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A Comparison of Outpatient Healthcare Expenditures Between Public and Private Medical Institutions in Urban China: An Instrumental Variable Approach

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  • Judy Xu
  • Gordon Liu
  • Guoying Deng
  • Lin Li
  • Xianjun Xiong
  • Kisalaya Basu

Abstract

The growth of healthcare expenditure provokes constant comments and discussions, as countries battle the issues on cost containment and cost effectiveness. Prior to 1978, medical institutions in China were either state‐owned or were collective public hospitals. Since 1978, China has been trying to rebuild its healthcare system, which was destroyed during the ‘cultural revolution’, allowing private medical institutions to deliver healthcare services. As a result, private medical institutions have grown from 0% to 28.57% between 1978 and 2010. In this context, we compare outpatient healthcare expenditures between public and private medical institutions. The central problem of this comparison is that the choice of medical institution is endogenous. So we apply an instrumental variable (IV) framework utilizing geographic information (whether the closest medical institution is private) as the instrument while controlling for severity of health and other relevant confounding factors. Using China's Urban Resident Basic Medical Insurance Survey 2008–2010, we found that there is no difference in expenditure between public and private medical institutions when IV framework is used. Our econometric tests suggest that our IV model is specified appropriately. However, the ordinary least square model, which is inconsistent in the presence of endogenous regressor(s), reveals that public medical institutions are more expensive. Copyright © 2013 John Wiley & Sons, Ltd.

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  • Judy Xu & Gordon Liu & Guoying Deng & Lin Li & Xianjun Xiong & Kisalaya Basu, 2015. "A Comparison of Outpatient Healthcare Expenditures Between Public and Private Medical Institutions in Urban China: An Instrumental Variable Approach," Health Economics, John Wiley & Sons, Ltd., vol. 24(3), pages 270-279, March.
    • Handle: RePEc:wly:hlthec:v:24:y:2015:i:3:p:270-279
    DOI: 10.1002/hec.3015
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    References listed on IDEAS

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    Cited by:

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    2. Yiwei Chen & Hui Ding & Min Yu & Jieming Zhong & Ruying Hu & Xiangyu Chen & Chunmei Wang & Kaixu Xie & Karen Eggleston, 2019. "The Effects of Primary Care Chronic-Disease Management in Rural China," NBER Working Papers 26100, National Bureau of Economic Research, Inc.
    3. R. Tamara Konetzka & Fan Yang & Rachel M. Werner, 2019. "Use of instrumental variables for endogenous treatment at the provider level," Health Economics, John Wiley & Sons, Ltd., vol. 28(5), pages 710-716, May.
    4. Wannian Liang & Jipan Xie & Hongpeng Fu & Eric Wu, 2014. "The Role of Health Economics and Outcomes Research in Health Care Reform in China," PharmacoEconomics, Springer, vol. 32(3), pages 231-234, March.
    5. Lu, Liyong & Pan, Jay, 2019. "The association of hospital competition with inpatient costs of stroke: Evidence from China," Social Science & Medicine, Elsevier, vol. 230(C), pages 234-245.
    6. Yang Cao & Feng Zhen & Hao Wu, 2019. "Public Transportation Environment and Medical Choice for Chronic Disease: A Case Study of Gaoyou, China," IJERPH, MDPI, vol. 16(9), pages 1-21, May.
    7. Bin Zhu & Yang Fu & Jinlin Liu & Ying Mao, 2018. "Modeling the Dynamics and Spillovers of the Health Labor Market: Evidence from China’s Provincial Panel Data," Sustainability, MDPI, vol. 10(2), pages 1-20, January.
    8. Wang, Qing & Zhang, Donglan & Hou, Zhiyuan, 2016. "Insurance coverage and socioeconomic differences in patient choice between private and public health care providers in China," Social Science & Medicine, Elsevier, vol. 170(C), pages 124-132.
    9. Guanfu Fang & Hui Cao, 2020. "State versus private provision: How does China’s market‐oriented reform affect healthcare delivery?," Economics of Transition and Institutional Change, John Wiley & Sons, vol. 28(3), pages 381-411, July.

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