Health Insurance

What is China’s NMCS?

In 2003, China introduced the New Cooperative Medical Scheme(NCMS), a health insurance scheme for the rural population. What is the NCMS?  Hou et al. (2014) describe the NMCS as follows:

As a voluntary and heavily subsidized scheme, it has seen extremely rapid growth of coverage in comparison with most new schemes in developing countries. By the end of 2011, 97.5% of the rural population (832 million people) had been enrolled in NCMS. Generally, the NCMS was primarily oriented at inpatient care and, especially, in the period before the 2009 Health Care Reform, characterized by rather high copayments and coinsurance rates. Outpatient care was typically covered through medical savings accounts (MSAs), which involve no risk pooling. Although the central government has issued broad guidelines for the design of the scheme, the policy details and implementation responsibilities have been decentralized to the county-level local governments. As a result, important scheme features, including the benefit package, the reimbursement level and the payment methods, display considerable variation across counties and over time, which can be used to identify the impact of the scheme.

How did NCMS affect the care patients receive? The authors exploit regional variation in the implementation of NCMS acoss six counties, three counties in Shandong province (Zhangqiu, Changle and Dong’e) and three in Ningxia province (Yongning, Qingtongxia and Zhongning). The authors find that NCMS is effective in increasing access to care but not in increasing financial protection.

We find clear evidence that adoption of a more generous scheme raises the probability of using both inpatient and outpatient care…We also find the variation in NCMS generosity to influence the choice of provider for inpatient care: all else equal, enrollees are more likely to choose providers with more generous reimbursement.

Our results indicate that NCMS has only limited effects on financial protection. No effects are found of NCMS on spending in the full sample, but conditional upon use, NCMS reduces the share of OOP spending for an outpatient visit. More worrisome is that we find higher NCMS cover to raise total spending per hospitalization and to increase the OOP spending per inpatient stay (among the users).

Based on these results, one should consider NMCS a promising first step, but currently only a partial success.


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