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Does Health Insurance Lead to Ex ante Moral Hazard? Evidence from China’s New Rural Cooperative Medical Scheme

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  • Xuezheng Qin

    (School of Economics, Peking University, Beijing 100871, China)

  • Tianyi Lu

    (School of Economics, Peking University, Beijing 100871, China)

Abstract

This paper examines whether participating in the New Rural Cooperative Medical Scheme (NRCMS), a publicly subsidised health insurance programme in rural China, encourages individuals to engage in risky health behaviours. Despite its rapidly increasing coverage rate, relatively little attention has been paid to the impact of NRCMS on the lifestyle choices of its enrollees. On the basis of the 2000–2009 longitudinal data from the China Health and Nutrition Survey (CHNS), we find that NRCMS participation has a statistically significant (although quantitatively small) impact on people’s tendency towards smoking, heavy drinking (among males), spending time in sedentary activities, consuming high-calorie food and being overweight. The increase in these unhealthy lifestyles in turn leads to elevated disease risks, indicating that insurance-induced, “ex ante moral hazard” is present in rural China. The findings are robust to the variation in model specification and sample selection, as well as to the introduction of an instrumental variable that controls the endogeneity of insurance participation. Our results provide implications on reforming the pricing and administration practice of China’s largest health insurance campaign and on evaluating public insurance schemes in other developing countries.

Suggested Citation

  • Xuezheng Qin & Tianyi Lu, 2014. "Does Health Insurance Lead to Ex ante Moral Hazard? Evidence from China’s New Rural Cooperative Medical Scheme," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 39(4), pages 625-650, October.
  • Handle: RePEc:pal:gpprii:v:39:y:2014:i:4:p:625-650
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    Cited by:

    1. Jian Zhao & Chang Su & Huijun Wang & Zhihong Wang & Bing Zhang, 2018. "New Evidence on the Effect of Medical Insurance on the Obesity Risk of Rural Residents: Findings from the China Health and Nutrition Survey (CHNS, 2004–2011)," IJERPH, MDPI, vol. 15(2), pages 1-20, February.
    2. Andrey Aistov & Ekaterina Aleksandrova & Christopher J. Gerry, 2021. "Voluntary private health insurance, health-related behaviours and health outcomes: evidence from Russia," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 22(2), pages 281-309, March.
    3. Lee, Hangsuck & Choi, Hyung-Suk & Ha, Hongjun, 2020. "A sharing mechanism of investment outcome for interest-sensitive life insurance products," The North American Journal of Economics and Finance, Elsevier, vol. 54(C).
    4. Emmanuel Nshakira-Rukundo & Essa Chanie Mussa & Nathan Nshakira & Nicolas Gerber & Joachim von Braun, 2021. "Impact of community-based health insurance on utilisation of preventive health services in rural Uganda: a propensity score matching approach," International Journal of Health Economics and Management, Springer, vol. 21(2), pages 203-227, June.
    5. Wanyue Dong & Jianmin Gao & Zhongliang Zhou & Ruhai Bai & Yue Wu & Min Su & Chi Shen & Xin Lan & Xiao Wang, 2018. "Effects of China’s urban basic health insurance on preventive care service utilization and health behaviors: Evidence from the China Health and Nutrition Survey," PLOS ONE, Public Library of Science, vol. 13(12), pages 1-14, December.

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