Health Care Market and the Effect of Health Insurance: the Case in Rural China

Why insurance program in rural China cannot improve health care demand? We show that if the provider is income maximization and has market power, the price will increase to such a level that the health care demand keep unchanged. We use China Health and Nutrition Survey data to provide evidence of price effect and we find price in county hospital increase with insurance but community clinic doesn't. We also test the change of health care demand and there is no significant effect. Our results imply it is not enough government offer insurance to farmers, necessary measures should be taken to change the target of public hospital and improve the competition in health care market.