Anticipated benefit termination and health care consumption responses: Evidence from a Quasi-experiment

Abstract

This study is among the first attempts to explore the behavioral responses of anticipated preferential treatment retraction from low-income individuals in the context of health insurance. Utilizing a unique quasi-experimental setting in China, we capture health care demand responses to anticipated benefit termination using a difference-in-differences design. We find a significant increase in individuals’ inpatient health care consumption in anticipation of losing generous insurance benefits. We further investigate the increased consumption and the results suggest that it is largely associated with providing necessary treatments. Additionally, we do not find evidence of supplier-induced demand. In terms of heterogeneity, we find that individuals with chronic disease history, more education, and higher income tend to be more responsive in increasing their health care consumption. While policy evaluations usually focus on the effects upon implementation, our findings shed light on the end-of-benefit responses, and the importance of providing education sessions and liquidity support on individuals’ dynamic decision-making, these findings are meaningful in fully evaluating the impact of insurance contractions.