Does health insurance decrease health expenditure risk in developing countries? the case of China

Author/Creator ORCID




Towson University. Department of Economics


Citation of Original Publication

Juergen Jung & Jialu Liu, 2011. "Does Health Insurance Decrease Health Expenditure Risk in Developing Countries? The Case of China," Working Papers 2011-04, Towson University, Department of Economics, revised Apr 2014.



This paper studies the impact of health insurance on individual out-of-pocket health expenditures in China. Using China Health and Nutrition Survey data between 1991 and 2006, we apply two-part and sample selection models to address issues caused by censored data and selection on unobservables. We find that, although the probability of accessing health care increases with the availability of health insurance, the level of out-of-pocket health expenditure decreases. Our results from a selection model with instrumental variables suggest that having health insurance reduces the expected out-of-pocket health expenditure of an individual by 29.42 percent unconditionally. Meanwhile, conditional on being subjected to positive health expenditure, health insurance helps reduce out-of-pocket spending by 44.38 percent. This beneficial effect of health insurance weakens over time, which may be attributable to increases in the coinsurance rates of health insurances in China.