Analysis of the role of medical insurance in the “Health shocks-consumption upgrading” model: evidence from China

Abstract

Abstract Background The COVID-19 pandemic has brought significant health shocks worldwide, along with a certain burden on healthcare systems. China's healthcare security system has been continuously improved and has essentially achieved universal coverage. Moreover, the health impact of COVID-19 on the Chinese population is diminishing, and the trend of consumption upgrading is becoming more pronounced. Methods Based on the Ramsey-Cass-Koopmans model, this study constructs a theoretical model of “health shocks-consumption upgrading” to deduce the impact of health shocks on consumption upgrading. We examine the results of the theoretical model using provincial panel data from China spanning from 2002 to 2019 and employing the system GMM estimation method. Furthermore, based on a moderation effect model, we explore the mechanism of basic medical insurance systems in this model. Results The theoretical model deduces that health shocks lead to a decline in consumption upgrading, which is empirically confirmed. Additionally, the results of moderation effect analysis demonstrate that basic medical insurance systems play a positive moderating role in the “health shocks-consumption upgrading” model. Among the basic medical insurance systems, the New Rural Cooperative Medical Scheme (NRCMS) primarily acts as a positive moderator. Conclusion Health shocks lead to consumption downgrading, while basic medical insurance systems help to diversify medical risks, alleviate health shocks, reduce precautionary savings, and thereby promote consumption upgrading.

Keywords

• Health shocks
• Medical insurance
• Consumption upgrading