Assessing determinants of health care prepayment in China: Economic growth or government willingness? New evidence from the continuous wavelet analysis

Significant prepayment of health care is a crucial factor to ensure that all individuals have access to effective health services at affordable prices. The research questions we address here are as follows: What role does economic growth play in changing the level of health care prepayment? Does government's willingness to spend more on health mean higher prepayment rates in the health financing system? What are their dynamic relationships? These questions are addressed in China over the 1978 to 2014 period by employing the continuous wavelet analysis. We focus in particular on their correlations and lead-lag relationships across different frequency bands. Our findings clearly show that overall government willingness has a positive effect on health care prepayment level, while the impact of economic growth varies in the time-frequency domain. This variation could be demonstrated in 1980 to 1998, when the positive correlation between economic growth and health care prepayment level in the short term turned negative in the medium and long term, which indicated that China could not achieve mutual development of economic growth and social welfare within the market-oriented health system. Notably, the time-varying analysis indicates that China's new round of medical system reform since 2006 plays an important role in changing the correlations and lead-lag relationships. In particular, health care prepayment tended to lead government willingness during the 2006 to 2012 period since the increase of health subsidies and expenditures strengthened government responsibility over the health sector, and there existed a persistent mutual stimulation between economic growth and health care prepayment level across all frequency bands along with the reform.