Does Health Insurance Mitigate the Consumption Fluctuation under Health Shock of Chronic Disease? Evidence from a Policy Reform in China

Abstract

Chronic disease is a kind of health shock that most people cannot avoid, which will increase households' medical expenditure and probably decrease other consumptions. Health insurance is a formal mechanism against health shocks. Theoretically, the integration policy of rural and urban residents medical insurance in China increases coverage level and reimbursement ratio of basic medical insurance, and thus can help smooth consumption better. Our study is aimed to test it empirically. Based on the data of China Household Finance Survey(CHFS) in 2015 and 2017, we use the strategy of difference-in-difference(DID) to investigate whether the fluctuation of household consumption caused by chronic diseases is mitigated by the policy reform. It is found that chronic diseases will cause the dicrease of household food and nonfood consumption and the increase of self-paid medical expenditure. But the integration policy significantly smooths the fluctuation of food consumption and self-paid medical expenditure, and plays no role for nonfood consumption.