Expenditure response to patient cost-sharing: evidence from China’s New Cooperative Medical Scheme

This study investigates healthcare expenditure responses to cost-sharing reduction in rural China. Using administrative claims data, we exploit a quasi-experimental setting under the New Cooperative Medical Scheme and identify the effect of cost-sharing using a difference-in-differences strategy. We find an overall price elasticity of inpatient expenditure of − 0.633, of which the extensive margin and intensive margin elasticities are − 0.407 and − 0.226, respectively. Expenditure responses on the extensive margin are heterogeneous by patient age, health, and poverty status. Further analyses suggest that providers’ financial incentives play a role in the intensive margin responses. We also find a reduction in rural residents’ exposure to out-of-pocket expenditure risk after the cost-sharing reduction. Our findings can help policymakers in developing countries enhance financial protection for low-income people and design effective cost-control policies.