This study aimed to investigate the health performance of the Urban and Rural Residents Medical Insurance (URRMI) scheme in China and to make practical recommendations and scientific references for its full implementation in China. This is a panel study that uses data from the China Family Panel Studies from 2018 to 2020, which is separated into treated and control groups each year, utilizing the key approach of propensity score matching and difference-in-difference (PSM-DID). Using 1-to-1 k-nearest neighbor matching, we proportionate the baseline data. Using difference-in-difference model, we examine the mean treatment impact of the outcome variables. Using a 500-time random sample regression model, we validate the robustness of the model estimation. The result was credible after matching, minimizing discrepancies. Good overall performance of self-rated health with an average Hukou status of, respectively, 0.8 and 0.4 in the treated and control group, primarily in rural and urban regions separately. The participation of URRMI significantly impacted self-rated health of residents, with a 0.456-unit improvement probabilities observed (p < 0.1). Additionally, the individuals are categorized into urban and rural, and those with urban hukou had a 0.311 expansion in the probability of having better health status compared to rural hukou (p < 0.05). Other factors, such as age, highest education, annual income, medical expenditure, hospital scale, clinic satisfaction, and napping, also impacted self-rated health. Moreover, elder individuals, higher education levels, and higher medical expenditure having a higher probability of improvement. The study utilized a placebo test to verify the robustness of the URRMI regression. The estimated coefficients showed that basic medical insurance did not significantly improve the health of insured residents under the URRMI scheme. The study demonstrates the crucial role of PSM-DID in determining the influence of URRMI on self-rated health status. It indicates that purchasing in URRMI has a favorable influence on the health of residents, advancing enhanced self-rated health effectiveness. It does, however, reveal geographical disparities in health, with urban dwellers faring far better than those who live in the suburb. Study suggests expanding URRMI coverage, narrowing urban-rural divide, increasing insurance subsidies, reforming laws, and developing effective advertising strategies.