Wealth, Education and Demand for Medical Care ___ Evidence from Rural China

1. Wealth, Education and Demand for Medical Care___Evidence from Rural China Feng Jin Qin Bei Yu Yangyang

2. Background • In many developing areas, health is much more important, since a person with poor health is more likely to be burdened with the tremendous medical expenditure • Due to the collapse of health care system and the increasing of medical price, the sick people suffer heavy financial burden • In rural China, disease has been cited as one of the top two reasons accounting for impoverishment

3. Wealth education and health(raw data) Age-wealth-health Graph A Age-education-health Graph B

4. Research Objective • To check the expected medical burden of people with certain wealth and education stocks Who has the higher probability to be sick Who has more expenditure after sick Who has more heavy medical burden • To test the hypothesis of use-related deprecation rate on health

5. Literature • Grossman (1972): health capital and demand for health • Muurinen (1982): three separated stocks (education, wealth and health) are substitutable • Empirical tests :Muurinen and Le Grand (1985) , Van Doorslaer (1987) , Case and Deaton (2004)

6. Model • Demand for medical care • Two part model of health expenditure • Measurement issues

7. Demand for medical expenditure

8. Two-part models • The first part: decision for participation • The second part: decision for expenditure

9. Marginal effect

10. Measurement issues • Wealth:household income per capita • Medical price:possible problem of self-selection. Using survey data of health providers. We use average price paying for a treatment of cold or flu in the community • Insurance:public insurance, worker insurance, cooperative medical insurance and all kinds of insurance. whether the individual has medical insurance

11. Data • CHNS (China Health and Nutrition Survey) 1991,1997 data of rural China • collected by Carolina Population Center (CPC) at the University of North Carolina at Chapel Hill, the Institute of Nutrition on Food Hygiene, and the Chinese Academy of Preventive Medicine

12. Sample size

13. Medical expenditure and household income

14. Education and age

15. Price and Insurance

16. Results • Possibility to be sick (Xtprobit) • Possibility to have expenditure (Xtprobit) • Possibility to have expenditure after sick (budget constrain) (Xtprobit) • Medical expenditure (random effect) • Marginal effect on medical expenditure of two part model

17. Marginal effect on probability of illness and having medical expenditure

18. Medical Expenditure

19. Marginal effect of two-part model

20. Test the endogineity of medical insurance • people with medical insurance might have some unobserved characteristics which influence their medical expenditure • We use “if the village enterprises subsidize the insurance” as an Instrument Variable

21. indicate the individual has medical insurance The first stage regression of ivprobit (instrumented: insurance)

22. Medical burden by income group and education group

23. conclusions • the less educated people have higher probability to be sick and expend more on medical care after sick. • the income elasticity of demand for medical care is low, so the lower income people have heavier medical burden . • due to the lack of price elasticity, the medical burden of lower income people is growing more fast

24. Policy implications • the inequality is much larger if taking account of the health inequality and the heavier medical burden imposed in poor people • it is particularly emergency to establish appropriate and widely covered public health insurance to share the risk of illness and medical expenditure • A proper insurance scheme will play a redistributive role, since the poor and the low educated people face higher risk

25. Thank You!