Working Paper

China introduced the Critical Illness Insurance (CII) program in 2012 to address persistent concerns over high out-of-pocket medical expenditures and financial risk by providing additional coverage for substantial medical expenditures. To account for the staggered implementation across regions, I employ the Difference-in-Differences (DiD) approach proposed by Callaway and Sant'Anna (2021) to examine the impact of CII program on household consumption and savings. I find that the intervention of the CII program stimulates per capita household consumption, non-medical consumption and food consumption, and reduces savings. In addition, The CII program mainly promotes consumption and reduces savings among rural households and people aged 60 and above, but no incentives for poor families, leading to increased consumption inequality. Results from event-study specifications and placebo tests support the causal interpretation of the estimates. My findings suggest that the CII program was successful in improving the financial protection of older adults.

Although China has made considerable progress towards universal health insurance coverage, high out-of-pocket medical expenditures remain a concern. To address this concern, the Critical Illness Insurance (CII) program was introduced in 2012. The CII program serves as supplementary insurance to enrollees of the New Rural Cooperative Medical Insurance Scheme (NCMS) and the Urban Residents Medical Insurance (URMI) program. Using a difference-in-differences estimator that accounts for the staggered implementation of CII across regions in China, we find that the program significantly reduced out-of-pocket inpatient expenditures among older adults and improved self-rated health and the number of activities of daily living limitations. Our findings suggest that the CII program was successful in improving the financial protection of older adults.