Impact of the New Cooperative Medical Scheme on Individual Healthcare Utilization and Expenditure

Previous studies have evaluated the New Cooperative Medical Scheme (NCMS) but have reached no consensus about its impact on medical care utilization and expenditure. Building upon earlier literature, this article uses a simultaneous equation model to assess the impact of NCMS participation on utilization and out-of-pocket expenditure while addressing the potential bias caused by the endogeneity of insurance choice and the selection bias due to healthcare utilization. We use a national sample from the China Health and Retirement Longitudinal Study (CHARLS) 2011. In addition to the simultaneous equations model, a set of other estimation strategies are used for sensitivity analysis. The estimation results confirm that the interrelationship of the NCMS participation with outpatient service decisions are different from those with inpatient service decisions. Our finding indicates that the NCMS increases medical care utilization for outpatient care (p < 0.05), but has no significant impact (p > 0.05) on (i) inpatient utilization, (ii) inpatient out-of-pocket spending, or (iii) outpatient out-of-pocket spending.