You are here

The Impact of Cost-Sharing on Hospital Expenditure in China: A Regression Discontinuity Approach*

Bei Lu

Bei Lu, Mi Hong, Guanggang Feng, John Piggott and Guy Mayraz

Abstract: This paper uses a unique dataset of seriously ill patients in China across the retirement window to analyse the impact of a change in the co-pay ratio at retirement on inpatient expenditures. We find that a decrease in the co-pay ratio (that is, a lower proportion of cost borne by the user) leads to an increase in medical insurance spending. Surprisingly, out-of-pocket spending also increases.  Individuals' Medical Saving Account (MSA) balances are associated with higher inpatient expenditures. Results indicate that cost-sharing arrangements in China are very sensitive to changes in the co-pay ratio, an effect which appears to be magnified by significant MSA balances. The reduction in the co-pay at retirement leads to substantial increases in medical expenditures at that time. If policy reform is aimed at containing aggregate health expenditures, the retirement age change in the co-pay rate should be re-visited.

JEL Classification Numbers: I13, I14, I15

Keywords: health policy, co-pay; cost-sharing, medical savings accounts, medical expenditure

PDF icon Download (718.56 KB)