A Paper b y Pan, Lei, & Liu (2016)
Prepared by Adrianna Bella
Implementing Universal Health Insurance (UHI) is
COSTLY!
UHI
i.e. UHI costs China US$20.55 billion in 3 years
There is a need to evaluate whether:
UHI can improve Health
UHI
3 TYPES OF PUBLIC INSURANCE
PROGRAMS IN CHINA:
PEOPLE ELIGIBLE FOR URBMI:
Young children
UEBMI  for employed people in urban
areas
NCMS  for people in rural areas
URBMI  for unemployed people in rural
areas
T h i s s tu d y f ocu s e d o n t h e i m p a c t
o f U R B M I o n h ea l t h
Students
(who are not covered by UEBMI)
Other unemployed people
(i.e. the elderly)
Eligibility which varies across
depending on regulation:
Informal employees
Working-age unemployed people
People without ID card (Hukou)
Local Residents with rural ID card
cities
PRINCIPLES OF URBMI
PREMIUM OF URBMI
1. Voluntary
2. Focus on catasthropic healthcare needs
3. Mostly covers inpatient care & only cover
outpatient care for specific diseases
Individual
Contributions
Government
Subsidy
Varies by city
with minimum
amount of subsidy
SOURCE
Urban Resident Basic Medical Insurance
Survey
PANEL DATA
4 Waves from 2007-2010
OBSERVATIONS: PEOPLE ELIGIBLE FOR URBMI
Only include: unemployed adult & the elderly
Exclude children, students, and disabled people.
𝑦𝑖𝑐𝑡 = 𝑈𝑅𝐵𝑀𝐼𝑖𝑐𝑡 𝛽0 + 𝑋′𝑖𝑐𝑡 𝛽1 + 𝛽𝑐 + 𝛽𝑡 + 𝜀𝑖𝑐𝑡
𝑦𝑖𝑐𝑡
1 if enrolled in URBMI
Self-reported Health with a
value ranging from 1 to 5
𝑈𝑅𝐵𝑀𝐼𝑖𝑐𝑡
Dummy of Good Health
1 = good/very good health
0 if eligible for BMI
but NOT enrolled in
URBMI
𝑦𝑖𝑐𝑡
𝑈𝑅𝐵𝑀𝐼𝑖𝑐𝑡
Causal impact
due to Endogeneity problem
Unobservable
Characteristics
Time-invariant errors
Solution
Fixed Effects
Time-variant errors
Reverse Causality
Measurement Errors of
the endogenous variables
Two-stage Least
Square
using Instrumental
Variables
This Paper combines:
2-SLS & Fixed Effects = FE-IV
FIRST-STAGE
REGRESSION
SECOND-STAGE
REGRESSION WITH
FIXED EFFECTS
𝑈𝑅𝐵𝑀𝐼𝑖𝑐𝑡 = 𝑃𝑟𝑜𝑝𝑜𝑟𝑡𝑖𝑜𝑛𝑗𝑐𝑡 𝛿0
𝑦𝑖𝑐𝑡 = 𝑈𝑅𝐵𝑀𝐼𝑖𝑐𝑡 𝛽0
+ 𝑋′𝑖𝑐𝑡 𝛿0 + 𝛿𝑐 + 𝛿𝑡 + 𝜇𝑖𝑐𝑡
+ 𝑋′𝑖𝑐𝑡 𝛽1 + 𝛽𝑐 + 𝛽𝑡 + 𝜀𝑖𝑐𝑡
Government
Subsidy
Individual
Contributions
IV = city-level proportion of
government subsidies
Larger government subsidy
=
Larger voluntary enrollment of
URBMI
𝑆𝑢𝑏𝑠𝑖𝑑𝑦
𝑃𝑟𝑜𝑝𝑜𝑟𝑡𝑖𝑜𝑛 𝑜𝑓 𝐺𝑜𝑣. 𝑆𝑢𝑏𝑠𝑖𝑑𝑦 =
𝑥 100%
𝑆𝑢𝑏𝑠𝑖𝑑𝑦 + 𝐼𝑛𝑑𝑖𝑣𝑖𝑑𝑢𝑎𝑙 𝐶𝑜𝑛𝑡𝑟𝑖𝑏𝑢𝑡𝑖𝑜𝑛
Self-reported health status for the
insured is
The insured has
higher probability of reporting good
health
than those who are uninsured but are eligible for
URBMI.
compared with the uninsured counterparts.
B Y INCOME
The health effects of URBMI is larger for
the lowest-income group
(compared to those in higher-income group)
B Y EDUCATION
LEVEL
The health effects of URBMI is
larger for those with primaryschool education or lower
(compared to those in higher-income group)
URBMI may improve health
through:
The increase in the probability of
inpatient care in level-3 hospitals by
13.1 percentage points
As well as…
The increase in hospital level used for
inpatient care.
The increase in the total expenditures
of recent inpatients by 3,671 Yuan
( bu t n ot t h e
ex p e n d i tu r e ) .
in c reas e
in
ou t - o f - p oc k e t
The reduction in the probability of
having catastrophic health expenditures
by 3.4 percentage points.
NO observed mechanism
through:
PREVENTATIVE CARE
Not covered in URBMI until 2010.
OUTPATIENT CARE
Not covered in URBMI until 2010.
URBMI enrollment may IMPROVE HEALTH by
increasing self-rated health and the probability
of having good health of the insured.
The ECONOMICALLY VULNERABLE
(those with lower income and/or lower education level)
tend to BENEFIT MORE from URBMI enrollment.
URBMI may affect health by:
Providing MORE and BETTER inpatient care,
WITHOUT paying more.
Reducing the financial burden of the insured.
Ex t e n d i n g U R B M I C o v e ra g e
U H I w i t h l i m i t e d c o v e ra g e m a y
c r e a t e a n o t i c e a b l e h e a l t h e f f e c ts
Could continuously
improve people’s health at
the national level.
T h e r esu l ts u p p o r t t h e
i m p l e m e n ta t i o n o f U H I , es p e c i a l l y i n
d e v e l o p i n g c o u n t r i es .
1. Additional Empirical
Evidence in China &
Developing Countries
Most previous studies
2. Identify CAUSAL
RELATIONSHIP
between health
insurance and health
outcomes
focused on developed
by using Fixed Effects 2SLS
countries, especially the US.
(FEIV)
3. The first study
analyzing the causal
impact of URBMI
participation on health
4. Explore
HETEROGENOUS
EFFECTS of URBMI
on health
and
MECHANISMS
through which URBMI
can affect health
D i d n o t e x p l a i n s p e c i f i c a l l y ab o u t t h e e n d o g e n e i t y
o f h e a l t h i n su ra n c e o r U R B M I .
Us e s e l f - r e p o r t e d h e a l t h as t h e h e a l t h o u t c o m e 
I n c r e as e m e asu r e m e n t e r r o rs a n d v a r i a n c e o f e r r o r
terms.
Did not account for the lagg ed impa ct of health
i n su ra n c e o n h e a l t h .
Us e d l i n e a r 2 S L S m o d e l i n s t e a d o f 2 S L S o r d e r e d
p r o b i t m o d e l ( d u e t o c a t e g o r i c a l s e l f - ra t e d h e a l t h ) .
Adrianna Bella