Expenditure response to health insurance policies: evidence from kinks in rural China
Yi Lu, Julie Shi, Wanyu Yang
Published: October, 2019
JEL Code: C14 · D12 · G22
URL to this Article: https://doi.org/10.1016/j.jpubeco.2019.104049
This paper utilizes administrative data to analyze expenditure responses to the health insurance policy in rural China, and clear visual evidence of bunching is observed at the kink point. A static response model with optimization frictions estimates that a complete elimination of the reimbursement would cause the total expenditure per visit to decrease by 34.5%, and approximately one-third of the studied population makes decisions with errors. Heterogeneous expenditure responses and optimization frictions are observed across demographic groups. Cost-benefit and counterfactual analyses indicate that the current policy generates the greatest welfare gains.
Bunching · Health care · Health insurance · Optimization friction