China’s Health Insurance Reform And Disparities In Healthcare Utilizatio And Costs A Long Gitudinal Analysis

CHILDREN AND FAMILIES EDUCATION AND THE ARTS The RAND Corporation is a nonprofit institution that helps improve policy and decisionmaking through research and analysis ENERGY AND ENVIRONMENT HEALTH AND HEALTH CARE INFRASTRUCTURE AND TRANSPORTATION This electronic document was made available from www.rand.org as a public service of the RAND Corporation INTERNATIONAL AFFAIRS LAW AND BUSINESS Skip all front matter: Jump to Page 16 NATIONAL SECURITY POPULATION AND AGING PUBLIC SAFETY SCIENCE AND TECHNOLOGY TERRORISM AND HOMELAND SECURITY Support RAND Browse Reports & Bookstore Make a charitable contribution For More Information Visit RAND at www.rand.org Explore the Pardee RAND Graduate School View document details Limited Electronic Distribution Rights This document and trademark(s) contained herein are protected by law as indicated in a notice appearing later in this work This electronic representation of RAND intellectual property is provided for noncommercial use only Unauthorized posting of RAND electronic documents to a non-RAND website is prohibited RAND electronic documents are protected under copyright law Permission is required from RAND to reproduce, or reuse in another form, any of our research documents for commercial use For information on reprint and linking permissions, please see RAND Permissions This product is part of the Pardee RAND Graduate School (PRGS) dissertation series PRGS dissertations are produced by graduate fellows of the Pardee RAND Graduate School, the world’s leading producer of Ph.D.’s in policy analysis The dissertation has been supervised, reviewed, and approved by the graduate fellow’s faculty committee Dissertation China’s Health Insurance Reform and Disparities in Healthcare Utilization and Costs A Longitudinal Analysis Henu Zhao C O R P O R AT I O N Dissertation China’s Health Insurance Reform and Disparities in Healthcare Utilization and Costs A Longitudinal Analysis Henu Zhao This document was submitted as a dissertation in October 2014 in partial fulfillment of the requirements of the doctoral degree in public policy analysis at the Pardee RAND Graduate School The faculty committee that supervised and approved the dissertation consisted of Hao Yu (Chair), Emmett Keeler, and Gema Zamarro PA R D E E R A N D GRADUATE SCHOOL The Pardee RAND Graduate School dissertation series reproduces dissertations that have been approved by the student’s dissertation committee The RAND Corporation is a nonprofit institution that helps improve policy and decisionmaking through research and analysis RAND’s publications not necessarily reflect the opinions of its research clients and sponsors R® is a registered trademark Permission is given to duplicate this document for personal use only, as long as it is unaltered and complete Copies may not be duplicated for commercial purposes Unauthorized posting of RAND documents to a non-RAND website is prohibited RAND documents are protected under copyright law For information on reprint and linking permissions, please visit the RAND permissions page (http://www.rand.org/publications/permissions.html) Published 2015 by the RAND Corporation 1776 Main Street, P.O Box 2138, Santa Monica, CA 90407-2138 1200 South Hayes Street, Arlington, VA 22202-5050 4570 Fifth Avenue, Suite 600, Pittsburgh, PA 15213-2665 RAND URL: http://www.rand.org/ To order RAND documents or to obtain additional information, contact Distribution Services: Telephone: (310) 451-7002; Fax: (310) 451-6915; Email: order@rand.org Table of Contents  Tables v Figures ix Abstract xi Acknowledgements xiii Chapter 1 Introduction Chapter 2 Background 3 2.1 Health insurance reform in China 2.1.1 Collapse of health insurance schemes in the 1970s and 1980s 4 2.1.2 Early efforts in the 1980s and early 1990s 5 2.1.3 Health insurance reform since the late 1990s 2.1.4 Healthcare reform after 2009 2.2 Three Major Health Insurance Schemes 10 2.2.1 The Basic Medical Insurance for Urban Employees 10 2.2.2 The Basic Medical Insurance for Urban Residents 11 2.2.3 The New Rural Cooperative Medical Insurance 13 2.3 Trends and Current Status of Healthcare Disparities 13 Chapter 3 Literature Review and Study Objectives 19 3.1 Existing Research 19 3.1.1 Literature on Rural–Urban Disparities in Healthcare Utilization 19 3.1.2 Literature on Disparities in Out‐of‐Pocket Expenditure and Healthcare Costs 21 3.1.3 Literature on Disparities in Health Insurance Coverage 22 3.1.4 Methodological Issues 22 3.2 Gap in the Existing Literature 26 3.3 Objectives and Research Questions 27 Chapter 4 Study Design 28 4.1 Data 28 4.2 Study Periods 30 4.3 Conceptual Model and Variable Selection 30 4.3.1 Dependent Variables 31 4.3.2 Independent Variables 33 4.4 Analytic Approach 38 4.4.1 Difference‐in‐Differences Analysis with Multiple Groups and Multiple Time Periods 38 4.4.2 Multivariate Regression for the Variables that do not meet the Assumption of Parallel Trends 44 4.5 Sensitivity analysis 46 4.5.1 Controlling for Insurance Status 46 4.5.2 Dropping the Richest Province or the Poorest Province 46 iii 4.5.3 Including Interaction Terms with Household Income 47 4.5.4 DID Analysis Results for Variables in Which Parallel Trends did not Hold 47 Chapter 5 Results: Disparities in Healthcare Utilization 48 5.1 Descriptive Analysis 48 5.2 DID Analysis for Formal Care Utilization and Outpatient Utilization 51 5.3 Multivariate Analysis Controlling for Existing Trends for Inpatient Utilization 57 5.4 Sensitivity Analysis 64 5.4.1 Controlling for Insurance Status 64 5.4.2 Dropping the Richest Province or the Poorest Province 71 5.4.3 Including Interaction Terms with Household Income 80 5.4.4 DID Analysis for Inpatient Care 84 5.5 Summary of Findings 85 Chapter 6 Results: Disparities in healthcare costs 88 6.1 Descriptive Analysis 88 6.2 Multivariate Analysis Controlling for Existing Trends 91 6.3 Sensitivity Analysis 103 6.3.1 controlling for health insurance status 103 6.3.2 dropping the richest province or the poorest province 107 6.3.3 Including interaction terms with household income 116 6.3.4 DID analysis results for cost variables 131 6.4 Summary of Findings 133 Chapter 7 Conclusion, Discussion, and Policy Implications 135 7.1 Conclusion 135 7.2 Discussion 137 7.2.1 Comparing With the Published Research 137 7.2.2 Strengths 138 7.2.3 Limitations 139 7.2.4 Future Directions 140 7.3 Policy Implications 140 Appendix 143 Reference 145   iv Tables  Table 4.1 Sample Size by Rural and Urban Residences and Registrations 29 Table 4.2 Descriptive Statistics of Independent Variables by Rural and Urban Residences and Registrations 37 Table 4.3 Results of DID Analysis Using 1993 and 1997 Waves for Healthcare Utilization 42 Table 4.4 Results of DID Analysis Using 1993 and 1997 Waves for Healthcare Costs 44 Table 5.1 DID Analysis Results for Formal Care Utilization and Outpatient Utilization 54 Table 5.2 Test Results for DID Analysis of Formal Care Utilization and Outpatient Utilization 55 Table 5.3 Multivariate Analysis Results for Inpatient Care Utilization 59 Table 5.4 Test Results of Disparities for Inpatient Care Utilization 60 Table 5.5 Test Results of Change in Disparities for Inpatient Care Utilization 62 Table 5.6 DID Analysis Results of Formal Care and Outpatient Utilization (Controlling for Insurance Status) 65 Table 5.7 Test Results for DID Analysis of Healthcare Utilization (Controlling for Insurance Status) 66 Table 5.8 Multivariate Analysis Results for Inpatient Care Utilization (Controlling for Insurance Status) 67 Table 5.9 Test Results of Disparities for Inpatient Care Utilization (Controlling for Insurance Status) 69 Table 5.10 Test Results of Change in Disparities for Inpatient Care Utilization (Controlling for Insurance Status) 70 Table 5.11 DID Analysis Results for Formal Care and Outpatient Utilization (Dropping the Richest Province) 73 Table 5.12 Test Results for Formal Care and Outpatient Utilization (Dropping the Richest Province) 74 Table 5.13 DID Analysis Results for Formal Care and Outpatient Utilization (Dropping the Poorest Province) 75 Table 5.14 Test Results for Formal Care and Outpatient Utilization (Dropping the Poorest Province) 76 v Table 5.15 Multivariate Analysis Results for Inpatient Utilization (Dropping the Richest/Poorest Province) 77 Table 5.16 Test Results of Disparities in Inpatient Utilization (Dropping the Richest/poorest Province) 78 Table 5.17 Test Results of Change in Disparities for Inpatient Care Utilization (Dropping the Richest/poorest Province) 79 Table 5.18 DID Analysis Results for Formal Care and Outpatient Utilizations (Including Interaction Term with Household Income) 82 Table 5.19 Test Results for Formal Care and Outpatient Utilizations (Including Interaction Term with Household Income) 83 Table 5.20 DID Analysis Results for Inpatient Care Utilization 84 Table 5.21 Test Results for Inpatient Care Utilization (DID Analysis) 85 Table 6.1 Multivariate Analysis Results for OOP Exceeding Certain Percentage of Household Income 93 Table 6.2 Multivariate Analysis Results for Total Healthcare Costs 95 Table 6.3 Test Results of Disparities for OOP Exceeding Certain Percentage of Household Income 100 Table 6.4 Test Results of Changes in Disparities for OOP Exceeding Certain Percentage of Household Income 101 Table 6.5 Bootstrap Results for Disparities in Total Health Costs 103 Table 6.6 Multi‐variate Analysis Results for OOP Exceeding Certain Percentage of Household Income (Controlling for Insurance) 104 Table 6.7 Test Results of Disparities for OOP Exceeding Certain Percentage of Household Income (Controlling for Insurance) 105 Table 6.8 Test Results of Changes in Disparities for OOP Exceeding Certain Percentage of Household Income (Controlling for Insurance) 106 Table 6.9 Bootstrap Results for Disparities in Total Health Cost (Controlling for Insurance) 107 Table 6.10 Multi‐variate Analysis Results for OOP Exceeding Certain Percentage of Household Income (Dropping the Richest Province) 109 Table 6.11 Test Results of Disparities for OOP Exceeding Certain Percentage of Household Income (Dropping the Richest Province) 110 vi Table 6.12 Test Results of Changes in Disparities for OOP Exceeding Certain Percentage of Household Income (Dropping the Richest Province) 111 Table 6.13 Multi‐variate Analysis Results for OOP Exceeding Certain Percentage of Household Income (Dropping the Poorest Province) 112 Table 6.14 Test Results of Disparities for OOP Exceeding Certain Percentage of Household Income (Dropping the Poorest Province) 113 Table 6.15 Test Results of Changes in Disparities for OOP Exceeding Certain Percentage of Household Income (Dropping the Poorest Province) 114 Table 6.16 Bootstrap Results for Disparities in Total Health Costs (Dropping the Richest Province) 115 Table 6.17 Bootstrap Results for Disparities in Total Health Cost (Dropping the Poorest Province) 116 Table 6.18 Multi‐variate Analysis Results for OOP Exceeding Certain Percentage of Household Income (Low‐income Families) 118 Table 6.19 Test Results of Disparities for OOP Exceeding Certain Percentage of Household Income (Low‐income Families) 119 Table 6.20 Test Results of Changes in Disparities for OOP Exceeding Certain Percentage of Household Income (Low‐income Families) 120 Table 6.21 Multi‐variate Analysis Results for OOP Exceeding Certain Percentage of Household Income (Medium‐income Families) 122 Table 6.22 Test Results of Disparities for OOP Exceeding Certain Percentage of Household Income (Medium‐income Families) 123 Table 6.23 Test Results of Changes in Disparities for OOP Exceeding Certain Percentage of Household Income (Medium‐income Families) 124 Table 6.24 Multi‐variate Analysis Results for OOP Exceeding Certain Percentage of Household Income (High‐income Families) 126 Table 6.25 Test Results of Disparities for OOP Exceeding Certain Percentage of Household Income (High‐income Families) 127 Table 6.26 Test Results of Changes in Disparities for OOP Exceeding Certain Percentage of Household Income (High‐income Families) 128 Table 6.27 Bootstrap Results for Disparities in Total Health Costs (Low‐income Families) 129 Table 6.28 Bootstrap Results for Disparities in Total Health Costs (Medium‐income Families) 130 vii Table 6.32 Bootstrap Results for Disparities in Total Health Costs (DID Analysis) disparity  Mean  Std. Err.  [95% Conf.  Interval]  Group RR period 1  37.136  0.485  36.183  38.089  Group RR period 2  242.434  3.155  236.236  248.632  Group RR period 3  120.964  1.393  118.226  123.701  Group RR period 4  68.133  1.385  65.413  70.853  Group RU period 1  34.784  0.550  33.703  35.865  Group RU period 2  233.906  3.186  227.646  240.165  Group RU period 3  129.381  1.479  126.476  132.287  Group RU period 4  22.255  1.753  18.811  25.699  Group UR period 1  27.080  0.600  25.902  28.259  Group UR period 2  211.009  3.431  204.267  217.751  Group UR period 3  42.139  2.338  37.545  46.733  Group UR period 4  75.695  1.442  72.861  78.529  6.4 Summary of Findings  The disparity in having high OOP exceeding 20%/40% of household income was reversed Rural residents and people with rural registrations were all less likely to have high OOP exceeding a certain percentage of their household income compared with Group UU The same was true with total healthcare costs Rural residents experienced lower healthcare costs than did urban residents Disparities in high OOP cost with Group UU were more significant in Group RR than the other two groups The disparities in high OOP were significantly reduced in 2009 compared with disparities in 1997 There is no evidence showing that more health insurance coverage had an immediate impact on high level of OOP 133 Disparities in total health costs were associated with insurance coverage Providing more health insurance would increase the chance of having any health cost, as well as the average amount of total health costs Having health insurance coverage could partly explain the disparities and changes in disparities Providing more insurance coverage actually made people worse off in terms of being more likely to have high OOP expenditures The disparities and changes in disparities were more significant in rich provinces than in poor provinces The disparities in high OOP were not significant in low‐ and high‐income families The changes in disparities were in different direction in low‐income families, although the changes in disparities were not significant In terms of total health costs, the magnitude of disparities was generally smaller within low‐income families In later years, the disparities in low‐income families in Group RR and Group RU were not significant 134 Chapter 7 Conclusion, Discussion, and Policy Implications  7.1 Conclusion  Using DID and multivariate analysis and drawing on seven waves of longitudinal data from CHNS, I was able to illustrate the trends of rural–urban disparities in healthcare utilization and cost, in conjunction with the major health insurance policy changes I was also able to examine whether the government’s health insurance policy changes affected changes in disparities From my results, it seems clear that there have always been rural–urban disparities in formal care utilization and outpatient visits Urban residents used formal care and outpatient visits more than did rural residents Results from DID analysis indicate that the rural–urban disparities in formal care utilization and outpatient visit were significantly affected by the policy changes in health insurance coverage When the government provided more health insurance coverage for residents with rural registration, the disparities in formal care and outpatient utilization decreased for Groups UR and RR Only for Group RR, the negative trend of using inpatient care was alleviated during later years However, there was no evidence showing that disparity in inpatient care utilization was also correlated with health insurance coverage The 2003 policy change in rural areas among residents with rural household registration reduced rural–urban disparities Providing more health insurance coverage to residents with rural household registration reduced the disparity between Groups RR and UR, allowing residents with rural household registration to use more formal healthcare and outpatient visits compared with Group UU The reform also reduced disparities between Groups RU and Group UU, suggesting that people in Group RU who had urban household 135 registration but resided in rural areas, benefited from the improved healthcare environment The 2003 policy change in rural areas brought the disparity down to the original level in 1990s This change occurred for both Group RR and UR After controlling for insurance status, the positive effects could still be observed in the two groups This finding indicates that the positive effects not only came from more health insurance coverage but also from other related measures that improved the healthcare environment Compared with the base model, the change in disparities was the largest for Group RR This indicates that the Group RR benefited most from the expanded health insurance coverage The policy change in 2003 affected both poor and rich provinces However, the expanded health insurance coverage was more effective in richer provinces The policy effect on poorer province was associated more closely with other measures aimed at changing the environment in rural areas, such as construction of basic medical facilities The positive impact on formal care and outpatient utilization of the 2003 policy change occurred mainly among high‐income families In the medium‐income group, there was no significant impact In the low‐income group, the positive impact was observed only in Group UR The disparity in financial risk was reversed In 2009, the disparities in high OOP were significantly reduced from the level in 1997 However, there was no evidence showing that the 2003 policy change in rural areas affected rural–urban disparities in financial risk The rural‐urban disparity in total healthcare costs was also reduced When the government provided more health insurance coverage in urban area, the rural‐urban 136 disparity in healthcare costs increased, and vice versa This was consistent with the finding for healthcare utilization More health insurance coverage in rural areas led to a smaller rural–urban disparity in healthcare utilization In order to test the sensitivity of results, I also performed sensitivity analysis by dropping the richest and the poorest provinces from the sample For both high OOP and total health costs, sensitivity analysis showed that the disparities and changes in disparities were more significant in the rich provinces I further examined the different impacts for different income groups The disparities in high OOP were not significant for the low‐ and high‐income families In terms of total health costs, the magnitude of the disparities was generally smaller within the low‐income families In later years, the disparities in low‐income families between Group RR and UU or between Group RU and UU were no longer significant This indicates that the disparities in total health costs finally diminished in low‐income families Low‐income families in Groups RR and RU had similar levels of total health costs to the costs of low‐income families in Group UU 7.2 Discussion  7.2.1 Comparing With the Published Research My findings agree with previous researchers who claimed there are rural–urban disparities in healthcare utilization My research further shows that the disparities were the most significant within rural residents with rural registration, and the disparity was alleviated after a set of health policy changes Regarding healthcare costs, my research conclusions agree with those of Wagstaff & Lindelow (2009), who claimed that providing 137 more health insurance coverage does not necessarily mean more financial protection Instead, although not statistically significant, I found the disparity in high OOP was reversed Rural residents were less likely to have high OOP compared with urban counterparts Wagstaff & Lindelow (2009) explained this case by noting the balance between better health and higher costs This could represent a possible explanation of the Chinese case The insured tend to use more formal healthcare, and their total health costs are also high However, the benefit coverage from NRCM is limited for outpatient visits, and the reimbursement cap is relatively low Therefore, the benefit coverage may be enough to encourage the insured to use more formal care but not sufficient to provide enough financial protection This explanation is also supported by the findings from the analyses for healthcare utilization and total healthcare costs 7.2.2 Strengths My research used a new classification of rural and urban By classifying the respondents into four categories, I was able to obtain a more accurate estimate of the effect from insurance coverage expansion, as well as to examine the impact of the residing environment My research provided a holistic picture of trends of rural–urban disparities in health insurance coverage, healthcare utilization, and healthcare cost in China over 20 years of the rapid‐reform era, which encompassed three major health insurance policy changes In my research, I examined the correlation between expansion of insurance coverage and healthcare utilization and healthcare cost, contributing new knowledge to a topic not well studied 138 My DID model included three major policy changes in China, providing more thorough evidence on the impact of policy change in health insurance coverage on rural–urban disparities in China I explored the policy effects in different subgroups of the population, providing new evidence to answer the research questions and enabling policy makers to examine policy effects at a deeper and more detailed level 7.2.3 Limitations Five limitations should be mentioned First, there might be an underestimation of the policy effect, since the definition of rural/urban residents and the definition of rural/urban household registration were not consistent Some of the urban residents held rural household registration, and the same was true for rural residents Therefore, no matter the definition used, I was not able to provide a precise estimate of the policy effect on rural–urban disparities Second, the three major policy changes focused on public health insurance coverage, and involved providing more coverage to certain groups of people each time However, during the same time periods, there were other policy changes, which also affected rural and urban residents differently, such as construction of health facilities, training of health workers, and changes in drug policy Due to the methodology, I could not separate the effect of policy expansion of health insurance coverage Third, my study did not distinguish the effects between the 2007 insurance expansion for urban residents and the 2009 national health care reform due to a lack of data in 2008 139 Fourth, I did not use a nationally representative sample Fifth, inpatient care utilization constituted a very low percentage in my sample; thus, I was not able to fully examine the change of disparity in inpatient care utilization Finally, I studied only healthcare utilization and costs; other related areas such as health outcome and mortality were outside the scope of this project 7.2.4 Future Directions Future research should involve the following: Examine the effect of different policy changes other than insurance using more detailed data Future studies need to differentiate the effects of the 2007 insurance expansion and the 2009 national health care reform Use a nationally representative sample to estimate the average policy effect in China Conduct more research on disparities in inpatient care utilization Study disparities in other healthcare‐related areas, such as health status and mortality 7.3 Policy Implications  Three important policy implications can be drawn from the results of this study First, more health insurance and better benefit coverage is needed As I found from the analysis, the policy changes that provided increased health insurance coverage to rural groups reduced rural–urban disparities in healthcare utilization and total healthcare costs However, current policy has not been able to reduce the rural–urban disparity in 140 healthcare to the original 1980s level Disparities still exist in the studied areas Therefore, policy makers should provide more healthcare coverage and healthcare resources to rural areas to further reduce the disparity I also found that rural groups were initially less likely to have high OOP, compared to the urban groups Rural groups also had lower total health costs than did urban groups When the government provided more health insurance to rural groups, the disparities decreased in high OOP as well as in total healthcare costs Insurance failed to provide financial protection in this case This result may indicate that the benefit coverage was not sufficient Therefore, better benefit coverage should be provided to rural groups Second, in order to reduce rural–urban disparities, policy makers should also consider policy directions other than offering increased health insurance coverage, such as construction of healthcare facilities, health education, and so on In my analysis, I found that the environment was also important because the environment determined the resources a person received The policy actions changed the environment and provided more healthcare resources to rural residents These actions are important policy alternatives in reducing rural–urban disparities Third, disadvantaged groups should receive more attention In terms of healthcare utilization as well as in total health costs, current policy affects rich provinces more than it affects poor provinces Therefore, new policy could provide more benefit coverage to rural residents in poor provinces The positive impact on healthcare utilization of the 2003 policy change occurred mainly in high‐income and medium‐income groups Therefore, new policy changes should focus more on low‐income groups in rural area In terms of financial 141 protection, high‐income groups also benefited more than did low‐income groups When designing new health insurance policy, policy makers should provide different benefit coverage to different income groups, and low‐income groups should receive more coverage As discussed in Chapter 2, the new round of healthcare reform is intended to provide universal coverage to all residents; the focus of the new reform is the disadvantaged population These actions are all consistent with my research findings 142 Appendix  Table A1 Major health insurance schemes Urban Employee Basic  Medical Insurance     Launching Time  1998  2007  2003  Urban Employee  Urban Resident who are  not covered by UEBMI  Rural Resident  Risk Pools  County level  City level  City level  Premium Paid By  Employer and  Employee  Government and insured  individual  Government and  insured individual  Annual Premium Level  (2012)  Employer pays 6% of  employee's wage,  employee pays 2% of  the wage  At least 300 CNY, in which  At least 300 CNY, in  government pays 240 CHY/  which government pays  insured  240 CHY/ insured  Reimbursement Cap (2012)  6 times of local average  salary (at least 60000  CNY)  6 times of local per capita  income (at least 60000  CNY)  8 times of local per  capita income (at least  60000 CNY)  Covered Services            Inpatient Services  Covered  Covered  Covered  Outpatient Services for  Catastrophic Illnesses  Covered  Covered  Covered  General outpatient services  Covered  Limited and vary by  location  Limited and vary by  location  237  195  New Rural Cooperative  Medical Insurance  Insured Population  Number of Insured at 2010  Year‐end (Million)  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