Ageing and Health-Care Expenditure in Urban China

The impact of ageing on health expenditure has recently attracted from policy makers and academics. Majority of studies, however, focus on developed countries, where health care systems are well developed. In China, where old age dependency ratio has grown faster than in most countries and the health care system has moved away from a public to a largely self-financed system, the issue of whether ageing induces a sharp increase in health expenditure and if elderly population can afford such an expenditure is of a greater concern. This paper addresses these issues using a household survey data. By endogenise health condition of individuals, we found that age is one of the most important contributing factors to the increase in health expenditure for individuals. On average, an individual in his/her 60s spends 50 to 100 per cent more out-of-pocket health expenditure than a 40 years old individual, whereas those who were in their 80s spend 100 to 170 per cent more than a 40 years old. Our findings indicate that the impact of age on health expenditure is by no means "read herring". Further more, we find that out-of-pocket health expenditure accounts for a large proportion of elderly’s income. For a women in her 60th the out-of-pocket health expenditure is around 20 per cent of her total income. These findings raise concerns about the well being of the elderly under the current health system in China. Key word: Ageing, Health care expenditure, China JEL classification numbers: ∗Department of Economics, Research School of Pacific and Asian Studies, Australian National University, Canberra 0200, Australia. E-mail: [email protected]. †Department of Economics, Research School of Pacific and Asian Studies, Australian National University.