Journal of Integrative Agriculture 2021, 20(4): 1068–1079

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RESEARCH ARTICLE

The impact of the New Rural Cooperative Medical Scheme on the

“health poverty alleviation” of rural households in China

QIN Li-jian1, Chien-ping CHEN2, LI Yu-heng3, SUN Yan-ming4, CHEN Hong5

1
Research Center for Health Economics, Anhui University of Finance and Economics, Bengbu 233000, P.R.China
2
School of Business Administration, University of Houston-Victoria, Sugar Land 77449, USA
3
Institute of Geographic Sciences and Natural Resources Research, Chinese Academy of Sciences, Beijing 100101, P.R.China
4
Institute for Global Innovation and Development/Institute of Eco-Chongming/School of Urban and Regional Science, East China
Normal University, Shanghai 200062, P.R.China
5
School of Languages and Media, Anhui University of Finance and Economics, Bengbu 233000, P.R.China

Abstract
This study investigates the impact of the New Rural Cooperative Medical Scheme (NRCMS) on rural households to escape
poverty. We employ the instrumental variable method, the IVProbit model, to analyze the national data from the rural-resident
field survey by the China Family Panel Studies (CFPS) in 2016. Based on the large-scale data, we found that, first, the
hospitalization of family members is the key factor in increasing the risk of the family falling into poverty. The NRCMS has
significantly reduced the likely risk of falling into poverty. Second, the impact of the NRCMS on poverty alleviation varies
among groups with different levels of income. There is no impact on the upper-middle and high-income groups; in contrast,
the NRCMS has substantially improved the capacity of low-income rural families to prevent poverty due to illness, especially
for the lower-middle-income group. Third, there exist significant regional differences in the impact of NRCMS on the health
poverty alleviation of rural households in China. The NRCMS has successfully reduced the risk of rural households in the
western region falling into poverty, simultaneously, no significant impact on those in the eastern and central regions. In
order to diminish and eliminate poverty eventually and boost rural residents’ capacity for income acquisition, we propose
the following: raise the actual compensation ratio of the NRCMS, control the rising expense of NRCMS by promoting the
payment method reform, construct the comprehensive healthcare system in the western region, strengthen the medical
security for the poor in remote area, and enhance the living environment for rural residents. 

Keywords: New Rural Cooperative Medical Scheme, rural households, health poverty alleviation

Received 20 February, 2020 Accepted 19 August, 2020
QIN Li-jian, E-mail: qinlj28@163.com; Correspondence CHEN
Hong, Tel: +86-552-3113120, E-mail: chenhong.china@163.com;
LI Yu-heng, E-mail: liyuheng@igsnrr.ac.cn
© 2021 CAAS. Published by Elsevier B.V. This is an open
access article under the CC BY-NC-ND license (http://
creativecommons.org/licenses/by-nc-nd/4.0/).
doi: 10.1016/S2095-3119(20)63372-X
1. Introduction
One of the most important tasks for governments at all
levels is to resolve and eradicate poverty. China has been
working hard in domestic poverty alleviation to significantly
reduce global poverty  (United Nations  2017; Luo et al.
2020).  However,  poverty in China is still a serious issue.
As indicated in Huang (2019), it is a very challenging task
 QIN Li-jian et al. Journal of Integrative Agriculture 2021, 20(4): 1068–1079
to resolve poverty among all 16 000 villages in which the
poverty rate is even higher than 20%. Illness is one of the
key causes to trap rural families into poverty. Due to the
uncertainty of disease and high medical expenses, the
governmental policy goal of full relief of poverty, advocated
by the slogan of “Health Poverty Alleviation” (Wang and
Liu 2019), is unlikely to be achieved in 2020  (SCOPRC
2017).  From the relative costs perspective, we observe
that the growth rate of medical expenses has been far
exceeded  the growth rate of  GDP  and rural household
income for many years in China. On the other hand,
from the absolute costs perspective, China’s per capita
hospitalization cost has reached 8 891 CNY. Meanwhile, the
rural households’ per capita disposable income is only at
8 452 CNY, even lower than the per capita hospitalization
cost  (NBSC 2016).  Theoretically, medical insurance can
serve as a remedy to disperse family financial risk. For the
purpose, China’s New Rural Cooperative Medical Scheme
(NRCMS) has been implemented since 2003, at a relatively
low per-capita funding rate, 570 CNY per year initially. Is
the low-funding NRCMS still effective in poverty alleviation?
It becomes one of the most important research topics to
explore the impact of the NRCMS on poverty alleviation to
improve rural revitalization by effective policy modifications
at all levels of government in China.
There are abundant studies on the impact of medical
insurance on households in different countries. Shmueli
et al. (2008), Hamid et al. (2011), Aryeetey et al. (2016), and
Alatinga and Williams (2019) found that health insurance
has reduced medical costs for farmers, improved the labor
efficiency and health of rural residents, increased rural
household income, and reduced the probability of poverty
caused by illness in Bangladesh and Spain. Benitez et al.
(2018), Fry and Sommers (2018), and Kwon et al. (2018)
studied the impact from varied medical insurances on
household income, based on data from the US Health and
Retirement Survey (HRS) and matched with data from
the US Rand Research Center for Aging. They found that
private insurance participants shouldered higher medical
expenses and heavier personal financial burdens than the
insured under public insurance. Low-income and middle-
aged people have the greatest burdens carried with medical
issues and are most likely to fall into poverty.
Remarkably, some works of literature found that health
insurance has no effect on household economics (Ekman
2007; Wagstaff and Lindelow 2008; Antunes et al. 2018;
Mozumdar et al. 2018). Studies in China and Vietnam
even concluded that insured rural residents tend to seek
treatment at high-level medical institutions with higher
overall medical costs and without any reduction in the direct
out-of-pocket medical costs (Nguyen et al. 2003; Chaudhuri
and Roy 2008; Wagstaff et al. 2009; Saksena et al. 2011;
1069
Lattof 2018). Furthermore, Ahmed et al. (2018) found that
residents in the Mekong Delta region of Vietnam raised their
out-of-pocket medical expenses after participating in medical
insurance, and the poverty rate even increased. Umeh
(2018) investigated national health insurance in Ghana,
Kenya, Nigeria, and Tanzania, to find that health insurance
plays no role in poverty alleviation due to the relatively low
medical insurance funds and the relatively large scale of the
poor population and informal employment.
Due to the late establishment of NRCMS, there are
limited studies focusing on the impact of insurance
coverage with varied findings such as Wang et al. (2009),
Song and Zhao (2015), Zhu and Li (2017), and Chen
et al. (2019). Based upon the 2003–2006 Fixed Rural
Observation Point of the Ministry of Agriculture of China of
360 villages, Qi (2011) employed the instrumental variable
method to resolve the endogenous problem and found that
the NRCMS can reduce the poverty rate for rural farmer
households when the coverage rate of NRCMS reaches
40.00% at the provincial level. However, the data were
neither up to date nor collected by random sampling in
the study. Huang (2019) investigated the 2000–2011 data
of China Health and Nutrition Survey (CHNS) to find that
the phenomenon of switching between poverty and out of
poverty is quite frequent, especially for those vulnerable
rural households who are easy to be trapped into poverty
again. The impact of NRCMS on poverty reduction was
significant only in the initial period (2000–2006). After the
NRCMS was fully implemented in 2009, its impact on poverty
reduction became insignificant due to the lack of focus on
the compensation for catastrophic medical expenses such
as hospitalization. However, the endogenous problem
was not resolved in the model of Huang (2019). Yao et al.
(2014) used the China Health and Retirement Longitudinal
Study (CHARLS) collected in 2011 to find that rural residents
face more induced demand such as transportation after
participating in the NRCMS. The cost of public hospital
visits is even higher than that of private hospitals. Yu
et al. (2018) studied a central province and found that the
hospitalization rate of the poor is 12.46%, which is much
higher than that for the population at 4.86%. After the
NRCMS, the proportion of unreasonable hospitalization
cases in township health institutions boosts up to as high as
26.50%. Yan et al. (2006), Xie (2008) and Fang (2013) found
that the implementation of the NRCMS has increased the
incidence of medical consultations among rural households;
however, it has no impact on poverty alleviation. Zhu (2013)
and Wang and Ning (2018) also studied poverty in the ethnic
areas and found that the NRCMS participation rate of the
ethnic minorities is lower than that of local Han residents.
The poverty caused by illness in the ethnic minority areas
is very noticeable. Undoubtedly, the task of a full poverty
1070 QIN Li-jian et al. Journal of Integrative Agriculture 2021, 20(4): 1068–1079
alleviation in China is very arduous.
There are several common problems in the existing
literatures about the impact of NRCMS in China. First, the
data are relatively outdated. As Huang (2017) indicated,
most previous studies use data in or before 2006. Even
in Yao et al. (2014) and Huang (2019), the survey periods
are in or before 2011 which only cover the initial years of
the pilot promotion of the NRCMS. Second, most previous
studies draw conclusions from the same data, CHNS, lack
of comparisons in the research conclusions. Third, the
sample representation is generally insufficient to reflect the
population. Several studies only investigate a few counties
or provinces. For example, Yu et al. (2018) inspected six
counties in the province of Anhui and Yan et al. (2006) only
explored five provinces. Even the CHNS data, the sampling is
also limited within the nine provinces. Fourth, most previous
studies focus on income, consumption, or medical services
for rural households but ignore the impact of NRCMS on their
poverty. Fifth, the endogenous problem remains in most
regressions. It will mislead the estimation results.
In this study, we employ the instrumental variable method,
the IVProbit model, to analyze the national data from the
rural-resident field survey by the China Family Panel Studies
(CFPS) in 2016 to resolve all the problems mentioned
previously. Not only more updated, the CFPS data also
cover 25 provinces to represent the majority of population
in China. To resolve the endogenous problem in regression,
we follow the setting in the research of migrant workers
(Qin et al. 2014, 2018), to adopt the NRCMS participation
rate in counties as the instrumental variable for household
participation. We also ignore the rural individual participation
of the other medical insurance or pension scheme in the
study. As Qin et al. (2015) indicated, the rural migrant
workers’ participation rates in the urban medical insurance
and rural pension insurance are only at 15.35 and 14.09%,
respectively. The basic monthly compensation from the rural
pension insurance (i.e., from 55 CNY in 2009 to 88 CNY in
2018) is also too minor to be considered as an impact on
poverty alleviation.
Our findings indicate that the hospitalization of family
members is a key factor in increasing the risk of the family
falling into poverty. The NRCMS has significantly reduced
the likely risk of falling into poverty. Second, the impact of
the NRCMS on poverty alleviation varies among groups
with different levels of income. There is no impact on
the upper-middle- and high-income groups; the NRCMS
has substantially improved the capacity of low-income
rural families to prevent poverty due to illness, especially
for the lower-middle-income group. Third, there exist
significant regional differences in the impact of NRCMS
on the poverty alleviation of rural households in China.
The NRCMS has successfully reduced the risk of rural
households in the western region falling into poverty,
simultaneously, no significant impact on those in the
eastern and central regions. The paper is arranged as
follows. The next section provides the data source and
descriptive statistics. Section 3 exhibits the economic
theoretical framework and econometric model. The
empirical results are discussed in the fourth section. The
final section concludes and provides recommendations for
government policymaking.
2. Data and descriptive statistics
The data used in this article are from CFPS conducted in
July 2016. The survey was implemented by the Institute
of Social Science Survey of Peking University of China to
investigate the socio-economic, demographic, and health
conditions, for all households in China. Compared with
the CHNS data covering only nine provinces, the CFPS
conducted 25 provinces, including the country’s autonomous
regions and the municipalities. The surveyed area covers
94.50% of China’s total population except for Hong Kong,
Macao and Taiwan. The CFPS survey employed the
implicit stratification to perform the multi-stage probability
sampling. It is a more accurate stratification method to
reflect the geographical representation with varied economic
development. A total of 14 019 households were selected
from 162 counties and districts, including 6 782 households
from rural areas. In order to examine the impact of NRCMS
on rural households’ health and poverty alleviation, we only
keep the sample of rural households who participate in the
NRCMS without any other types of medical insurance. As
a result, the number of sample rural households is reduced
to 5 877. The variable definitions and descriptive statistics
are detailed in Table 1.
Poverty lines serve as an important indicator of poverty
verification for rural households. In China, the national
poverty line is defined at the annual per-capita household
income of 2 855 CNY or below. It is slightly higher than the
World Bank poverty line, 1.90 USD per day, equivalent to
2 665 CNY per year (NBSC 2017; World Bank 2018). Table 1
shows sample households containing the poverty ratios,
according to China’s national poverty line and the World Bank
poverty line, 16.53 and 15.22%, respectively. The ratios are
not far away from the poverty incidence of 14.40% in the 2015
National Sample Survey (Chen et al. 2018, 2019). One of
the core independent variables is whether a rural household
participates in the NRCMS or not. If the family members only
participate in the NRCMS, then the value is 1; otherwise, it
is 0. We can see that participation in NRCMS is as high
as 91.96%. In the past year, 22.98% of households with at
least one family member were hospitalized. The descriptive
statistics also show the low education for rural households.
 QIN Li-jian et al. Journal of Integrative Agriculture 2021, 20(4): 1068–1079 1071

Table 1 Variable definition and descriptive statistics

Standard
Variable Definition Mean
deviation
Dependent variables
C China poverty line, household annual income less than 0.1653 0.2246
2 855 CNY=1; otherwise=0
W World Bank poverty line, household annual income less than 0.1522 0.2153
2 665 CNY=1; otherwise=0
Core independent variables
Join the NRCMS or not Yes=1; no=0 0.9196 0.2719
Hospitalization At least one family member hospitalized in the past year=1; 0.2298 0.4208
no=0
Other control variables
Household labor force
Age Age of household labor force (years) 39.4196 8.9112
Education Education of household labor force (schooling years) 5.1900 4.2409
Number of male labor Number of household male labor 0.9879 0.7958
Head of household
Gender Male=1; female=0 0.5644 0.4959
Age Age of household labor (years) 51.4803 14.8997
Education
Illiterate/Primary Elementary school or under=1; otherwise=0 0.6128 0.4871
Middle school Middle school or under=1; otherwise=0 0.2742 0.4462
High school High school or under=1; otherwise=0 0.0873 0.2823
College College or under=1; otherwise=0 0.0257 0.1581
Marital status Married=1; otherwise=0 0.7497 0.4332
Mental status Household head feels depress: hardly=1; sometimes=2; 1.7056 0.8057
often=3; usually=4
Family living condition
Water quality Using well water, cellar water, or rain water for cooking=1; 0.3368 0.4726
using tapped water or filtered water for cooking=0
Fuel usage Burning LG or natural gas for cooking=1; burning electricity 2.0843 0.8716
for cooking=2; burning wood or coal for cooking=3
Educational expenses Annual household education expenses (CNY) 3 368.6520 6 987.4580
Durable good consumption Value of owned durable goods (CNY） 24 152.4800 63 132.6100
Community
Condition of public facilities Very good=1; good=2; fair=3; bad=4; very bad=5 2.7090 0.9426
Assistance of neighborhood Definitely yes=1; maybe yes=2; uncertain=3; maybe no=4; 1.5059 0.8571
definitely no=5
Distance to town Distance from village committee to the nearest town (km) 7.9341 9.4028
Landform of villages
Plain Household is located in plain=1; otherwise=0 0.5088 0.5000
Hills Household is located in hills=1; otherwise=0 0.2871 0.4525
Highland or mountain Household is located in highland or mountain=1; 0.2040 0.4030
otherwise=0
County participation rate of NRCMS County participation rate of NRCMS for the surveyed 0.9193 0.0638
households
Region
Eastern Household is located in the eastern region=1; otherwise=0 0.3776 0.4848
Central Household is located in the central region=1; otherwise=0 0.2894 0.4535
Western Household is located in the western region=1; otherwise=0 0.3330 0.4713

The household labor force’s average age is 39 years; the
average schooling years are only 5.19 years. To distinguish
the household head and labor force in the CFPS survey, we
assume the first interviewed family member as the head of
household because the first person speaks for the household
is generally holding the most important role in a traditional
Chinese family. Not surprisingly, the household head tends
to be an older male at 56.44% with the average age at 51
years old. There are still 33.68% of the rural households
using well water, cellar water or rainwater for cooking. The
households in the hilly and alpine regions account for 28.71
and 20.40%, respectively, and the proportions of households
in the central and western regions were 28.94 and 33.30%,
respectively.
1072 QIN Li-jian et al. Journal of Integrative Agriculture 2021, 20(4): 1068–1079

3. Theoretical framework and econometric household participates in the NRCMS or not, serving as a
model system factor, is embraced in both budget constraints and
production constraints. The objective eq. (1) exhibits the
3.1. Theoretical framework utility-maximizing choices for a rural household during the
entire life cycle T periods, where Ci denotes consumption;
The study employs the classic Agricultural Household Model Lgi and Lsi denote the leisure time of the head of household
(AHM) as the foundation. The model was pioneered in and other family members respectively, in period i. The
Singh et al. (1986) to explore the farm household economic production constraint (2) summaries the limitation for rural
behavior, which was then widely used by researchers household labor force in which Hgi and Hsi denote the health
(Wang et al. 2014; Hadley et al. 2019). A large number of human capital input of the head of household and other
empirical studies have been performed on the behaviors family members, respectively. Ki represents the input of
of supply, production, and consumption for the developing other necessary productive factors. The time constraint (3)
countries. The AHM considers a rural household the most summaries the time distribution in which Tgi and Tsi denote
fundamental and important economic component engaging the time endowment of the head of the household and
in both consumption and production in the countryside to other family members, respectively. They allocate time
exhibit dual characteristics. Based upon the duality of among leisure, Lig, s, non-farming labor supply, Nig, s, and
rural households, we cannot simply analyze a households’ farming labor supply, Fig, s. Finally, the budget constraint (4)
economic behavior from one perspective as a consumer contains that Pic represents the price of consumer goods;
or a producer; instead, the theoretical model for the rural wig, s, denotes the non-farming wage rate for the head of
household should be composed of multiple interconnected household and other family members; Piy is the price of
equations. The basic assumptions are as follows. First, farming output Yif; and Pix is the price of farming input Xif.
rural households pursue utility maximization; and the utility The system factor, NRCMSig, s, indicates whether the head
is affected by varied factors such as income. Second, the of household and other family members participate in the
non-separability of income, consumption, and production NRCMS in period i.
determine the rural household economic behavior. Third, We can plug eqs. (2) and (3) into the budget constraint
rural household labor forces are subject to time constraints; of eq. (4) to obtain the following:
all time is allocated to leisure time, farming labor time, and wig, sNig, s+PiyYif+NRCMSig, s=PicCi+PixXif+wig, s(Lig, s+Fig, s)(5)
non-farming labor time. Fourth, there is heterogeneity in The Lagrange equation can be developed in the following
the utility of households. with the constraint (5):
The objective function and constraints for a rural G=U(Ci; Lig, Lis; i)+λ[wig, sNig, s+PiyYif+NRCMSig, s–PicCi
household’s decision making, including the decision of –PixXif–wig, s(Lig, s+Fig, s)]+μYif (6)
NRCMS participation in the constraints, are composed in The marginal impact of NRCMS on the rural household
the following equations: income will be determined by the sign of partial derivatives,
Utility-maximization objective function: ∂G ∂G
either >0, or <0 (7)
i=T ∂(NRCMSi ) g, s
∂(NRCMSig, s) 
g
Max
s g s
g
U(Ci ; Li , Lsi ; i )=Max ∑U(Cgi , Lgi , i )+U(Csi , Lsi , i) If the partial derivative is positive, it implies the NRCMS
Ci , Ci , Li , Li i=1
participation enhances labor productivity and raises labor
 (1) supply; the substitute effect dominates. In contrast, if
Production constraint: the partial derivative is negative, it implies the NRCMS
i=T i=T
participation provides the incentive for more leisure time.
∑Yif =∑ f(Fig, Fis; Xif; Hig, His; Ki) (2)
i=1 i=1  Labor supply declines with the income effect. It is required
where Hi =f(NRCMSi ); Xi =f(NRCMSig, s)
g, s g, s f to explore the net effect of NRCMS on rural household
Time constraint: income by empirical research.
i=T i=T
∑Tig, s=∑Lig, s+Nig, s+ Fig, s , where, L g, s, N g, s, F g, s≥0 (3)
i=1 i=1  3.2. Econometric model
Budget constraint:
i=T i=T
Based on the above theoretical framework, we develop the
∑ PicCi=∑Pic(Cig+Cis)
i=1 i=1 econometric model by using the large-scale micro-survey
i=T data to test the impact of the NRCMS on the health poverty

=∑ [wi
g, s g, s y g, s
Ni +(Pi Yif –PixXif )+NRCMSi ] (4)
i=1 alleviation of rural households in China. According to eq. (6),
The utility maximization is the core of the theoretical we take the first order condition with respect to the NRCMS
model of farming household economics. Whether a rural participation for utility-maximization to obtain the impact of
 QIN Li-jian et al. Journal of Integrative Agriculture 2021, 20(4): 1068–1079
the NRCMS on rural household income can be expressed as:
Incomej=αj0+αj1NRCMSj+αj2Πj+εj0 (8)
where Incomej denotes the jth household income. If it is
lower than the poverty line, then it defines the households
up to the jth are in poverty; the rest of households are not in
poverty. We can replace the income variable by the discrete
bivariate random variable, Povertyj, in which
Povertyj=αj0+αj1NRCMSj+αj2Πj+εj0 (9)
The system factor, NRCMS j, the core independent
variable in our study, indicates whether the household j
participates in the NRCMS to determine the poverty. The
vector Π summaries the other explanatory variables other
than the participation in NRCMS, including the household
labor force vector variables, the head of household vector
variables, the family living condition vector variables, and the
community variables. In order to control the heterogeneous
impact by regional differences on empirical results, we
introduce the regional dummy variables in which α0 is a
constant term; α1 and α2 are parameters to be estimated;
and ε0 is the random error term.
The household labor force vector variables include the
average age of household labor, the average schooling
years of household labor, and the number of male labor.
As suggested by Cheng et al. (2014) to illustrate the non-
linear impact, we add the square terms of the average age
and the schooling years of household labor. The head of
household vector variables include gender, age, education,
marriage, and mental status which is also considered in
Huang (2017). Family living condition vector variables
include whether family members are hospitalized, water
quality and fuel types for cooking, educational expense,
and the value of durable good consumption measured in
Bai et al. (2013). The community vector variables count the
condition of public facilities, the neighborhood assistance,
the distance to town, and the landform of the village (Qi
2011; Huang 2017).
Unlike universal insurance, it is a self-decision making
for a rural household to participate in the NRCMS. In the
enrollment process, although all levels of local governments
have done a lot of promotion, the central government
still insists on the principle of voluntary participation.
Participation in the NRCMS will have a certain impact on
the poverty (income) of rural households; on the other
hand, the poverty (income) of rural households will also
affect the decision to participate in the NRCMS. As a
result, the endogenous issue exists between the poverty
variable and the NRCMS participation variable to cause
the possible biased estimates in the regression results. To
resolve the problem, we follow the setting in Qin et al. (2014,
2018) to adopt the NRCMS participation rate in counties
as the instrumental variable for household participation.
This variable is highly correlated to whether a household
1073
participates in the NRCMS but relatively independent
from the household poverty (income) to serve as an ideal
instrumental variable (Wooldridge 2018).
It is an appropriate choice of the Probit model to construct
the estimated equation in eq. (9) in which a dichotomous
dependent variable is associated with the large sample size.
If the test results indicate an endogenous problem between
the variables, then we will switch to the IVProbit model for
estimation. Otherwise, the ordinary Probit model is accurate
enough to dominate. To reduce the data anomalies, we
also take the logged value of the educational expense
and the value of durable good consumption. In the next
section, there are three empirical tests to verify the impact
of NRCMS on rural household poverty alleviation. First,
we use the China’s national poverty line as the dependent
variable. Then a heterogeneity test follows for varied income
groups and regional differences. Finally, we use the World
Bank poverty line as the dependent variable to perform a
robustness test.
4. Results and discussion
4.1. IVProbit model
Table 2 shows the regression results of the IVProbit model
of the impact of the NRCMS on rural households’ health
poverty alleviation. Model (1) is the basic model that
includes the characteristics of household labor, head of
households, family living condition, and regional dummy
variables. Model (2) is an expansion to include additional
community characteristics. The results of the endogenous
test (i.e., the Wald test) indicate that both models reject the
exogenous null hypothesis at significantly low  P-values
at 0.0300 and 0.0103, respectively. It is noted that the
IVProbit model using the instrumental variable method
resolves the serious endogenous problems successfully in
both models. In Model (1), the coefficient sign of whether
to join the NRCMS is negative at a significance level at
5%.  It confirms that the NRCMS significantly reduces the
probability of rural households falling into poverty. The
coefficient of the same NRCMS variable in Model (2) even
decreases more from –1.4148 to –2.1018 at a significance
level of 1%. The result implies that the positive impact of
the NRCMS on rural households’ health poverty alleviation
is not only confirmed but also becomes more substantial
if the community characteristic variables are considered.
We ignore the possible correlation between the two
core independent variables, NRCMS participation and
hospitalization here. First the correlation coefficient of
NRCMS participation and hospitalization is only 0.0652 to
confirm the independence. Second, as Sun et al. (2009)
indicated, the low compensation ratio of NRCMS does
1074 QIN Li-jian et al. Journal of Integrative Agriculture 2021, 20(4): 1068–1079

Table 2 Results of IVProbit model for the impact of New Rural Cooperative Medical Scheme (NRCMS) participation
Model (1) Model (2)
Variable Standard Standard
Coefficient P-value Coefficient P-value
deviation deviation
Core independent variables
Join the NRCMS or not –1.4148** 0.6448 0.0280 –2.1018*** 0.7622 0.0060
Hospitalization 0.1010** 0.0461 0.0280 0.0957** 0.0481 0.0470
Other control variables
Household labor force
Age –0.0146 0.0204 0.4750 –0.0307 0.0224 0.1710
Age square 0.0001 0.0002 0.6610 0.0003 0.0003 0.2630
Schooling years –0.0361** 0.0176 0.0400 –0.0251 0.0185 0.1750
Schooling years square 0.0007 0.0015 0.6230 –0.000 0.0016 0.9910
Number of male labor 0.0019 0.0318 0.9530 –0.0134 0.0342 0.6940
Head of household
Gender –0.0116 0.0422 0.7830 0.0022 0.0452 0.9610
Age 0.0133 0.0119 0.2630 0.0187 0.0130 0.1520
Age square 0.0000 0.0001 0.9240 –0.0000 0.0001 0.7250
Education (contrast to elementary school)
Middle school –0.1139** 0.0486 0.0190 –0.1024** 0.0522 0.0500
High school –0.1375* 0.0827 0.0960 –0.0990 0.0878 0.2600
College –0.2591 0.2028 0.2010 –0.3688 0.2517 0.1430
Marital status –0.0026 0.0720 0.9720 0.0034 0.0772 0.9650
Mental status 0.0251 0.0240 0.2960 0.0158 0.0261 0.5440
Family living condition
Water quality 0.1398*** 0.0404 0.0010 0.1338*** 0.0443 0.0003
Fuel usage 0.1637*** 0.0257 0.0000 0.1461*** 0.0281 0.0000
Educational expenses –0.0066 0.0050 0.1890 –0.0032 0.0054 0.5580
Durable good consumption –0.0610*** 0.0072 0.0000 –0.0526*** 0.0085 0.0000
Community
Condition of public facilities –0.0002 0.0226 0.9990
Assistance of neighborhood 0.0272 0.0272 0.3170
Distance to town 0.0056*** 0.0021 0.0090
Landform of villages (contrast to plain)
Hills 0.0216 0.0524 0.6800
Highland or mountain 0.2397*** 0.0590 0.0000
Region (Contrast to eastern)
Central 0.0253 0.0527 0.6300 0.0525 0.0552 0.3410
Western 0.2322*** 0.0497 0.0000 0.1798*** 0.0562 0.0010
Constant 0.3798 0.5450 0.4860 1.1249 0.6948 0.1050
Log likelihood –615.5910 –145.8067
Prob>chi2 0.0000 0.0000
Wald test of exogeneity 0.0300 0.0103
* **
, , and ***, 10, 5, and 1% statistical significances, respectively.

not reduce the participating rural households’ burden of
medical expenses. The total out-of-pocket payments
of hospitalization may even increase after NRCMS
participation (Wagstaff and Lindelow 2008; Wagstaff et al.
2009). The coefficient of hospitalization measures that, if
at least one family member was sick and hospitalized in the
past year, whether the household’s risk of falling into poverty
is increased or not. Table 2 shows that the coefficients in
both models are positive at a significance level of 5%. The
result indicates that household members’ illness is one of the
key causes to trap a rural family in poverty. From medical
service providers’ perspective, China’s medical costs have
been rising rapidly in recent years creating a huge financial
burden on patients. From the perspective of medical service
takers, once a family member is hospitalized for an illness,
the hospitalized is out of the labor market and requires
the care from the other family members. The household
income can drop significantly due to the double loss of
household labor force. Compared with urban households,
rural residents generally face limited channels of earnings.
Once a family member needs to be hospitalized, the adverse
impact on household income and development is greater
than that on the other.
The results of some other significant variables are also
noteworthy. In Model (2), among the household labor
force variables, the older the average age, the lower the
 QIN Li-jian et al. Journal of Integrative Agriculture 2021, 20(4): 1068–1079
probability of the household falling into poverty. More
working experiences and a higher share of income based
on working experiences can explain the result. The longer
the schooling years of the household labor force also
significantly reduce the probability of falling into poverty.
It is expected to see a more educated labor can adopt
modern agricultural production skills well and fit the current
production regulations quickly to improve the household
income. The household head variables results show that
gender makes no difference in the probability of falling in
poverty. As the age of the head of household increases,
the probability of the family falling into poverty increases,
but the impact is non-linear. All the education levels, marital
status, and mental status of the household head have no
significant effect on poverty alleviation.
It is also noted that the family living condition variables
indicate that households using well water, cellar water, or
rainwater for cooking, have a higher probability of falling into
poverty than those who using tapped or filtered water. How
clean the fuel is used for cooking also matters. Compared to
households using LG, natural gas, or electricity for cooking,
the households burning woods or coals for cooking are more
likely to fall into poverty. Both the water quality and the
type of fuel usage reflect the harshness of the environment
and the economic status of a household. It is also worth to
note that the greater the value of a household durable good
consumption, the lower the probability that the household
falling into poverty. The value of durable goods owned by
a household serves as an important indicator of household
wealth. Among the community characteristic variables,
the distance to town exhibits a significant impact on the
probability of falling into poverty. The greater the distance
away from town, the household is more likely to fall into
poverty. Towns are important in a rural area to serve as
trading centers. Markets and information are more available
to those who live nearby to escape from poverty. Similarly,
rural households in the mountains or high plateau areas are
more likely to fall into poverty. Lack of natural resources
and transportation, they are easily trapped in the harsh living
environment. They are also the key target for the Chinese
Table 3 Results of heterogeneity test for the impact of New Rural Cooperative Medical Scheme (NRCMS) participation1)
Dimension Group Variable
Income Low Join the NRCMS or not
Lower-middle Join the NRCMS or not
Upper-middle Join the NRCMS or not
High Join the NRCMS or not
Region Eastern Join the NRCMS or not
Central Join the NRCMS or not
Western Join the NRCMS or not
1)
Control variables are the same as those in Table 2.
* **
, , and ***, 10, 5, and 1% statistical significances, respectively.
1075
government to bail out from poverty. Significant regional
differences exist in China for varied poverty risks. Compared
with the eastern region, the probability of falling into poverty
in the western region is significantly higher.
4.2. Heterogeneity test
Table  3 shows the heterogeneity testing results for the
impact of the NRCMS on the rural households’ poverty
alleviation in two dimensions, income and regions. Income,
divided into four groups, were categorized equally according
to the annual per capita household net income, as the low-
income group, the lower-middle-income group, the upper-
middle-income group, and the high-income group. Regions,
divided into three groups for interviewed households were
the eastern region, the central region, and the western
region. The results show that the NRCMS significantly
reduced the probability of falling into poverty for the rural
households in the low-income group and lower-middle-
income group with the significantly estimated coefficients
–1.8279 and –3.8739, respectively. It implies that the
NRCMS has the greatest impact on lower-middle-income
households for poverty alleviation. The lower-middle-
income group is also the target group most vulnerable to
falling back into poverty once bailed out. Different from the
impact of residential insurance in the urban area (Huang
2017), the participation of the NRCMS for rural households
does not exhibit a “moving-on-up-to-the-target” effect; that
is, only the higher income group has a greater and growing
participation rate in health insurance. It indicates that the
NRCMS has achieved the expected policy goal to reduce
the probability of falling into poverty for lower-income people.
The grouping results by region show that the impact of
NRCMS in the western region is particularly significant. In
China, the overall economic and social developments are
relatively slow in the western region. The rural residents
in the western region are more vulnerable to family risks
such as illness or accident and have fewer channels to
resist risks. The results also show that the participation of
NRCMS has effectively reduced the risk to fall into poverty
Coefficient Standard deviation Z-value P-value
–1.8279* 1.0460 –1.7500 0.0810
–3.8739** 1.9657 –1.9700 0.0490
1.6869 871.5463 0.0000 0.9980
2.1445 971.7604 0.0000 0.9980
1.7852 1.2668 1.4100 0.1590
–0.8597 1.6212 –0.5300 0.5960
–5.9554*** 0.5058 –11.7700 0.0000
1076 QIN Li-jian et al. Journal of Integrative Agriculture 2021, 20(4): 1068–1079

for rural households in the western region.
4.3. Robustness test
Table  4 shows the results of the robustness test on the
impact of NRCMS. We adopt the World Bank’s poverty
line as a benchmark to test whether the NRCMS has a
stable impact on poverty alleviation in rural China. Similar
to Table 3, the Model (1) and Model (2) in Table 4 exhibit the
basic model and the extended model, including community
characteristic variables. The results of both models confirm
the robustness of the significant positive impact of NRCMS
participation on rural household poverty alleviation. All the
coefficient signs and statistical significances of variables
are consistent with those in Table 2 by using the China’s
national poverty line as the standard.
It is a common goal for all nations in the global community
to eliminate poverty and promote prosperity. Diverse in
natural resources, human capital, government policies, and
economic development, every country worldwide faces the
poverty problem at varied stages. Global organizations
such as the World Bank and the United Nations have been
working hard in poverty reduction. Since the 21st century,
the progress to resolve global poverty reduction has been
remarkable in East Asia, the Pacific, and South Asia. Among
those countries, China has been contributing substantially
to poverty reduction in the world. Although the extreme
poverty rate has dropped, new types of poverty have also

Table 4 Results of robustness test for the impact of New Rural Cooperative Medical Scheme (NRCMS) participation
Model (1) Model (2)
Variable Standard Standard
Coefficient P-value Coefficient P-value
deviation deviation
Core independent variables
Join the NRCMS or not –1.3352** 0.6565 0.0420 –2.0893*** 0.7699 0.0070
Hospitalization 0.0887* 0.0468 0.0580 0.0837* 0.0487 0.0860
Other control variables
Household labor force
Age –0.0200 0.0201 0.3330 –0.0348 0.0226 0.1240
Age square 0.0002 0.0002 0.4820 0.0003 0.0003 0.1910
Schooling years –0.0451*** 0.0177 0.0110 –0.0347* 0.0187 0.0630
Schooling years square 0.0013 0.0015 0.3890 0.0007 0.0016 0.6690
Number of male labor 0.0022 0.0322 0.9450 –0.0105 0.0345 0.7620
Head of household
Gender –0.0062 0.0427 0.8850 –0.0056 0.0456 0.9020
Age 0.0125 0.0120 0.2970 0.0181 0.0132 0.1700
Age square –0.0000 0.0001 0.8800 –0.0000 0.0001 0.7770
Education (contrast to elementary school)
Middle school –0.1049** 0.0494 0.0340 –0.0861* 0.0529 0.1040
High school –0.1261 0.0837 0.1320 –0.0789 0.0885 0.3730
College –0.2318 0.2035 0.2550 –0.3346 0.2513 0.1830
Marital status –0.0168 0.0730 0.8180 –0.0157 0.0783 0.8410
Mental status 0.0237 0.0243 0.3290 0.0155 0.0264 0.5560
Family living condition
Water quality 0.1276*** 0.0409 0.0020 0.1201*** 0.0447 0.0070
Fuel usage 0.1553*** 0.0260 0.0000 0.1356*** 0.0283 0.0000
Educational expense –0.0070 0.0051 0.1700 –0.0031 0.0055 0.5770
Durable good consumption –0.0589*** 0.0072 0.0000 –0.0496*** 0.0085 0.0000
Community
Condition of public facilities –0.0026 0.0228 0.9080
Assistance of neighborhood 0.0155 0.0273 0.5700
Distance to town 0.0058*** 0.0021 0.0070
Landform of villages (contrast to plain)
Hills 0.0243 0.0531 0.6460
Highland or mountain 0.2702*** 0.0594 0.0000
Region (Contrast to eastern)
Central 0.0171 0.0534 0.7490 0.0431 0.0559 0.4410
Western 0.2214*** 0.0504 0.0000 0.1613*** 0.0568 0.0050
Constant 0.4570 0.5490 0.4050 1.2168* 0.6974 0.0810
Log likelihood –648.9428 –87.2643
Prob>chi2 0.0000 0.0000
Wald test of exogeneity 0.0400 0.0107
* **
, , and ***, 10, 5, and 1% statistical significances, respectively.
 QIN Li-jian et al. Journal of Integrative Agriculture 2021, 20(4): 1068–1079
emerged around the world. For example, the proportion of
people without health facilities in East Asia and the Pacific
has risen; the income of the bottom 40% of the sub-Saharan
Africa’s population has declined; East Asia, the Pacific,
as well as the Latin America and the Caribbean, have the
most prominent transfer of poverty to the rural areas. The
focus of global geographic poverty has also shifted from
South Asia to the African continent (Li et al. 2019). Just
a single disease, Malaria, causes Africa to lose 1.30% of
GDP each year (WHO 2016). China has been willing to
share the experience of poverty alleviation, based upon its
diverse geographical regions and economic developments,
especially with the developing countries and regions.
5. Conclusion and policy recommendations
This study investigates the impact of the New Rural
Cooperative Medical Scheme (NRCMS) on rural households
for poverty alleviation in China. We employ the instrumental
variable method, the IVProbit model, to analyze the national
data from the rural-resident field survey by the China
Family Panel Studies (CFPS) in 2016 and test the results
empirically. The China’s national poverty line serves as
a benchmark for the dependent variable proxy; it is also
grouped with the two dimensions of income and region to
test the heterogeneity. We also use the World Bank poverty
line as another benchmark for the dependent variable proxy
to test the robustness of the empirical results. Our results
indicate that, first, NRCMS has significantly reduced the
probability of Chinese rural households trapped into poverty,
according to either China or the World Bank poverty line.
The high risk of back to poverty, caused by the family
members who are ill for hospitalization, has been effectively
lowered by the support of NRCMS. The positive impact of
the NRCMS on poverty alleviation in China is substantial.
Second, the impact of NRCMS on rural households’ poverty
alleviation vary among different income groups. It bails out
the low-income households, especially those in the lower-
middle-income group, from falling back to poverty due to
illness. However, the NRCMS plays no role in preventing
poverty due to illness for the middle- and high-income
groups. Third, the NRCMS substantially moderates the risk
of rural households in the western region falling into poverty,
much more significant than that on the eastern and central
regions. The regional differences exist among the impact
of NRCMS on poverty alleviation in China.
The findings in this paper have important policy
implications. In order to reduce and eliminate poverty in
China, we propose the following for policymaking: First,
lift up the actual compensation ratio of the NRCMS. The
conventional policy packages for cost control include
deductible, cap line, co-pay ratio and compensation scope
1077
to limit the moral hazard problem. However, it often ends
up in a situation where patients’ actual compensation ratio is
significantly different from the nominal compensation ratio.
A higher actual compensation ratio of NRCMS is expected
to raise the participation rate of rural households for poverty
alleviation. Second, reconstruct the payment schedule for
the NRCMS. Given the current low per capita funding of
the NRCMS, if the cost control of medical services cannot
be exercised efficiently, the impact of the NRCMS on rural
households’ poverty alleviation will be greatly reduced. For
example, the payment method of Diagnosis Related Groups
(DRGs) and the prepayment method based on the total
medical amount, which has been practiced in the United
States and in some pilot regions in China, have shown
good control over medical expenses. Third, improve the
overall quality of the medical and health service system in
the western region. Not only increase the capacity of the
township and village-level health institutions, but the local
government should also intensify the training of medical
staffs. It is also important to promote the local patients
seeking medical treatment in the township and village
medical institutions associated with the remote technical
supports from the higher-level medical institutions in the
metropolitan area. By doing so, the number of out-of-county
consultations will be reduced to maintain the NRCMS funds
to provide insurance for more rural residents. Fourth,
reinforce the medical security system for the marginal
poor who are at a high risk of falling into poverty at any
time. It might be necessary to integrate all the funds from
the NRCMS, the critical illness insurance, the medical
assistance, and the Red Cross charitable assistance, to
coordinate the total usage and payment to achieve the health
poverty alleviation. Fifth, provide a healthy environment in
rural areas including drinking water safety, clean fuels for
cooking, and toilet facilities. It is also important to promote
the self-governance of the environment in rural areas. The
income of rural households can be also boosted.
Our study can be extended and modified in the following
directions. First, how the mechanism of NRCMS affects
the rural household health poverty alleviation needs to
be explored in depth. The NRCMS is supposed to have
complicated effects on health status, labor migration,
labor supply, consumption, savings, and investment. The
combined impact on household income may take a longer
time to prevail. Second, the panel data of CFPS will be
investigated to explore the dynamic decision making and
equilibrium. The time fixed effect will be also controlled.
Third, it is worth exploring the impact of the NRCMS on
personal poverty. Although our result indicates that if a
person becomes ill, then the whole family is very likely to
fall into poverty, the uneven allocation of available resources
within a family may lead to quite different results for each
1078 QIN Li-jian et al. Journal of Integrative Agriculture 2021, 20(4): 1068–1079
individual. More detailed data to distinguish resource
allocation among individual members will lead to a more
accurate identification for the health poverty alleviation.
Acknowledgements
We gratefully acknowledge the supports by the National
Social Science Fund of China (18FGL014), the Key Project
of Humanities and Social Science Base of Anhui Province
of China (SK2019A0491), the Humanities and Social
Science Foundation of the Ministry of Education of China
(18YJA790065), the Social Science Foundation of Anhui
Province of China (AHSKY2017D01), the Outstanding
Scholar Project of Anhui Province of China (gxbjZD12),
the Key Project of the Social Science Foundation of Anhui
Province of China (AHSKY2020D44), and the 2019 Major
Project of the Social Science Foundation of Anhui Province
of China (AHSKZD2019D04).
Declaration of competing interest
The authors declare that they have no conflict of interest.
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