health insurance, rural population, China, Health Economics and Policy,

Chu, Xueling

Liu, Donald J.

Wei, Longbao

English

Research Papers in Economics

The effects of New Cooperative Medicine Scheme coverage 
on health outcomes and health care in rural China
Xueling Chu
Phd Candiate (Contact author)
China Academy for Rural Development
Zhejiang University, China
chuxueling@hotmail.com
Longbao Wei
Professor
China Academy for Rural Development
Zhejiang University, China
lbwei@zju.edu.cn
Donald Liu
Professor
Department of Applied Economics
University of Minnesota
dliu@umn.edu
Poster prepared for presentation at the Agricultural & Applied Economics Association 2010
AAEA, CAES, & WAEA Joint Annual Meeting, Denver, Colorado, July 25-27, 2010
Copyright 2010 by Xueling Chu, Longbao Wei & Donald Liu. All rights reserved. Readers may make 
verbatim copies of this document for non-commercial purposes by any means, provided that this copyright 
notice appears on all such copies.Who: Rural population in China.
What: Health insurance program: the New Cooperative Medicine Scheme (NCMS).
Why:  To estimate the effects of NCMS on health outcomes and health care.
History:
-- Between the early 1950s and 1978, the now defunct Cooperative Medicine Scheme was in effect, covering 90% of the
rural population in China in 1976.
-- As of 2003, more than 87% of the rural population in China was without health insurance.
-- The government established the NCMS in 2003, with the goal of achieving 100% coverage by 2011. By September 2009 ,
the new scheme has reached 94% of the rural residents in China, covering a total of 833 million enrollees.
-- However, the NCMS does require large deductibles, low ceilings, and high coinsurance rates.
Literature:
There are only few empirical studies estimating the causal effect between the NCMS and health outcomes. Results of those 
studies tend to be inconsistent. Further, those studies haven’t pay sufficient attention to the control of unobservable variables.
Hypothesis:
The coverage of NCMS should make health care more available, more affordable, and thus should improve health outcomes.
How: We apply the triple difference method to data from three survey periods, combining with regression analysis.
Methods: Triple Difference Model
Conclusions
The effects of New Cooperative Medicine Scheme coverage 
on health outcomes and health care in rural China
Xueling Chu    ( PhD Candidate, Zhejiang  University, China, chuxueling@hotmail.com )
Longbao Wei    ( Professor, Zhejiang  University, China)
Donald Liu      (Professor, University  of Minnesota)
Introduction
Figure  The process of triple Difference
Do not join the NCMS 
in t0 and t1 time.
Average effect of treatment
on the treated (ATT)
Has the merit of
the Difference in
Difference (DID);
could control the 
effects of 
unobservable
variables.
Join the NCMS 
during this period 
C: control group
T: treated group
outcomes
time
t2 t1 t0 t
T2
β2
β3
β5
y
T0
β1
β0
C0
C1
T1
β1
β0 β0
β2
β1
β4
β3
C2
β3
Relax the
parallel trends
assumption 
in DID; only 
assume that the
unobservable 
variables grow
by the same 
amount.
Method Merits:
It allows for essential heterogeneity 
(i.e. unobserved idiosyncratic returns)
It can release the parallel trends assumption in difference-in-
difference method.
It does not require exclusion restrictions nor does it need
assumptions on functional form.
It can be combined with the regression method for
controlling unobservable variables.
Data
Source:
China Health and Nutrition Survey, 2000, 2004, 2006
Subject: 
rural residents 18-60 years old 
Treated Group: 
consisting of participants of the NCMS during 2004-2006
Two Control Groups:
(1) Non-participant Group  
consisting of individuals residing in the counties covered
by the NCMS but choosing not to participate
(2) Non-exposed Group
consisting of individuals not residing in the counties covered
by the NCMS and thus didn’t have the chance to participate
Conclusion Results
Reference
Levy, H., and Meltzer, D. (2004). What do we really know about
whether health insurance affects health, ed. C. G. McLaughlin,
The Urban Institute, pp. 179-204.
Mao, Z. (2005). "Pilot program of NCMS in China: System design 
and progress." World Bank, Washington, DC.
Wagstaff, A. (2010). "Estimating health insurance impacts under 
unobserved heterogeneity: the case of Vietnam's health care
fund for the poor." Health Economics 19, no. 2189-208.
Wagstaff, A., Lindelow,M., Gao. J., Xu. L. & Qian J. (2009).  
"Extending health insurance to the  rural population: An impact    
evaluation of China's new cooperative medical scheme."   
Journal of Health Economics 28, no. 1: 1-19.  
Treated Group (cf.
Non-participant   
Group)
-0.004 -0.028 -0.009 -0.006 -0.054 -0.05
(0.066) (0.035) (0.069) (0.063) (0.045) (0.036)
Treated Group (cf.
Non-exposed Group)
0.064 0.031 -0.065 -0.053 -0.090*** -0.048*
(0.048) (0.024) (0.051) (0.046) (0.031) (0.025)
The NCMS has a
significant effect 
on reducing sickness. 
Effects on 
Health Outcome
Effects on 
Health Care 
Expenses (by 
income groups)
Compared with the 
Non-participant Group
Compared with the
Non-expose Group
All Expense Outpatient 
Expenses
All Expense Outpatient 
Expenses
Low Income   -891.432 -100.681 -260.136 39.921
Group (990.940) (282.979) (619.846) (208.087)
Low & Middle
Income Group
-202.87 -170.031 -52.441 -575.829**
(1805.319) (162.662) (1037.970) (245.410)
Middle & High
Income Group
43.33 289.774 -1750.674 -692.24
(1241.852) (684.803) (1747.158) (792.634)
High Income   331.243 -468.503 1797.062 1179.879
Group (3411.630) (3673.441) (3021.812) (3245.599)
The NCMS significantly 
reduces the health care 
expenses of the low/middle 
income group patients;
But, it has no significant 
effects on the health care
expenses of other income
groups.
no effects
X :the observable variables,
θ: an unobservable individual-specific term  that affects the
outcome whether or not the individual is covered.
b: an unobserved individual-specific gain to the individual 
being covered by the program
The NCMS significantly 
increases the price of
health care services.
no effect
The NCMS increases the 
use of city level health care
service facilities.
After controlling for the effects of unobservable variables in the triple
difference model, the results on health outcomes and health
care of the NCMS are found to be different from the previous estimates 
using the DID method or simply using the regression method.
The NCMS can
- increase the supply of health care services (via reducing distance to 
a facility and waiting time inside the facility),
- reduce sickness, and
- reduce health care expenses of the low/middle income rural 
residents.
However, the study finds that the NCMS
- has no effects on participants’ self-assessment of feeling healthy,
- has the effect of increasing the price of health care services.
Limitation of the Study: 
The data were collected  only up to 2006, at which point the NCMS
had only been implemented for a short period of time. More 
comprehensive results may be obtained if the data can be extended 
to reflect more recent development and usage of the program.
Acknowledgments
The authors wish to thank the Y. C, Tang Disciplinary 
Fund, Zhejiang University, for funding the project.
Effects on
Health Care 
Minutes to 
Hospital by 
Bikes
Waiting Time to be 
Seen by a Health 
Worker in the 
Facility 
Flu Fee  
per 
Visit
Village  
Clinic
Private 
Clinic
Town 
Hospital
Country 
Hospital
City 
Hospital
Treated Group (cf.  -2.706* -2.484** 10.511** 0.001 -0.015 0.018 0.012 -0.039
Non-participant 
Group)
(1.57) (1.03) (4.76) (0.07) (0.06) (0.03) (0.02) (0.04)
Treated Group (cf. -2.475* -2.080** 15.510*** -0.078 -0.003 0.018 0.004 0.058*
Non-exposed Group) (1.28) (0.92) (3.34) (0.05) (0.04) (0.02) (0.02) (0.04)
The NCMS has the 
effect of reducing the
distance to health
care facilities.
The NCMS has a significant
effect of reducing the 
waiting time inside a health
care facility.
Definitions:

Estimating health insurance impacts under unobserved heterogeneity: the case of Vietnam's health care fund for the poor.&quot;

Extending health insurance to the rural population: An impact evaluation of China's new cooperative medical scheme.&quot;

Pilot program of NCMS in China: System design and progress.&quot; World Bank,

What do we really know about whether health insurance affects health,

The effects of New Cooperative Medicine Scheme coverage on health outcomes and health care in rural China

The effects of New Cooperative Medicine Scheme coverage on health outcomes and health care in rural China

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