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A DID analysis of the impact of health insurance reform in the city of Hangzhou


  • Jiale Zhang

    (Graduate School of Economics, Osaka University, Japan)


The purpose of this study is to examine the impact of the 2003 reform of the health insurance system (in particular, the reduction in the co-payment amount) on the consumption of inpatient medical services in the city of Hangzhou using a differences-in-difference (DID) empirical strategy. The results confirm that private-sector employees (PSEs) (who were much more directly affected by the 2003 reform) were much more responsive to the reform than government employees. The growth rate of overall inpatient expenditures of PSEs (including retirees) increased by 26.4 percentage points more than that of government employees, which implies a relatively high (in absolute magnitude) price elasticity of demand for inpatient care of −1.10. Moreover, the growth rate of overall inpatient expenditures of currently employed PSEs increased by 37 percentage points more than that of government employees. Thus, the reform was effective in increasing PSEs' consumption of inpatient medical services, thereby reducing inter-occupational inequities. However, a gap still exists between government employees and PSEs in their consumption of inpatient medical services, and thus further reforms of the system (for example, further reductions in inter-occupational inequities) are needed. Copyright © 2007 John Wiley & Sons, Ltd.

Suggested Citation

  • Jiale Zhang, 2007. "A DID analysis of the impact of health insurance reform in the city of Hangzhou," Health Economics, John Wiley & Sons, Ltd., vol. 16(12), pages 1389-1402.
  • Handle: RePEc:wly:hlthec:v:16:y:2007:i:12:p:1389-1402 DOI: 10.1002/hec.1230

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    References listed on IDEAS

    1. Meng, Qingyue & Rehnberg, Clas & Zhuang, Ning & Bian, Ying & Tomson, Goran & Tang, Shenglan, 2004. "The impact of urban health insurance reform on hospital charges: a case study from two cities in China," Health Policy, Elsevier, vol. 68(2), pages 197-209, May.
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    3. Mari Kan & Wataru Suzuki, 2006. "The demand for medical care in Japan: initial findings from a Japanese natural experiment," Applied Economics Letters, Taylor & Francis Journals, vol. 13(5), pages 273-277.
    4. David Meltzer & Jeanette Chung & Anirban Basu, 2002. "Does Competition under Medicare Prospective Payment Selectively Reduce Expenditures on High-Cost Patients?," RAND Journal of Economics, The RAND Corporation, vol. 33(3), pages 447-468, Autumn.
    5. Mocan, H. Naci & Tekin, Erdal & Zax, Jeffrey S., 2004. "The Demand for Medical Care in Urban China," World Development, Elsevier, vol. 32(2), pages 289-304, February.
    6. Tu, Feng & Tokunaga, Shoji & Deng, ZhouLu & Nobutomo, Koichi, 2002. "Analysis of hospital charges for cerebral infarction stroke inpatients in Beijing, People's Republic of China," Health Policy, Elsevier, vol. 59(3), pages 243-256, March.
    7. Liu, Yuanli, 2002. "Reforming China's urban health insurance system," Health Policy, Elsevier, vol. 60(2), pages 133-150, May.
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    Cited by:

    1. Xilong Pan & Hassan H. Dib & Minmin Zhu & Ying Zhang & Yang Fan, 2009. "Absence of appropriate hospitalization cost control for patients with medical insurance: a comparative analysis study," Health Economics, John Wiley & Sons, Ltd., vol. 18(10), pages 1146-1162.
    2. Adam Wagstaff & Winnie Yip & Magnus Lindelow & William C. Hsiao, 2009. "China's health system and its reform: a review of recent studies," Health Economics, John Wiley & Sons, Ltd., vol. 18(S2), pages 7-23, July.
    3. Schreyögg, Jonas & Grabka, Markus M., 2010. "Copayments for Ambulatory Care in Germany: A Natural Experiment Using a Difference-in-Difference Approach," EconStor Open Access Articles, ZBW - German National Library of Economics, pages 331-341.
    4. Ha Trong Nguyen & Luke B Connelly, 2017. "Cost-sharing in health insurance and its impact in a developing country: evidence from a quasi-natural experiment," Bankwest Curtin Economics Centre Working Paper series WP1702, Bankwest Curtin Economics Centre (BCEC), Curtin Business School.

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