can more accurately estimate the medical expenditure and its uncertainty on consumption;Second,the literature didn’t take the consumption of public goods or that help from other family members or friends may also affect the individual’s level of consumption into account.In this paper,in the process of building model,we consider this part of the individual consumer;Third,through the Markov state transition matrix to discuss the different age group’s high medical expenditure risk.We find that: first,when there are no medical expenses,consumption will increase,the ratio of increase in consumption to the reduce in out-of-pocket medical expenditures also changes over age.Second,when there is no medical expenditure uncertainty reduced or even no uncertainty,people’s precautionary saving motivation is weakened,correspondingly,the current consumption increase.Third,the medical insurance reimbursement ratio by 60% to 70%,or 80%,individual consumption will increase,and the higher the reimbursement ratio,the greater the consumption increase.When reimbursement ratio increases,the ratio of increase in consumption to the reduce in out-of-pocket medical expenditures changes over age.Fourth,the radio of the increase in consumption under the situation of there is no medical expenditure uncertainty to the increase in consumption under the situation of that there is no medical expenditure is82.7%-84.3%,varies with age.Which means that the change caused by medical expenditure uncertainty can explain most of the medical expenditure’s impact on consumption.After quantitating the relationship of medical expenditure and consumption,for puts forward advice on how to reduce medical expenditure and its uncertainty,this paper also explores the risk of high medical expenditure faced by individuals,we find that people under the state of lower health care costs who are at the age of 25-45 and 46-52,will transform to high medical expenditure state at the next age group at the probability of35.5% and 38.5% respectively,means that in addition to care for the elderly’ health status,health status of young and middle-aged individuals also deserves attention.