Is universal and uniform health insurance better for China? Evidence from the perspective of supply-induced demand

Abstract China has achieved nearly universal social health insurance (SHI) coverage by implementing three statutory schemes, but gaps and differences in benefit levels are apparent. There is wide agreement that China should merge the three schemes into a universal and uniform SHI. However, data on the medical expenses of all inpatients in 2014 at a public Tier-three hospital suggests that supply-induced demand (SID) is a serious concern and that, under the design of the current schemes, a higher benefit level has a greater impact on the total expenses of insured patients. Thus, if SID is not effectively controlled, a universal and uniform SHI may be more harmful than beneficial in China. Finally, we suggest that China should substitute the existing fee-for-service design with a suite of bundled provider payment methods; furthermore, China should replace its current system of pricing drugs that encourages hospitals and doctors to use costlier medications.