Health and Rural Cooperative Medical Insurance in China: An empirical analysis

China abandoned its free universal health care system and privatized it since 1980s. The direct consequence was that many people lost their access to health care, especially those without employers, including farmers in rural China, which in turn significantly reduced their medical care utilization. A new wave of rural cooperative medical insurance was first promoted in selected areas in 2003 and has since spread to the whole nation. The ultimate goal is to cover all the rural areas by 2010. Using 4 waves of China Health and Nutrition Survey (CHNS) data before and after 2003, our paper shows that in general health insurance has a significantly positive impact on individuals’ health status, even during the period of health care privatization. We also find that the new cooperative insurance scheme attracted more individuals with worse health. Although it might be the goal of this new scheme to cover all rural population, it definitely raises concerns about over-utilization and financial sustainability.