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Critical Illness Insurance to alleviate catastrophic health expenditures: new evidence from China

Ying Zhang (), Jacques Vanneste, Jiaxin Xu and Xiaoxing Liu
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Ying Zhang: Southeast University
Jacques Vanneste: University of Antwerp
Jiaxin Xu: Tsinghua University
Xiaoxing Liu: Southeast University

International Journal of Health Economics and Management, 2019, vol. 19, issue 2, No 3, 193-212

Abstract: Abstract Currently, a high percentage of China’s households face financial catastrophe as a direct result of excessive out-of-pocket (OOP) health expenditures. To alleviate this, China has set up the Critical Illness Insurance (CII) program since 2012. However, the current CII is still in an experimental phase and tested in 8 (out of 34) provinces, which has not been proved to be effective. This paper develops a health financing system for reducing catastrophic medical spending using a two-layer model for CII. This model partly compensates expenses exceeding the cap line of the Social Resident Basic Medical Insurance scheme to maintain the ratio of OOP expenses to total medical expenditure approximately at 20%. Adjustment coefficients based on individual net income across different regions are applied to increase fairness. The financial sustainability of the model is tested using a fund balance calculation. Finally, the two-layer model of the CII is empirically simulated with the latest provincial data from China Family Panel Studies. The results demonstrate that the model can effectively alleviate the incidence and severity of catastrophic health expenditures.

Keywords: Critical Illness Insurance (CII); Catastrophic health expenditures; Insurance pricing; Fund balance; Chinese data (search for similar items in EconPapers)
JEL-codes: I13 I18 G22 (search for similar items in EconPapers)
Date: 2019
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DOI: 10.1007/s10754-018-9252-1

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