Beyond income: Multilevel medical security and relative deprivation–Evidence on rural household growth after health shocks

This paper studies whether medical security helps rural households recover from health shocks. We link medical insurance settlement records to a rural household panel and measure the realized share of medical costs covered by different security tiers. Higher medical security is associated with higher household net income per capita in the following year. The effect is partly explained by greater household business inputs, but is weaker when households face stronger human-capital investment pressure. The income gains are concentrated among households with low medical expenditure and those impoverished by illness. Decomposing payments by tier shows that basic medical insurance is positively associated with income, whereas commercial supplementary insurance has a negative short-run association that does not persist at longer lags. Finally, medical security raises absolute income but does not improve households’ relative economic position within the village. The results suggest that income recovery after health shocks depends not only on insurance coverage, but also on the timing and structure of cost sharing. The results suggest that basic insurance should remain the core cost-sharing tier, while high-expenditure households require complementary production and employment support, and commercial insurance requires faster claim settlement.