Adverse selection in a voluntary-based RMHC insurance scheme
- Presenter:
Chair: Timothy McBride; Discussant: TBA Wed June 7, 2006 9:45-11:15 Room 235
This study examines adverse selection in a subsidized voluntary-based health insurance, the Rural Mutual Health Care (RMHC), in the poor rural area of China. This study was made possible by a unique longitudinal data set, which combines the measures of health status and other socio-economic and demographics variables from baseline survey (before RMHC is established) with the measures of enrollment status from first year evaluation survey (after RMHC is implemented one year) from the RMHC, which is a social experimental project in rural China. Total sample of this study includes 3492 rural residents from1020 households. Multinomial Logit model is employed for the data analysis.
The results of this study show that 70% rural residents enrolled in RMHC scheme. In general, enrolled individuals have worse health status than non-enrolled health status. Although household is set as the enrolment unit for the RMHC for the purpose of reducing adverse selection, nearly 1/3 enrolled household is partial-enrolled household. The residents in the group of non-enrolled individuals in partial-enrolled households have the best health status, while the residents in the group of enrolled individuals in partial-enrolled households have the worst health status. The residents in the group of non-enrolled individuals in non-enrolled households have the second best health status, while the residents in the group of enrolled individuals in full-enrolled households have the second worst health status. Pre-RMHC medical expenditure for enrolled individual in partial-enrolled households is 206.6 Yuan per capita per year, which is 1.7 times as much as the pre-RMHC medical expenditure for non-enrolled individual in partial-enrolled households. The study also reveals that pre-enrolled medical expenditure per capita per year of enrolled individuals is 9.6% higher than pre-enrolled medical expenditure of overall residents, including both enrolled and non-enrolled individuals.
In conclusion, although RMHC scheme reached a very high enrollment rate, adverse selection still exists, especially within the partial-enrolled households. Voluntary-based RMHC would not be financially sustainable if the adverse selection were not fully taken into account.
