Research on the Influence of Medical Insurance on Technological Innovation in Medical Industry：Evidence from Serious Illness Insurance in China

doi:10.21203/rs.3.rs-2375833/v1

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Research on the Influence of Medical Insurance on Technological Innovation in Medical Industry：Evidence from Serious Illness Insurance in China

https://doi.org/10.21203/rs.3.rs-2375833/v1

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Can medical insurance, as an incision, promote technological innovation in the medical industry against the backdrop of China's high-quality development of medical insurance? Using serious illness insurance as an example, this paper employs the multi-period double difference method to assess the impact and mechanism of serious illness insurance on medical device innovation, based on R&D investment data for medical device industry in 29 Chinese provinces from 2007 to 2019. The study found that serious illness insurance considerably increased the development of medical devices. According to a mechanism study, serious illness insurance raises patients' demand for medical care, which increases the number of people who seek treatment, the number of people who stay in hospitals, the number of outpatient visits, and the market for medical devices. According to the adjustment effect, the more beds accessible to regional hospitals and the lower the level of market competition, the more overtly serious illness insurance encourages medical device innovation. This study provides policy insight for supporting high-quality coordinated growth of medical security and pharmaceutical services, as well as a deeper understanding of the logical relationship between medical insurance and technological innovation in the medical industry.

Health Policy

Social Policy

Health Economics and Outcomes Research

public health insurance

innovation incentives

technological innovation

medical devices

The impact of medical insurance policy on medical device innovation is examined using serious illness insurance as a representative policy for treatment adjustment after China's basic medical insurance basically achieves full coverage.
Examine the impact of serious illness insurance on the size of the medical service demand market, such as changes in patient outpatient and hospitalization requirements.
In contrast to the non-significant impact of urban and rural medical insurance coordination policies on medical device innovation, market size is highlighted as a key mechanism role.

Technological innovation in the medical industry not only reflects China's high-tech development level, but it is also closely related to people's livelihood and well-being. Despite China's rapid development and continuous improvement in innovative drug and medical device output, patented drugs and large, medium, and high-end medical devices continue to rely on imports due to a lack of innovative ability, and the resulting monopoly high price has also become an important cause of "expensive medical treatment" for Chinese patients. Since the 18th National Congress of the Communist Party of China, the government has released a number of industrial support policies, including "Made in China 2025" and "Guidelines for the Development Planning of Medical Industry," which have successfully promoted the technological innovation of the medical industry to support the high-quality development of medicine and health as well as to address the main technological "bottleneck" and other issues.

A good opportunity for the innovation and development of the medical industry is presented by the growing purchasing power of medical insurance funds as China's medical security system keeps getting better. China had 1.364 billion individuals engaging in basic medical insurance at the end of 2021, with a coverage percentage of more than 95% continuing consistent, according to the Statistical Express of Medical Security Development in 2021. The overall income for the medical insurance fund was 2.87 trillion yuan, and the total balance was 3.61 trillion yuan. In its Opinions on Deepening the Reform of Medical Security System in the State Council, the Central Committee of the Communist Party of China proposed in 2020 that "Give full play to the strategic purchasing role of medical insurance funds, and promote high-quality coordinated development" to address the reform challenges that the supply side of medical services faced, such as exorbitant prices and a lack of innovation. As a result, it is critical to clarify the relationship between medical insurance and technological innovation in the medical industry.

Medical demands of patients and medical gadgets are intimately intertwined in the healthcare sector. The need for hospitalization services is higher, particularly for seriously ill patients, and as a result, so is the demand for medical device services. The National Development and Reform Commission, along with the other six departments, jointly released the Guiding Opinions on Carrying out Serious Illness Insurance for Urban and Rural Residents in August 2012, proposing the establishment of a serious illness insurance system that would cover insured residents in both urban and rural areas. This was done to lessen the financial burden of medical treatment for seriously ill patients. The goal of this paper is to provide empirical support and policy enlightenment for the high-quality coordinated development of medical security and medical services in China. This is accomplished by looking at how serious illness insurance affects the development of medical devices and by attempting to assess how medical insurance affects medical technology innovation in China from the standpoint of treatment modification.

The main element in medical insurance that affects technological innovation in the medical field is market size. Schmookler stated that firms are driven by profit [21], the quantity of innovations is influenced by market size, and the majority of innovation is an economic activity. For instance, external shocks caused by demographic changes like the baby boomers have changed the size of the market for treating diseases, driving up drug innovation [1]. According to research by Grossmann on the impact of American medical insurance policy on drug innovation [9], increasing the prescription drug insurance coverage would increase drug prices and R&D expenditures, whereas increasing the coinsurance rate in a cost-sharing plan would have the opposite effect. Clemens found that the development of American medical insurance has sparked the development of medical devices [6].

However, research has shown that medical insurance doesn't necessarily promote the development of medical technologies [2]. Depending on whether medical insurance's influence is brought on by partial equilibrium or general equilibrium, it is possible for it to have an impact on medical technological progress. If the approach of lowering patient cost sharing, such as the expansion of medical insurance, does not significantly affect the demand for patients' medical services and the market size of the medical industry, businesses will not be compelled to make innovative decisions. An example of this is the fact that, despite the fact that developing countries have more than 80% of the world's population, the majority of global drug R&D funding is allocated to ailments in affluent countries [29]. According to pertinent studies, the prevalence of disease is positively correlated with the number of medication breakthroughs in industrialized countries but not in underdeveloped countries [5, 13, 17]. The cause is that patients in developing nations have poor disease burden capacities, and there is little or no motivation for businesses to produce treatments that primarily target diseases that strike individuals in underdeveloped nations.

Because it is unclear how medical insurance will affect the size of the medical industry's market, the influence of medical insurance policies on technological innovation in different nations or areas may differ [23]. For instance, despite having a small population, Switzerland is a major player in the pharmaceutical industry. It could be challenging to execute a medical insurance policy that would change the market size of the healthcare sector and have an impact on technological innovation in that sector. The installation of medical insurance policies is more likely to spur a shift in the size of the medical industry's market and have an impact on its technological innovation because the United States is both a large country of pharmaceutical invention and a large country of consumption [8, 12]. Therefore, it is crucial to consider the national context when discussing how medical insurance affects technological innovation in the medical industry.

The impact of medical insurance on people's requirements for medical treatment has been widely researched in China. From the perspective of population coverage, the new rural cooperative medical system and urban residential insurance have significantly raised the utilization rate of patients' medical services [4, 19]. From the perspectives of treatment adaption, serious illness insurance, and medical insurance for urban employees, the coordination of outpatient care significantly enhanced the usage of patients' medical services (urban occupational insurance) [32, 24, 11]. There haven't been enough studies done to determine whether the shift in patient demand for medical services will spur further technological innovation in the medical sector. The literature currently in print primarily examines how urban occupational insurance encourages drug innovation for diseases with large market shares and describes the positive correlation between the introduction of China's medical insurance policy and drug and medical device innovation [20, 28, 29]. The research angle focuses more on the impact of medical insurance from scratch, but there is no discussion of how, given the current full coverage of medical insurance, the market size change brought on by the modification of medical insurance benefits and other policies might impact the technological advancement of the medical industry.

In conclusion, there is still opportunity for more research on the impact of medical insurance on technological innovation in the medical industry. First, a significant influencing mechanism is market size. The national circumstances have a significant impact on whether the medical insurance programs of various nations or regions can influence technological advancement in the medical sector. The ability of China's medical insurance policy to direct the technological innovation of the medical industry must be specifically examined in conjunction with the development of medical insurance in China in light of the high-quality development of medical insurance. Second, existing research has focused on the impact of the establishment of a medical insurance coverage system on technological innovation in medical industry. Because of China's large population, the expansion of medical insurance has resulted in a rapid increase in the number of insured people and the demand for medical treatment. As a result, it has a larger impact on the size of the medical industry's market and a stronger incentive effect on technological innovation. China's basic medical insurance coverage is currently stable at more than 95%. So, in the case of a large coverage base but a small increment, whether the change in medical demand caused by treatment adjustment can affect medical industry technological innovation requires further investigation.

Based on this, this paper conducts a quasi-natural experiment with the help of serious illness insurance for urban and rural residents, using panel data from the Statistical Yearbook of China, the Statistical Yearbook of China Health, and the Statistical Yearbook of China High-tech Industry from 2007 to 2019, and employing a multi-period double difference (DID) model to examine the impact of serious illness insurance on medical device innovation. The following are the reasons for selecting serious illness insurance for examination: First, in 2011, China's medical insurance participation rate exceeded 95%, and basic medical insurance coverage was nearly complete. Serious illness insurance, which is a useful supplement to basic medical security, was piloted in 2012. Patients' treatment levels have significantly improved thanks to its secondary reimbursement rate of at least 50%; Second, because the serious illness insurance pilot program is being implemented in a variety of provinces (autonomous regions and municipalities directly under the Central Government), it can be viewed as a quasi-natural experiment to accurately assess the impact of policy implementation; Third, the new urban residential insurance and rural cooperative medical system's insured members immediately enroll in the serious illness insurance, which significantly reduces the issue of adverse selection. The policy influence might be more visible given that China has almost a billion urban and rural population as well as the fact that very ill individuals are more likely to receive payment from serious illness insurance.

According to the study presented in this paper, serious illness insurance has greatly increased the investment in medical device innovation. This effect is more evident in areas with a large supply of beds and minimal market competition. The total number of patient medical visits per capita increased following the implementation of serious illness insurance, while the number of outpatient visits decreased and the number of hospitalizations increased, indicating that serious illness insurance not only increased the number of patients' medical needs, but also improved the quality of those needs. As a result, the market for medical devices has expanded, encouraging companies to increase their R&D spending.

The following are this paper's minor contributions: First, learning from study experiences both domestically and internationally, summarizing the major mechanisms by which medical insurance affects technological innovation in the medical field, and combining this information with the real situation in our nation are the first steps to be taken; Second, the focus of medical insurance development in China has shifted from coverage extension to quality enhancement in the current period. Based on the treatment adjustment policy after coverage expansion, this study confirmed the incentive effect of lowering patients' cost sharing on medical industry technological innovation, and provided policy enlightenment for fully utilizing the role of medical insurance in guiding medical industry technological innovation and promoting high-quality coordinated development of medical security and medical services.

3.1 The history of serious illness insurance policy

China established the urban occupational insurance system, the new rural cooperative medical system, and the urban residential insurance system in 1998, 2003, and 2007, respectively, forming a medical security system that essentially covers the entire population. However, many families are unable to withstand the impact of major diseases due to a lack of security, and the problem of poverty caused by illness and returning to poverty due to illness remains serious. To further protect patients' medical treatment and prevent them from becoming or returning to poverty as a result of illness, the National Development and Reform Commission and six other departments jointly issued the Guiding Opinions on Developing Serious Illness Insurance for Urban and Rural Residents (hereinafter referred to as the Opinions) in August 2012, proposing to establish a serious illness insurance system for urban residents' insurance. Following the publication of the "Opinions," the pilot program of serious illness insurance was rapidly expanded across the country. Serious illness insurance reached full implementation in 2015, covering more than 1 billion urban and rural residents. Table 1 shows the specific years of the serious illness insurance pilot program in each province (autonomous regions and municipalities)[1].

Table 1

Implementation time of serious illness insurance pilot
Year	Provinces (autonomous regions and municipalities)
2012	Qinghai
2013	Yunnan, Hebei, Gansu, Liaoning, Jilin, Anhui, Guizhou, Shaanxi, Guangdong, Zhejiang, Ningxia, Chongqing, Jiangxi, Shanxi, Inner Mongolia, Fujian, Henan, Hubei, Hunan, Guangxi, Sichuan, Xinjiang, Heilongjiang, Shandong and Jiangsu.
2014	Beijing, Hainan, Shanghai, Tianjin
2015	Tibet

Source: The author collated data from official government, health, civil affairs, and social security agency documents from several provinces (autonomous regions and municipalities).

3.2 Model setting

The traditional DID method is not applicable because the provinces (autonomous regions and municipalities directly under the Central Government) do not conduct the pilot at the same time. Therefore, a panel two-way fixed effect model is built in this study's analysis of the effect of serious illness insurance on medical device innovation using the multi-period DID method.

$${lnrd}_{it }=\alpha +\beta {policy}_{it}+\gamma {X}_{it}+{A}_{i}+{B}_{t}+{\epsilon }_{it}$$

Whereby $i$ represents the $i$th province and $t$ represents the $t$th year; ${lnrd}_{it }$is the explanatory variable medical device innovation, and this paper is measured by the logarithmic value of the internal R&D investment cost of the medical devices industry; ${policy}_{it}$is the core explanatory variable, whether the pilot of serious illness insurance is implemented, and its coefficients reflect the policy effect of serious illness insurance; ${X}_{it}$is the set of control variables for the model; ${A}_{i}$is the fixed effect of provinces, controlling the characteristics of province differences that do not change with time; ${B}_{t}$is a fixed effect of years, and the control does not change with the province, but changes with time; ${\epsilon }_{it}$is a random error term.

3.3 Data sources

Data from the China Statistical Yearbook, China Health Statistical Yearbook, and China High-tech Industrial Statistical Yearbook, covering the years 2008 to 2020, were used in this study. Data for a few provinces and years are missing. The mean replacement method is employed in this paper to interpolate the missing values. The balanced panel data for 29 Chinese provinces from 2007 to 2019 are eventually acquired after the deletion of Hainan Province and the Tibet Autonomous Region due to the excessive number of missing values for key variables in those two regions. Information on the serious illness insurance pilot program is gathered from official documents of the provinces' governments (autonomous regions and municipalities directly under the Central Government), as well as those of the departments of health, civil affairs, social security, etc. The pilot year is chosen in accordance with the pilot period specified in the documents.

3.4 Description of variables

3.4.1 Explained variable

Innovation in medical technology (lnrd). In the literature now in existence, there are primarily two ways to measure technological advancement. First, the amount of R&D expenditure and the percentage of R&D expenditure in sales are used to determine the amount of innovation investment [10, 16]; Second, the number of patent applications and patents granted is used to determine the amount of innovation output [7]. The number of patents cannot accurately indicate how businesses reacted to the timely deployment of serious illness insurance due to the extensive R&D cycle of medical equipment items. In order to quantify the innovation of medical devices, this research uses innovation investment, which is the internal R&D spending of medical devices in medical industry, and applies a logarithmic treatment.

3.4.2 Explain variables

Serious illness insurance pilot program(policy). First, check the pilot paperwork for serious illness insurance policies that have been formally issued by different jurisdictions (autonomous regions and municipalities directly under the Central Government). Second, determine the timeline for implementing the policies in the pilot areas listed in the document. Set the year the pilot begins, the subsequent years, and the remaining years to 1, and the remaining years to 0.

3.4.3 Control variables

The following are some of the paper's control variables. (1) Human capital (hum). An increase in human capital can spur technological innovation [26]. The population aged 6 and over is used as the measurement group for this paper's per capita years of education. (2) External reliance (open). The region's capacity for technical innovation will be impacted by the percentage of foreign registered capital, the average level of FDI, and the degree of dependence on foreign nations [14]. The location of the business and the total import and export volume are converted using the RMB to USD exchange rate in this study to determine the share of each region's total import and export volume to GDP. (3) Age level(aging). Aging will restrict the supply of human resources, impede the investment of human capital, and compel technological innovation in factor substitution, according to the viewpoint of the factor market. Aging will have an impact on consumer demand for medical services and will raise companies' investments in R&D for healthcare [7]. This study measures the percentage of the population that is over 65 years old. (4) Industrialization (indus). The degree of industrialization reflects the industrial structure of the region, and the modernization and rationalization of the industrial structure have an impact on the effectiveness of regional innovation [15]. This study measures industrial added value as a percentage of GDP. (5) Intelligence (infor). Intelligence level will have an impact on enterprise finance restrictions and human capital accumulation, which will then have an impact on technological innovation [30]. This study calculates the fixed asset investment to GDP ratio for the software, computer services, and information transmission industries. (6) The entire population (lnpop). Population size affects market size for goods, and a sizable local market can encourage businesses' capacity for innovation [25]. This study adopts logarithmic processing and uses the number of year-end permanent residents as a measure. (7) Real GDP per capita (lnpgdp). The capacity for innovation will depend on the amount of regional economic development [27]. This study uses a logarithmic processing method and uses 2007 as the base period to calculate the real GDP per capita.

Descriptive statistics of variables are shown in Table 2. The average value of the logarithm of medical device innovation investment is 8.22, and there is a big gap between the maximum value and the minimum value, which indicates that the development of medical device innovation in different regions is unbalanced. Among the control variables, the average values of human capital, aging and industrialization are 8.92, 10.03 and 36.54, respectively, and they are close to the median, with symmetrical distribution. The average values of external dependence and intelligence are 30.03 and 0.69, respectively, which are far from the median and scattered in distribution. The logarithmic values of total population and real GDP per capita are 8.24 and 10.05, respectively, which are close to the median, and the standard deviation is small, indicating that the development of population and GDP in different regions is relatively stable.

Table 2

Descriptive statistics of variables
Variable	Variable meaning	Observed value	Mean value	Median	Standard deviation	Minimum value	Maximum
lnrd	Logarithmic value of medical device innovation investment	377	8.22	8.03	1.77	3.40	11.60
policy	Serious illness insurance pilot	377	0.53	1.00	0.50	0	one
hum	Manpower capital	377	8.92	8.82	0.98	6.76	12.78
open	External dependency	377	30.30	13.84	34.45	1.28	167.01
aging	Aging	377	10.03	9.83	2.12	5.47	16.26
indus	Industrialization	377	36.54	37.14	7.66	11.97	57.38
infor	Intelligentize	377	0.86	0.69	0.69	0.04	6.54
lnpop	Total population logarithmic value	377	8.24	8.28	0.71	6.31	9.43
lnpgdp	Logarithmic value of real GDP per capita	377	10.05	9.95	0.49	8.97	11.33

[1] The pilot period for implementing serious illness insurance is determined by the implementation plans or opinions provided by various provinces (autonomous regions and municipalities directly under the Central Government). For example, in the Notice of the General Office of Liaoning Provincial People's Government on Printing and Distributing the Implementation Opinions on Carrying Out Serious Illness Insurance for Urban and Rural Residents, the deadline for issuing a document is December 30, 2012, and the pilot time is March 1, 2013, so the pilot time is 2013(http://www.ln.gov.cn/zwgkx/zfwj/szfbgtwj/zfwj2011_1/201412/t20141208_1499129.html).

4.1 Benchmark regression

The regression analysis of serious illness insurance on medical device innovation is presented in Table 3. It is clear that the adoption of serious illness insurance has encouraged the development of medical equipment. A model without control variables is Model 1. Model 2 regulates additional factors that influence the development of medical devices, such as human capital, reliance on outside resources, age, industrialisation, intelligence, population size, real GDP per capita, etc. Model 3 also regulates the year fixed effect and the province fixed impact. All of the estimated results indicate that serious illness insurance has a significant positive impact on the development of medical devices, and that this increase in innovation R&D spending by the medical device industry has followed the implementation of serious illness insurance.

Table 3

Regression results of serious illness insurance on medical device innovation
Variable	(1)	(2)	(3)
policy	0.16***	0.04***	0.01*
policy	(31.29)	(8.08)	(1.84)
hum		0.05***	-0.01
hum		(8.38)	(-1.04)
open		0.00	-0.00
open		(0.47)	(-0.47)
aging		0.00	0.00
aging		(1.29)	(0.35)
indus		-0.01***	-0.00
indus		(-12.24)	(-1.24)
infor		0.02***	0.01**
infor		(8.80)	(2.12)
lnpop		0.02	-0.01
lnpop		(0.52)	(-0.18)
lnpgdp		0.46***	0.08**
lnpgdp		(17.74)	(2.27)
province	no	no	yes
year	no	no	yes
constant	8.13***	3.08***	7.52***
constant	(2127.85)	(9.05)	(17.41)
observation	377	377	377

Note: The figures in parentheses are t statistics; *, * *, * * * stand for 10%, 5%, and 1%, respectively, that are statistically significant. similar to the table after that.

4.2 Robustness test

4.2.1 Parallel trend test

The basis for using the multi-period DID approach in this study is that, before to the introduction of the pilot policy, the innovation of medical devices in many provinces (autonomous regions and municipalities directly under the Central Government) followed the same development path. This study builds a dynamic model for a parallel trend test using the event analysis method to assess the reliability of DID estimation:

$${lnrd}_{it }=\alpha +\sum _{k\ge -6}^{k\le 6}{\beta }_{k}{policy}_{it}^{k}+\gamma {X}_{it}+{A}_{i}+{B}_{t}+{\epsilon }_{it}$$

Where $i$ represents the $i$th province and $t$ represents the $t$th year; ${lnrd}_{it }$is the explanatory variable medical device innovation, ${policy}_{it}^{k}$ is the serious illness insurance pilot implementation event, ${s}_{i}$ is the specific year of serious illness insurance pilot implementation in different provinces. If${t-s}_{i}\le -6$, then $\text{d}\text{e}\text{f}\text{i}\text{n}\text{e}{ policy}_{it}^{-6}$ as 1, otherwise, define${policy}_{it}^{-6} \text{a}\text{s} 0$. If ${t-s}_{i}\ge 6$, then $\text{d}\text{e}\text{f}\text{i}\text{n}\text{e}{ policy}_{it}^{6}$ as 1, otherwise, define ${policy}_{it}^{6} \text{a}\text{s} 0$ (to avoid the problem of sparse samples, ${t-s}_{i}=-7$ is merged into − 6 and ${t-s}_{i}=7$ is merged into 6). In the model, the year of serious illness insurance pilot implementation is taken as the base year.

The parallel trend of policies is tested in this essay using a graphic method. Before the pilot implementation of serious illness insurance, as shown in Fig. 1, the model satisfies the parallel trend hypothesis because the estimated coefficient's confidence interval includes 0, indicating that there is no discernible difference in the introduction of new medical devices between the treatment group and the control group.

4.2.2 Placebo test

A placebo test was performed using the methods of Huang & Fu and Wang et al. to determine whether other unobservable missing variables have an impact on the innovation of medical devices [11, 22]. In particular, this paper randomly distributes the time of the serious illness insurance pilot in the 29 provinces that make up the sample, creates corresponding treatment groups, re-estimates the benchmark model (1), and gets the results of the parameter estimation of the main explanatory variables. Draw a nuclear density map using the results of the coefficients after 1500 repetitions. Figure 2 shows that the distribution of nuclear density is almost normal on the axis of $X=0$ symmetry, and the estimated coefficients of virtual variables of random sample policy are mostly distributed near 0, and the $P$-value is greater than 0.1. The dotted line on the left side is the above estimated coefficients of real sample about s${policy}_{it}$, which deviates from the distribution range of the estimated coefficients of random samples, fully demonstrating that the influence of serious illness insurance on medical device innovation investment is not due to other unobservable factors.

4.2.3 Considering how the total medical insurance program affects inhabitants in both urban and rural areas

It is vital to take other policies' effects into account in order to accurately assess how the pilot program for serious illness insurance has affected the development of medical devices. The innovation of medical equipment may also be impacted by the medical insurance policies of urban and rural populations that were introduced in various locations during the study period. The Opinions on Deepening the Reform of Medical and Health System, published in December 2009 by the Central Committee of the Communist Party of China and the State Council, clearly proposed to gradually realize the integration of social basic medical insurance system in order to increase the fairness of the medical insurance system and decrease the management cost. Since then, certain regions have begun to implement the new rural cooperative medical system and urban residential insurance as experimental projects. The Opinions on Integrating the Basic Medical Insurance System for Urban and Rural Inhabitants were released by the State Council in January 2016, and the overall medical insurance for urban and rural residents reached the stage of extensive promotion. All 31 of China's provinces have implemented policies that integrate the medical insurance system for inhabitants of urban and rural areas as of July 2019.

The medical insurance benefits of urban and rural people are coordinated under the guiding idea of "high treatment but not low treatment" for both groups of citizens. Due to this, both urban and rural households now have access to higher maximum payment limits for medical insurance, with rural persons' improvements being more pronounced [31]. Controlling the impact of the overall medical insurance policy for urban and rural residents is necessary to more accurately determine the net effect of the implementation of serious illness insurance given that serious illness insurance also enhances residents' medical insurance benefits. The urban-rural medical insurance coordination (tc) variable is defined and introduced to the regression equation for control in this research. The policy implementation year and subsequent years are set to 1 for the pilot provinces of the coordination of medical insurance for urban-rural people, while the remainder of the years are set to 0. Whether or not data from the new rural cooperative medical system are recorded in China Health Statistics Yearbook determines when the policy will go into effect. For details on when the coordination will really be implemented, see Table 4.

Table 4

Overall implementation time of urban and rural medical insurance
Pilot year	Provinces (autonomous regions and municipalities)
2010	Tianjin
2013	Guangdong
2014	Shandong, Zhejiang
2015	Ningxia, Chongqing, Qinghai
2016	Beijing, Hebei, Shanxi, Inner Mongolia, Shanghai, Fujian, Henan, Hubei, Hunan, Guangxi, Sichuan, Tibet, Xinjiang
2017	Heilongjiang, Jiangsu, Jiangxi, Hainan, Yunnan, Gansu
2018	Jilin, Anhui, Guizhou, Shaanxi
2019	Liaoning (Province)

Source: The author collated the data of China Health Statistics Yearbook over the years.

The results in Table 5 show that the development of medical equipment has been considerably aided by the essential serious illness insurance. After adjusting for other factors and fixed effects, column (3) shows that the correlation between urban and rural medical insurance is not significant, but the correlation between serious illness insurance is significant and still positive. It demonstrates that the general medical insurance policy for urban and rural inhabitants won't have an impact on medical device innovation, further demonstrating the validity of the paper's main thesis.

Table 5

Eliminate the interference of medical insurance policy for urban and rural residents
Variable	(1)	(2)	(3)
policy	0.13***	0.04***	0.01*
policy	(22.20)	(7.96)	(1.80)
tc	0.06***	-0.00	-0.00
tc	(8.82)	(-0.37)	(-0.92)
control	no	yes	yes
province	no	no	yes
year	no	no	yes
constant	8.13***	3.03***	7.49***
constant	(2349.67)	(8.11)	(16.96)
observation	377	377	377

4.3 Mechanism analysis

Market size is a key tool that medical insurance uses to influence medical technology development. The innovation normative model predicts that businesses would invest more in innovation as they reap its benefits [32]. So, how does the demand for medical gadgets among patients impact serious illness insurance? First, after the installation of the serious illness insurance, patients' financial constraints are lessened, allowing those who had previously shrugged off illness to seek medical attention, which could lead to an increase in demand for personal medical services; Second, patients are less sensitive to the cost of medical services and are more prepared to pay for cutting-edge medical technology due to the greater reimbursement ratio;Third, the technical demand for medical devices has increased, and seriously ill patients have a higher demand for hospitalization services. As a result, after the introduction of serious illness insurance, patients' demands for medical services are reduced and their awareness of quality is raised, which raises the overall number of doctor and hospital visits as well as the anticipated revenue of corporate innovation.

This study investigates the effect of serious illness insurance on the aggregate number of patient visits, outpatient visits, and hospitalizations per capita, as well as the changes in patient medical requirements. If serious illness insurance encourages the release of medical needs, it follows that it encourages the innovation of medical equipment by encouraging the release of patients' medical demands. The pilot deployment of serious illness insurance is considered as an explanatory variable, along with the overall number of medical visits per 10,000 people, outpatient visits per 10,000 people, and hospitalized visits per 10,000 people. This paper further controls the variables of urban and rural medical insurance co-ordination on the basis of the original control variables, and uses the multi-period DID model for regression, taking into account that the principle of "high treatment but low treatment" in urban and rural medical insurance coordination may also affect patients' medical needs.

The findings in column (1) of Table 6 demonstrate that the overall number of medical visits per 10,000 persons has increased dramatically as a result of serious illness insurance. That is, the market for medical services has seen a rise in total medical visits per capita since serious illness insurance was introduced, showing that it has met all of the patients' medical needs. According to columns (2) and (3), the number of outpatient visits per 10,000 people is greatly decreased by serious illness insurance, but the number of inpatient visits per 10,000 people grows. It demonstrates how patients' sensitivity to medical service pricing reduces, their demand for high-quality care rises, and more patients switch from outpatient care to inpatient care after the installation of serious illness insurance. The fact that the above-mentioned changes in medical demand were not brought about by the implementation of the urban-rural medical insurance policy shows that serious illness insurance affects market expectations of businesses by raising the quantity and quality of patient medical demand, which in turn encourages the development of medical devices.

Further illuminating the research issue of this paper from the side is the negligible impact of urban and rural medical insurance policies on medical demand and medical device innovation. The impact of medical insurance on technological innovation in the medical industry is uncertain, and the market size is the key mechanism. The "high treatment but low treatment" of the urban and rural medical insurance coordination only slightly raises the treatment level of the insured groups as compared to the serious illness insurance and is unable to produce a significant shift in medical demand. This demonstrates that even though the coverage base is sizable, in the case of small increments, the change of the treatment level formulated by the policy needs to be the largest enough, which can significantly affect the change of patients' medical needs. This is done through demand-side policies like reducing patient cost sharing.

Table 6

Influence of serious illness insurance pilot on the number of medical visits
Variable	(1)	(2)	(3)
Variable	Total number of visits per 10,000 people	Number of outpatient visits per 10,000 people	Number of hospitalizations per 10,000 people
policy	0.03**	-0.06**	0.03*
policy	(2.17)	(-2.57)	(1.89)
tc	0.01	0.02	0.01
tc	(0.55)	(1.09)	(0.62)
control	yes	yes	yes
province	yes	yes	yes
year	yes	yes	yes
constant	8.63**	-2.48	9.46**
constant	(2.78)	(-0.68)	(3.00)
observation	337	377	377

5.1 The impact of medical resources

Medical choices made by patients may be influenced by local medical resources. Healthcare access and quality are higher in places with more medical resources, and hospitals may require more cutting-edge medical equipment. In order to investigate the regulation effect of local medical resources, this paper also includes interactive elements for the Serious illness insurance Pilot, the log number of hospitals per 10,000 people (lnhosp), the log number of technicians per 10,000 people (lnstaff), and the log number of hospital beds per 10,000 people (lnbed), respectively. The estimated outcomes of table models (1) and (2) demonstrate that there is no significant interaction between the number of hospitals per 10,000 people, the number of health technicians per 10,000 people, and the serious illness insurance. This finding suggests that the impact of serious illness insurance on the development of medical devices has not been significantly modified by local physicians, hospitals, and other resources. According to the estimated model (3) result, there is a significantly positive interaction between the number of hospital beds per 10,000 people and serious illness insurance. This suggests that the impact of serious illness insurance on the development of medical devices is more pronounced the more beds there are. This could be because the incentive effect of implementing a policy is more visible when there are more hospital beds available, hospitalized patients are more accessible, and there is a greater demand for cutting-edge medical technologies.

5.2 The impact of industry competition

Enterprises' decisions about innovation may be influenced by industry competitiveness. The more businesses there are in a given area, the more fierce the industry competition, the lower the market price that businesses must accept, and the more money must be spent on sales expenses like advertising, which could put pressure on R&D costs. Additionally, the more competition there is in an industry, the smaller the share of the "cake" that each enterprise can have, and the less incentive there is for businesses to engage in R&D and innovation. This is true even when changes in external policy result in an increase in market expected returns. Therefore, depending on the level of competition in a location, the implementation of serious illness insurance may have varying effects. This study examines the regulatory impact of regional industry rivalry by incorporating the interaction between the log number of medical device manufacturing businesses (lnfirm) and the serious illness insurance pilot. The estimation outcomes of Table 7 model (4) demonstrate that the impact of serious illness insurance on the development of medical devices decreases with increased industry rivalry. In other words, serious illness insurance increases predicted profitability of businesses when the number of regional businesses is low, and the incentive effect of policy implementation is more pronounced.

Table 7

Regulatory effect of medical resources and industry competition
Variable	(1)	(2)	(3)	(4)
policy	0.03*	-0.04	-0.08	0.03***
policy	(1.71)	(-1.02)	(-1.67)	(4.21)
lnhosp	-0.03**
lnhosp	(-2.26)
policylnhosp*	0.01
policylnhosp*	(1.35)
lnstaff		-0.02**
lnstaff		(-2.22)
policylnstaff*		0.01
policylnstaff*		(1.05)
lnbed			-0.01
lnbed			(-0.64)
policylnbed*			0.03*
policylnbed*			(1.74)
lnfirm				0.00
lnfirm				(1.38)
policylnfirm*				-0.01**
policylnfirm*				(-3.13)
control	yes	yes	yes	yes
province	yes	yes	yes	yes
year	yes	yes	yes	yes
constant	7.46***	7.49***	7.52***	7.51***
constant	(20.32)	(19.72)	(17.18)	(19.92)
observation	376	377	377	377

6.1 Research conclusions

This paper uses the policy impact of the implementation of serious illness insurance for urban and rural residents, makes use of the time difference of implementation in different provinces (autonomous regions and municipalities directly under the Central Government), and uses panel data from 29 provinces in China from 2007 to 2019 from the China Statistical Yearbook, China Health Statistical Yearbook, and China High-tech. It was shown that serious illness insurance promoted the innovation of medical devices after passing a robustness test. The mechanism analysis demonstrates that the serious illness insurance reduces the patients' demand for quantity and quality of medical care, which raises the overall number of medical treatments per person and causes a greater shift in outpatient to inpatient medical treatment requirements. The increase in patient demand for medical care has raised market expectations for medical device revenues and encouraged business innovation. The adjustment impact demonstrates that the promotion effect of serious illness insurance on medical device innovation is larger the more abundant the bed resources in the location and the less intense the industry competition.

6.2 Policy enlightenment

The "expensive medical treatment" of Chinese citizens is mostly due to the medical industry's lack of innovation capacity and its reliance on imported high-end technical devices. Making wise use of the demand-side approach to medical insurance, lowering the cost of medical care for patients, and directing medical technology innovation are all important in the long run. This study emphasizes the impact of medical insurance policies with tailored treatments on medical industry technological innovation during the high-quality development of medical security. It also has significant policy implications for advancing the future high-quality coordinated development of medical security and medical services.

First, capitalize on the scale advantage of the medical insurance system. It is possible to stimulate technical innovation in the medical industry with medical insurance policy based on China's largest medical insurance system in the world, despite the fact that low disease affordability is a significant factor in the inability of developing countries to innovate. The government should continue to increase the purchasing power of medical insurance funds, use demand-side policies to rationally direct the direction of technological advancement in the medical industry, and pay close attention to how the creation of demand-side policies will affect the market scale.

The multi-level security mechanism should also be improved. Low-income groups find it difficult to purchase medical care. By enhancing benefits and lowering patient cost sharing, basic medical insurance helps protect patients' basic requirements. The higher-level requirements of middle- and high-income people should be satisfied by the market since the role and weight of the government are, in fact, constrained. The government can assist and direct the growth of commercial health insurance, increase the size of the commercial health insurance market, shape market expectations for the medical sector, and promote technological advancement in the medical sector.

6.3 Research limitations and prospects

There are some repairs left. This paper still has some gaps in its research: First, although the data in this article are based on provinces, it's possible that not all medical devices used in local hospitals are produced by companies in that province. As a result, the early adoption of serious illness insurance in other jurisdictions may also have an impact on the development of medical equipment in this province, or possibly the entire nation. The parallel trend test did not find any significant differences prior to the implementation of the policy, so it is assumed that this issue does not affect the conclusion and research significance of this paper. Considering that each province's implementation time is constrained, it only takes three years from the start of the pilot to the full implementation. Second, the effect of medical device innovation on societal welfare is no longer a topic of dispute. Through the advancement of technical level after the creation of medical devices, it may be possible to enhance patients' health and decrease their long-term medical burden, or it may be possible to further increase medical expenses and increase their medical burden due to growing costs. Future research must examine the welfare impact of medical insurance in order to direct the technological innovation of the medical industry.

The authors declare no competing interests.

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Research on the Influence of Medical Insurance on Technological Innovation in Medical Industry：Evidence from Serious Illness Insurance in China

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Abstract

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Highlights

1 Introduction

2 Literature Review

3 Research Design

3.1 The history of serious illness insurance policy

3.2 Model setting

3.3 Data sources

3.4 Description of variables

3.4.1 Explained variable

3.4.2 Explain variables

3.4.3 Control variables

4 Analysis Of Empirical Results

4.1 Benchmark regression

4.2 Robustness test

4.2.1 Parallel trend test

4.2.2 Placebo test

4.2.3 Considering how the total medical insurance program affects inhabitants in both urban and rural areas

4.3 Mechanism analysis

5 Further Analysis

5.1 The impact of medical resources

5.2 The impact of industry competition

6 Research Conclusions And Policy Implications

6.1 Research conclusions

6.2 Policy enlightenment

6.3 Research limitations and prospects

Declarations

References

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