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Health Care Demand, Reimbursement Modes and the New Cooperative Medical Scheme in Rural China

Dan Liu, Daniel Tsegai, Yuansheng Jiang


The purpose of this paper is to investigate the determinants of health care demand in rural China, to simulate the effects of New Cooperative Medical Scheme’s (NCMS) reimbursement modes on treatment choices as well as reducing headcount and overshoot of catastrophic heath expenditure (CHE). We utilize the China Health and Nutrition Survey data (CHNS) to provide prolific longitudinal information. Selection bias correction based on multinomial logit model is used to derive expectation of ex-ante medical expenditure. Mixed logit model is employed to analyze health care demand choice and policy discussion. Results indicate that non-monetary factors and severity of illnesses play a vital role in health care demand and choice of treatment type. Preference heterogeneity of individual demand was found in non-monetary variables (waiting and travel time). The choice of treatment type varied little with adjustment of reimbursement modes but various reimbursement modes are found to have disparity effects on reducing headcount and overshoot of CHE. However, irrespective of how high the reimbursement level was set (80%), the overshoot of the CHE bottlenecked at around 8%, which implies other complementary polices are needed to rectify the deficiencies of NCMS and to improve the intended effect on public health care delivery in rural China. 

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