DOES CHINA'S RURAL COOPERATIVE MEDICAL SYSTEM ACHIEVE ITS GOALS? EVIDENCE FROM THE CHINA HEALTH SURVEILLANCE BASELINE SURVEY IN 2001

I. INTRODUCTION China's rural health care system has undergone a significant transformation since the late 1970s, when China embarked on the process of moving from a planned to market economy. The reform has led to the collapse of the old Cooperative Medical System (CMS)--a health care safety net which was an integrated part of the overall collective welfare system under the Rural Communes. The percentage of the rural population covered by health insurance decreased from 90% in the 1970s to 4.8% in 1989 (Liu et al. 1996). Without access to health insurance, the majority of rural households paid for health services' out-of-pocket. These households had greater difficulty gaining access to essential health care (Akin, Dow, and Lance 2004; Hesketh and Zhu 1997) and were more likely to be pushed into poverty (van Doorslaer et al. 2006). Previous studies in China indicate that about 30% to 50% of poor households attributed their low economic status to paying for medical care to treat the illnesses of the family members ( Chinese Ministry of Health 1998. 2003; Gu 1991). The Chinese government has been aware of these issues since the 1990s and has sought to address them by planning a new rural CMS nationwide. In the mid-1990s, the government initiated pilot programs in some rural counties. But in 2003, about 80% of the rural population still lacked any type of health insurance (Chinese Ministry of Health 2003). In 2004, the Chinese government announced an initiative to accelerate the development of the CMS. whereby the CMS would be established in every rural county by 2011. The goals of the new CMS include ensuring access to essential health services for the rural population (particularly the poorest members) and providing financial risk protection to rural residents with catastrophic illnesses. Except for the special issue of Health Economics in China, published in June 2009, the literature contains few studies on the impact of CMS pilot programs. Among limited studies, Liu et al. (2003) found that rural residents with insurance coverage are more likely to obtain health services than those without insurance, even after controlling for severity of illness and other factors. Wagstaffet al. (2007) investigated the impact of the CMS in some rural areas and suggested that the CMS increased health service utilization, but had a positive impact on catastrophic spending. Similar findings are generated by Yi et al (2009) and Lei and Lin (2009). In this article, using the individual and household level data from the China Health Surveillance Baseline 2001 Survey (CHSS), we conducted a case study on two CMS pilot programs in two counties with low coverage for medical services and investigated whether or not enrolling in the CMS pilot programs increases medical visits when an individual feels sick and decreases the likelihood of facing catastrophic spending for a household. Individuals or households covered only by the CMS and individuals or households without insurance coverage are included in the analysis. The self-selection issue is examined. A matched data set is generated to further address this issue. Using a two-part hurdle model to analyze the impact of the CMS on utilization, we find that, for individuals who reported being ill in the previous 2 weeks, the coverage of CMS significantly increased the likelihood of seeking health care services and the number of outpatient visits. This finding is robust to various estimation methods. At the household level, results from a logistic regression show that the CMS programs did not have a significant impact on households' out-of-pocket health expenditure and catastrophic spending. The regression results generated from the matched data are consistent with those obtained from the full set of data. The article is organized into five sections. Section II gives some background to the CHSS and the benefits design of the CMS in the two pilot counties. …