ABSTRACT Background Since the 20th century, pursuing Universal Health Coverage (UHC) has emerged as an important developmental objective in numerous countries and across the global health community. With the intricate ramifications of population mobility (PM), the government faces a mounting imperative to judiciously deploy health expenditure to realise UHC effectively. Objective This study aimed to construct a comprehensive UHC index for China, assess the spatial effects of Government Health Expenditure (GHE) on UHC, and explore the moderating effects of PM on this association. Method A Dynamic Spatial Durbin Model (DSDM) was employed to investigate the influence of the GHE on UHC. Therefore, we tested the moderating effect of PM. Results In the short-term, the GHE negatively impacted local UHC. However, it enhanced the UHC in neighbouring regions. Over the long term, GHE improved local UHC but decreased UHC in neighbouring regions. In the short-term, when the PM exceeded 1.42, the GHE increased the local UHC. Over the long term, when the PM exceeded 1.107, the GHE impeded local UHC. If the PM exceeded 0.91 in the long term, the GHE promoted UHC in neighbouring regions. The results of this study offer a partial explanation of GHE decisions and behaviours. Conclusions To enhance UHC, a viable strategy involves augmenting vertical transfer payments from the central government to local governments. Local governments should institute healthcare systems tailored to the urban scale and developmental stages, with due consideration for PM. Optimising the information disclosure mechanism is also a worthwhile endeavour.