The Relationship Between the Basic Medical Insurance and the Commercial Medical Insurance in the Old Age Security in China

Abstract

It is very significant to explore the interacting relationship between the basic medical insurance and commercial medical insurance for improving the medical security system. Based on the analytical framework of expected utility theory, by analyzing the model of insurance demand theory, this article shows following: the interacting relationship between the basic medical insurance and commercial medical insurance is either “Complementary Effect ” or “Crowd-out Effect”. The dominant relationship is decided is depend on the probability of illness in the elderly and the setting rate of basic medical insurance reimbursement. When both medical insurances coexist, if both price and quantity of commercial medical insurance reach the optimum point, the expect utility of the medical security for the aged will maximize.