Examining the Association Between Social Health Insurance Participation and Patients' out-of-Pocket Payments in China: The Role of Institutional Arrangement

Background and Purpose: Social health insurance (SHI) is advocated to be capable of decreasing patients’ out-of-pocket payments (OOP) and hence reducing health-related financial problems. However, the problem of the affordability of healthcare seems not to be mitigated by the development of SHI, even though such schemes now cover almost the whole population in China. Previous work on the relationship between SHI participation and patients’ out-of-pocket payments (OOP) in China has overlooked the mediating mechanisms of the institutional arrangement. This study aims to investigate the association between SHI participation and patients’ OOP as well as the mediating role of institutional arrangement in this relationship.

This study combines theoretical studies of the institutional arrangements from social policy and empirical studies of SHI. It establishes a conceptual framework involving the reimbursement, behavior management and purchasing mechanisms to elaborate on the institutional arrangement of SHI in China.

Methods: The data used in this study are drawn from the latest wave of the China Health and Retirement Longitudinal Study, which was administered in 28 out of 31 provinces in China from 2011 to 2012 based on a multi-stage cluster sampling method. Data on 1,645 hospitalized patients are analyzed.

We use four dummy variables to represent four kinds of SHI participation (Government Medical Insurance, Urban Employee Basic Medical Insurance, Urban Resident Basic Medical Insurance, and New Rural Medical Scheme), with uninsured patients as the reference group. We use three mediating variables, namely reimbursement rate, facility level, and cost-containment level to represent the performance of each of the three mechanisms of institutional arrangement. We use participants’ OOP for their last hospitalization as dependent variable. Several variables are controlled for, including age, gender, place of residence, education, employment, facility location, health status, and economic status.

Using structural equation modeling, a hypothesized structural model is established. Three indicators of goodness of fit are used, including χ², CFI, and RMSEA.

Results: The measurement model of the two latent constructs, namely health and economic status, offers a good fit to the data. In addition, a test of the hypothesized structural model shows that it provides a good fit to the data.

The results show that the reimbursement mechanism of SHI played a significant role in reducing OOP. However, the behavior management and purchasing mechanisms of SHI perform poorly, undermining the function of the reimbursement mechanism and mitigating the association between SHI participation and OOP. As a result, SHI participation has a weak negative or even no significant association with the OOP of hospitalized patients.

Conclusions and Implications: The results seem to contradict the principles of SHI, which aims to reduce people’s OOP and enhance their wellbeing. More specifically, this study corresponds with the critics of Chinese healthcare reform as being input-based through the reimbursement mechanism of SHI. It denotes how the lion’s share of SHI benefits may be wasted due to the inefficient behavior management and purchasing mechanisms. These findings are expected to provide valuable insights to the ongoing healthcare reform process in China.