Paying for outpatient care in rural China: cost escalation under China’s New Co-operative Medical Scheme

China’s New Co-operative Medical Scheme (NCMS), a government-subsidized health insurance programme, was launched in 2003 in response to deterioration in access to health services in rural areas. Initially designed to cover inpatient care, it has begun to expand its benefit package to cover outpatient care since 2007. The impacts of this initiative on outpatient care costs have raised growing concern, in particular regarding whether it has in fact reduced out-of-pocket (OOP) payments for services among rural participants. This study investigates the impacts on outpatient costs by analysing data from an individual-level longitudinal survey, the China Health and Nutrition Survey, for 2004 and 2009, years shortly before and after NCMS began coverage of outpatient services in 2007. Various health econometrics strategies were employed in the analysis of these data, including the Two-Part Model, the Heckman Selection Model and Propensity Score Matching with the Differences-in-Differences model, to estimate the effects of the 2007 NCMS initiative on per episode outpatient costs. We find that NCMS outpatient coverage starting in 2007 had little impact on reducing its participants’ OOP payments for outpatient services. The new coverage may also have contributed to an observed increase in total per episode outpatient costs billed to the insured patients. This increase was more pronounced among village clinics and township health centres—the backbone of the health system for rural residents—than at county and municipal hospitals.