The Crowding Out Effect Of Urban Medical Insurance In China

The medical security system is also an essential economic and social system for the country, with a focus on improving the population health. Since 2009, the CPC Central Committee and the State Council have proposed that "efforts should be made to quicken the construction and improvement of the multi-layer medical security system covering urban and rural residents, with the basic medical security as the main body, and other diversified supplemental medical insurance and commercial health insurance as the supplement". By defining the boundaries and relationships between different medical insurance programs, it not only helps the government intervention as a 'visible hand' to quicken the construction and improvement of basic medical security system, but also assists the commercial health insurance companies as an 'invisible hand' to steadily expand the socialist health insurance market.The study objects in this dissertation are Urban Employee Basic Medical Insurance (UEBMI), Urban Resident Basic Medical Insurance (URBMI),and Commercial Health Insurance (CHI), with the relationships between theses three insurance programs as the principle line of research, and the development history and existing problems of China's urban medical insurance system as the basic research question. This dissertation uses the data from the State Council URBMI household survey (2007-2010) and employs empirical methods to examine the'crowding out' effect of UEBMI on URBMI,of URBMI on UEBMI,and of URBMI on CHI. The specific research contends and major viewpoints are as follows.First, there is an invisible role of medical security by the Medical Savings Account (MSA) in UEBMI on the uninsured members in the family where one or more than one members are UEBMI beneficiaries. When the uninsured residents facing choices of whether or not participating in URBMI, they will consider not only their income, health conditions and so forth, but also give considerations to the interests of the whole family. As long as the UEBMI of one or more than one family members can fully meet the individual demand for medical security of the rest family members who are eligible for URBMI, the demand for insurance of these groups of people would be significantly crowded out. This is the adverse selection in a specific historical background. When empirically examining the impact of having UEBMI beneficiaries in a family on the URBMI participations for the rest of the family members who are eligible, we found: for those who are male,without chronic conditions, with better self-rated health, without sick conditions for the past two weeks, without hospital admissions for the past year, or non-students with lower income, there exists significant crowding-out effect of having one or more than one UEBMI beneficiaries in the family on the other family members' demand for URBMI. The crowding-out effect is derived from the MSA in UEBMI in that it subsidizes the other family members for their outpatient care and medicines; and this subsidizing role almost meets the demand for medical services at a low level. The research findings show that, on the one hand, the free-riding behavior of those MSA beneficiaries satisfies the demand for care of some of the other family members (spill-over effect); on the other hand, the free-riding behavior also undermines the interests of other UEBMI enrollees.Therefore, we need to regulate the scope of functions of MSA, to further improve the management of MSA, and explores family accounts.Second, the coverage of UEBMI and URBMI barely overlap with each other,except for the flexible employees. As stipulated in the Social Insurance Law of the People's Republic of China, the flexible employees are eligible to participate in UEBMI. Meanwhile, most regions set rules that those flexible employees who are not participated in UEBMI are eligible to participate in URBMI, and people can switch between the two basic medical insurance programs. Using the data sample of the flexible employees who enroll in URBMI, we also preliminarily examine the crowding-out effect of URBMI on UEBMI. The conclusions are as follows: for those male flexible employees with lower income or lower age, they tend to switch from UEBMI to URBMI (i.e. the crowding-out effect of URBMI on UEBMI).However, for those flexible employees with high level of income, they prefer to purchase UEBMI after comparing between the two (i.e. the spill-over effect of URBMI on flexible employees with high income). The magnitude of impact for either crowding-out effect or spill-over effect increases over time based on the dynamic trend. Therefore, we should be cautious in defining the relationship between URBMI and UEBMI as either substitutive or complementary, and whether there is a crowding-out effect or a spill-over effect. The results are contingent on the sample group and time of study. The flexible employees choose their basic insurance programs based on their family income. It will put forward new requirements for the basic medical insurance agencies to formulate and/or adjust their policies of switching between URBMI and UEBMI,benefit package,premium, and so forth. It will also bring new challenges for the personnel to improve their professional and actuarial skills.Third, the expansion of coverage of URBMI will produce a certain impact on the existing CHI market, making some individuals or families drop their expensive commercial insurance policy to participate in the basic medical insurance (i.e. the crowding-out effect of URBMI on CHI). The empirical analyses of the residents by different age groups find that for adults above 18 years old, the crowding-out effect is as high as 2.11% of URBMI on CHI,which remains constant over the four years; for those under 18 years old, there is no crowding-out effect of URBMI on CHI. The research findings show that, on the one hand, part of the medical security role of CHI is replaced by URBMI; on the other hand, we document significantly different pattern of crowding-out effect for different age groups of residents, which reflects a flow of family resources towards juveniles. It provides a market opportunity for the development of CHI, and also provides an evidence-based support for promoting the complementation and coordination of social medical insurance programs and CHI in the long run.Fourth, based on the empirical research, we provide policy recommendations for the reasonable cohesions and win-win cooperation of different urban medical insurance programs. We need (?) to upgrade the major tasks for URBMI from coverage expansion to improving the level of security,to quicken the process of reimbursing outpatient care, 'to optimize the payment method for outpatient care, to improve the quality apart from the coverage of national medical security systems,to bring benefit to the general enrollees, to increase enrollee satisfaction, and to increase the level of population health; (?) to provide a equal basic benefit package for every individual and family, to achieve unification of URBMI and UEBMI when the benefit package and coverage reach a certain level,and to achieve enrollment with family as a unit. (?) CHI companies should accurately understand the relevant medical insurance policies and medical security demand from different groups of people,adjust their scope of business,provide professionalized and diversified health insurance product,and develop potential consumers,meanwhile,introduce and reserve multi-disciplinary talents step by step as planned and reinforce industry regulation, form a healthy and well-ordered insurance market. (?) We also need to make good efforts to build information platform to facilitate the communications between doctors, patients, hospitals, and payers.As one of the first empirical doctoral dissertation on the relationship between different urban medical insurance programs from perspective of crowding-out effect, this dissertation is innovative from the following aspects:First, this dissertation is one of the first empirical researches on the crowding-out effect in different urban medical insurance programs. There is no lack of research on the construction and improvement of medical security system in China, but there is a lack of research on the crowding out effect between different urban medical insurance programs. Among the past literatures, most of them are either theoretical research or empirical researches that focus on the crowding-out effect of New Cooperative Rural Medical System (NCRMS) on CHI.There is barely any research on the relationship between URBMI and UEBMI.Therefore, this dissertation is innovative in. its topic selection and empirical methodologies.Second, this dissertation adopts a new perspective to examine the relationship between URBMI and UEBMI. Starting from the theories in resource allocation within the family,this dissertation examines the impact of the UEBMI enrollment status of family members on the decisions in participating in URBMI, using Logit regression model. It proves that there are adverse selection problem under the specific historical context from a new perspective. The study not only helps understand the motives and tendencies for urban residents to participate in the basic medical insurance programs in a comprehensive way,but also helps to effectively promote the unification of the two systems with a great realistic and directive significance.Third, this dissertation thoroughly evaluates the impact of the coverage expansion and increase of benefit package of URBMI on the residents' behaviors in participating in CHI. OLS, Probit, Logit and IV models are used to testify the substitutive relationship between URBMI and CHI at the present stage, in order to illustrate the impact on the relatively underdeveloped CHI market by the change of social insurance policies. CHI plays an insufficient role as a supplement to social medical insurance programs; and there is a potential market to explore of the CHI in China. This dissertation fills the academic gap in the empirical studies on crowding-out effect of URBMI on CHI in China..