Association Between Supplemental Private Health Insurance and Burden of Out-of-Pocket Healthcare Expenditure in China: A Novel Approach to Estimate Two-Part Model with Random Effects Using Panel Data

Introduction: Private health insurance (PHI) is an important supplement to the basic health insurance schemes in the Chinese healthcare system. However, there is an absence of evidence on whether the strategy of engaging PHI to reduce burden is effective in China. As such, we aimed to investigate the association between supplemental PHI and the out-of-pocket (OOP) burden of household healthcare expenditure in China. Methods: We conducted a panel data analysis using data from three waves of China Health and Retirement Longitudinal Study (CHARLS). Specifically, a two-part model (TPM) with a first-stage probit and second-stage generalized linear model (GLM) framework was used to analyze the data. To account for individual-level random effects in both stages and their correlation in the TPM analysis, we proposed a generalized structural equation modeling (GSEM) approach to implement the estimation. The proposed approach allowed us to simultaneously analyze the association of PHI with the probability of having any healthcare and the OOP burden conditional on having any healthcare expenditure. Results: Using the GSEM estimates, we found that supplemental PHI was significantly associated with a higher probability (4.29 percentage points) of having any OOP healthcare expenditure but a lower OOP burden conditional on having any expenditure (- 2.37 percentage points). Overall, supplemental PHI was insignificantly associated with a lower OOP burden (- 1.05 percentage points). Discussion: Our findings suggested that supplemental PHI in China may be able to effectively improve access to healthcare while keeping the OOP healthcare expenditure burden flat. Also, GSEM is a feasible method to estimate random-effect TPMs.