Exploring the Relationship Between Health and Out-of-Pocket Health Expenditures: Evidence for Middle-Aged and Older Adults in China

Background/Objectives: With population aging, disability and chronic conditions are increasingly prevalent among middle-aged and older adults in China. Using panel data from the China Health and Retirement Longitudinal Study (CHARLS) from 2011 to 2018, this paper explores the effects of Activities of Daily Living limitations, Instrumental Activities of Daily Living limitations, and chronic conditions on Out-of-Pocket Expenditures (OOPEs) among middle-aged and older adults in China. Methods: A first-difference model and a system-generalized method of moment model (GMM) are used. Results: The system-GMM model for the first time addresses unobserved heterogeneity and produces unbiased estimates of the effects of health and OOPEs. Additionally, this paper assesses the heterogeneity of the results across the demographic and socioeconomic groups. Conclusions: These findings can be used to inform policymakers on improving medical resource allocation and ensure better financial protection for those living with a disability and chronic diseases.