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Affordable care encourages healthy living: Theory and evidence from China's new cooperative medical scheme

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  • Ning Neil Yu
  • Xi Zhu

Abstract

In developing a theory of medical insurance and health behavior with bequest motive, we discover that whether ex ante moral hazard or the opposite occurs hinges upon the differential effects of health behavior on morbidity and mortality. Providing insurance can encourage healthy living by making longevity more affordable. We test the theory utilizing a unique experiment of China introducing the new cooperative medical scheme, unique in its long‐term credibility necessary for our proposed channel. This scheme reduced cigarette use by around 9%. Further empirical analysis failed to falsify our theory or the alternative mechanism of health insurance reducing stress and thus the demand for cigarettes and hard liquor. Both newly proposed mechanisms alleviate concerns over ex ante moral hazard caused by providing affordable care for the poor.

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  • Ning Neil Yu & Xi Zhu, 2018. "Affordable care encourages healthy living: Theory and evidence from China's new cooperative medical scheme," Health Economics, John Wiley & Sons, Ltd., vol. 27(12), pages 2051-2066, December.
    • Handle: RePEc:wly:hlthec:v:27:y:2018:i:12:p:2051-2066
    DOI: 10.1002/hec.3820
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    2. Conglong Fang & Qingen Gai & Chaofei He & Qinghua Shi, 2020. "The Experience of Poverty Reduction in Rural China," SAGE Open, , vol. 10(4), pages 21582440209, December.
    3. He, Wen, 2023. "Social medical insurance integration and health care disparities in China: Evidence from an administrative claim dataset," Economic Analysis and Policy, Elsevier, vol. 79(C), pages 20-39.
    4. Jin Liu & Scott Rozelle & Qing Xu & Ning Yu & Tianshu Zhou, 2019. "Social Engagement and Elderly Health in China: Evidence from the China Health and Retirement Longitudinal Survey (CHARLS)," IJERPH, MDPI, vol. 16(2), pages 1-16, January.
    5. Wen He, 2022. "Effects of establishing a financing scheme for outpatient care on inpatient services: empirical evidence from a quasi-experiment in China," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 23(1), pages 7-22, February.
    6. Shen, Menghan & He, Wen & Li, Linyan, 2020. "Incentives to use primary care and their impact on healthcare utilization: Evidence using a public health insurance dataset in China," Social Science & Medicine, Elsevier, vol. 255(C).
    7. Dai Su & Yingchun Chen & Hongxia Gao & Haomiao Li & Jingjing Chang & Shihan Lei & Di Jiang & Xiaomei Hu & Min Tan & Zhifang Chen, 2019. "Is There a Difference in the Utilisation of Inpatient Services Between Two Typical Payment Methods of Health Insurance? Evidence from the New Rural Cooperative Medical Scheme in China," IJERPH, MDPI, vol. 16(8), pages 1-16, April.

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