The Impact of Health Insurance in Rural China : Evidence from the New Cooperative Medical Scheme

China's old rural Cooperative Medical Scheme (CMS) all but collapsed following the economic reforms of the early 1980s. In an effort to reduce financial risk and make health care more affordable, the Government of China recently began piloting of a new voluntary health insurance scheme for rural areas, commonly referred to as the New Cooperative Medical Scheme (NCMS). Using panel data from both households and providers, this paper provides an early assessment of the impact of the NCMS on medical expenditures, prevalence of catastrophic health care expenditures, use of health services, and facility revenues and activities. It shows NCMS enrollment is influenced by income level, health status, and other observable characteristics. Controlling for selection bias using differences-in-differences and matching methods, the paper finds that the scheme has increased utilization of health services. However, it has not reduced out-of-pocket spending or the risk of catastrophic health expenditures. The household level evidence is consistent with findings of increased service volumes and revenues at facility level