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China’s New Rural Cooperative Medical Scheme

Evolution, Design and Impacts

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Dan Liu

The New Cooperative Medical Scheme (NCMS) was implemented in 2003 in response to the poor state of health care in rural China. It holds the primary objective of insuring rural residents against catastrophic health expenses, protecting them from impoverishment caused by medical expenses. The objective of this study, therefore, is to explore variation in the determinants of household enrolment in this scheme and the impact of enrolment on health care utilization and medical expenditures in three large geographic regions in China and further to simulate the reimbursement package design in order to achieve better financing protection and policy effectiveness.
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2. Healthcare management

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Health is considered an engine for economic growth and a productive human asset (Barro, 1996). Moreover, rather than simply the absence of disease, it also represents the presence of physical health, psychological health, good social adaption and ethical health (WHO, 2006)11. An uncertain health status presents a number of risks for individuals, the most obvious being the loss of health itself, as well as incurring financial costs and time loss associated with medical treatments aimed at maintaining or improving health. An extensive understanding of the interaction between health risk management and poverty reduction is essential to identify the obstacles to growth and development in poor rural societies.

In economic terms, health is a durable commodity given that it does not quickly wear out and brings utility over time rather than being completely consumed in one use. When health acts as a consumption commodity, it brings satisfaction to individuals and makes them feel good; as an investment commodity, it increases the time available for other activities such as school attendance and income-generating activities. Therefore, health is a fundamental factor in human capital formation. However, there are various factors in human life that can damage health, including aging, illness, environment and lifestyle. Furthermore, our health deteriorates over time, particularly at an increasing rate later in life. When health considerably worsens, people lose their ability to function and eventually die. Naturally, death also results in great loss for family and society, specifically the early death12 of the adult breadwinner may...

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