Financial Protection of a Rural Health Insurance Program in China∗

In 2003, the Chinese government launched in a rural area a voluntary health insurance plan, called New Cooperative Medical Scheme (NCMS), aiming to prevent rural residents from becoming impoverished by health expenditures. This paper uses a nation-wide four-year panel data to address county selection problem, households' participating behavior, and the impact of the plan. The results show: 1) Counties with a greater fraction of rural households, higher rural income, higher government health expense, and better facilities have a higher probability of launching earlier than other counties. 2) Adverse selection was not severe on a household level, although we found last year's out-of-pocket expense and the household head's age a ects households' participation. 3) The impact of the plan on reducing of out-of-pocket expense is greater for the rich than that for the poor, although on average was not signi cant.