Assessing healthcare payment reforms’ effects on economic inequities and catastrophic expenditures among cancer patients in ethnic minority regions of China

Abstract

Background

Ethnic minority groups are particularly vulnerable to healthcare inequities, with catastrophic medical expenditures often pushing them into poverty. However, empirical research on the impact of healthcare reforms on these populations remains limited. This study aims to address this gap by exploring the effects of healthcare payment reforms on healthcare outcomes and financial protection during serious illnesses among ethnic minority populations.

Methods

A cross-sectional study was conducted using data from three major ethnic minority groups in China: the Zhuang, Hui, and Manchu. The analysis is based on hospitalization data from 59,622 ethnic minority cancer patients spanning from 2013 to 2024. Ordinary least squares (OLS) linear regression was employed to assess the effects of healthcare payment reforms on healthcare expenses and cost-sharing.

Results

The findings indicate that, compared to traditional payment methods, the implementation of diagnosis-related group (DRG) payment reforms led to reductions in hospitalization, drug, and treatment expenses for ethnic minority patients. However, a closer examination of the cost structure reveals that while DRG payment systems have reduced expenditures for public health insurance fund, they have simultaneously increased out-of-pocket costs for minority patients.

Conclusions

Given that many ethnic minority patients belong to economically disadvantaged groups with limited financial resources, the rise in out-of-pocket costs exacerbates their economic burden, making them more vulnerable to catastrophic medical expenditures. This situation poses a severe challenge to minority patients already in precarious financial circumstances. This study offers insights and lessons from China that may guide governments worldwide in mitigating healthcare inequities faced by vulnerable populations.

Background

Health inequities exacerbate individual health disparities while simultaneously imposing significant strain on public health systems. Marginalized populations, particularly ethnic minorities, low-income groups, and rural residents, are disproportionately affected by these inequities, often facing exorbitant medical expenses that perpetuate a vicious cycle of poverty induced by illness [1,2,3,4,5]. The dual challenge of catastrophic healthcare costs and inequitable access to healthcare resources worsens their health outcomes, reinforcing broader social and economic disparities. In response to this, the World Health Organization (WHO) has urged its member states to increase public financial support to alleviate the economic burden on patients and improve healthcare accessibility and coverage [6,7,8]. However, despite these efforts, the global Universal Health Coverage (UHC) Index faces considerable challenges, especially in low- and middle-income countries (LMICs), where out-of-pocket expenses for healthcare remain prohibitively high, pushing many families into severe financial distress [9, 10]. To enhance the efficiency of public healthcare systems and optimize the utilization of public health funds, numerous countries have initiated reforms in their healthcare payment systems, which are regarded as essential policy strategies to address healthcare inequities [11, 12]. Nonetheless, research suggests that the effectiveness of these healthcare payment reforms varies substantially across populations, with ethnic minority regions continuing to struggle with issues related to access, quality, and equity of healthcare services [13,14,15]. Accordingly, this study aims to investigate the implications of healthcare payment system reforms on healthcare equity for ethnic minorities, elucidating both the potential opportunities and challenges associated with these reforms, while emphasizing their significant academic and policy relevance.

Globally, ethnic minority groups experience pronounced healthcare inequities, which are further exacerbated by economic disadvantages and cultural marginalization. Studies, such as those on maternal mortality rates in the UK, underscore ethnicity as a critical risk factor contributing to disparities in maternal health outcomes [16]. These populations often face systemic barriers, including high poverty rates, insufficient health literacy, and significant shortages of healthcare resources within their communities [17,18,19]. Such obstacles not only lead to delayed diagnoses and suboptimal management of chronic conditions but also heighten the incidence of infectious diseases, intensifying health disparities that negatively affect both individual well-being and public health systems [20]. Moreover, economic vulnerability is a significant determinant of healthcare inequities, particularly in the treatment of major illnesses. Inadequate health insurance coverage forces ethnic minorities to bear disproportionately high medical costs, which can have catastrophic financial implications for already economically disadvantaged groups. This economic strain frequently traps individuals in a cycle of illness and poverty, where the fear of unaffordable medical expenses leads many to delay or forgo necessary healthcare, further exacerbating existing health disparities [21]. Given the marginalized status of ethnic minorities and the complex challenges in addressing their healthcare needs, public health funding emerges as a crucial tool for mitigating healthcare inequities [5, 22]. However, the effectiveness of such funding hinges not only on the amount of financial investment but also on the development of strategic, evidence-based policies to ensure its efficient utilization. With increasing demand for healthcare services and growing fiscal pressures on national budgets, maximizing the potential of public healthcare funds to safeguard the health rights of socially disadvantaged groups represents an urgent and significant challenge for governments worldwide.

To address healthcare demands arising from population growth, control rising medical costs, enhance the efficiency of healthcare services, and promote the equitable allocation of medical resources, diagnosis-related group (DRG) payment system, originally developed in the USA, has become a widely adopted payment system globally [23]. The DRG system categorizes hospitalized patients based on factors such as disease diagnosis, surgical procedures, age, gender, commodities, and complications, standardizes pricing by grouping cases according to diagnosis, treatment complexity, and resource consumption, establishing a prospective payment mechanism [5]. Unlike fee-for-service (FFS), which reimburses healthcare providers based on the volume of services rendered, DRG payments link reimbursement to patient diagnosis rather than services quantity, thus incentivizing hospitals to improve care efficiency [11]. Initially introduced in high-income countries with well-established healthcare infrastructure, the DRG system has proven successful in controlling healthcare costs, improving financial protection, reducing hospital lengths of stay, and enhancing the overall quality of care [23]. In recent years, several LMICs such as Thailand, Ghana, and Poland have implemented DRG system in an effort to achieve similar benefits of cost containment and quality improvement [24]. However, empirical evidence from LMICs presents mixed results. In Thailand, the DRG system has been linked to a notable reduction in healthcare costs [25, 26]. Conversely, evidence from a study on stroke patients in Poland shows that under the DRG payment system, hospitals have the incentive to up-code patients in order to obtain higher compensation [27]. These differences highlight the complexities of DRG implementation in diverse healthcare contexts, where variations in infrastructure, provider incentives, and patient needs can significantly impact outcomes.

China, with its large population and diverse ethnic composition, faces numerous challenges in its healthcare system. In addition to addressing the pressures of an aging population, the rising incidence of chronic diseases, increasing healthcare demands, and the escalating costs driven by rapidly evolving medical technologies, the healthcare system must also account for the unique needs arising from ethnic diversity [12]. The healthcare insurance system in China comprises both public and private insurance, with public insurance playing a central role in healthcare financing [28]. Public insurance includes the employee-based basic health insurance and the urban-rural resident basic health insurance, while the employee-based health insurance is jointly funded by employers and employees, covering both active and retired workers, while the urban-rural resident health insurance relies on government subsidies combined with individual contributions to provide basic healthcare coverage for residents without stable employment [29]. Due to differences in their funding mechanisms, reimbursement rates and cost-sharing policies also vary, with employee-based insurance generally offering higher reimbursement rates than urban-rural resident insurance. This disparity reflects the economic status and healthcare needs of different groups but also presents challenges to healthcare equity, particularly for disadvantaged populations such as ethnic minorities. Ethnic minorities in China are often socioeconomically disadvantaged, and their participation in the healthcare insurance system is influenced by various factors [30]. Many ethnic minorities primarily rely on the urban-rural resident health insurance, which, due to lower reimbursement rates, significantly limits their access to timely and effective healthcare services. Beyond economic factors, ethnic minorities also face challenges from cultural, religious, and social perspectives. Traditional health beliefs that differ from modern medical systems, dietary habits linked to health risks, and gender-specific health preferences may all impact healthcare choices [31]. Given these unique healthcare needs, the health system, particularly the insurance framework, must conduct in-depth analyses of the healthcare demands of ethnic minorities and adjust policies to ensure equity in healthcare access, while respecting cultural and social contexts.

To improve the allocation of healthcare resources and promote health equity, the Chinese government has implemented a critical reform by transitioning from FFS to DRG payment system [5, 11]. The primary objective of implementing the DRG payment reform in China is to establish a value-driven healthcare system that addresses systemic challenges, including the rapid growth of healthcare expenditures, the sustainability of health insurance funds, imbalances in healthcare resource allocation, and persistent health inequities [12]. Since the implementation of DRG payment reforms, there has been growing scholarly attention on the impact of DRG payments on patient healthcare outcomes, providing empirical insights to inform further health insurance reforms [32,33,34,35]. However, the effects of DRG payments on health outcomes show considerable variability among different population groups. For example, a study conducted on patients in hospitals in Beijing indicated that DRG payments have improved the quality of healthcare for patients with cardiovascular diseases and reduced their medical expenses [11]. In contrast, research on rural patients indicates that although DRG payments decreased insurance fund expenditures, they also resulted in higher out-of-pocket costs for patients, thereby shifting the financial burden onto individuals [5]. The transition of the DRG reform to its 2.0 phase, as announced by the National Healthcare Security Administration of China in August 2024, provides an opportunity to further assess the effectiveness of the system. As China moves forward with these reforms, it is crucial to further elucidate the effectiveness of the initial reforms, summarize the experiences, and learn from the lessons to refine and enhance the health system. Additionally, current research often overlooks ethnic minority groups, who are disadvantaged in terms of accessing health services and are major recipients of health inequities. It remains unclear whether these minority groups benefit from the recent health payment reforms, or if reforms can alleviate the disparities they face.

To address this critical gap in understanding, this study investigates the economic inequities and financial burdens faced by ethnic minority patients in China, specifically addressing the high costs associated with major diseases. Specifically, we examine the impact of DRG payment reforms on the healthcare expenses and cost-sharing experiences within these populations. The primary objective is to assess whether the reforms have alleviated financial burdens and reduced economic disparities in healthcare costs among ethnic minority patients. By providing empirical analysis of the effects of China’s health reforms on mitigating financial inequities, this study offers valuable insights and lessons for policymakers seeking to improve the affordability and financial sustainability of healthcare for disadvantaged populations. These findings may help other countries refine their health financing strategies, enhance cost containment measures, and promote equitable healthcare payment systems, ultimately contributing to high-quality universal health coverage and sustainable development.

Methods

Study population and data

This study aims to establish a nationally representative sample encompassing three major ethnic minority groups in China: the Zhuang, Hui, and Manchu populations. Cancer, as one of the leading causes of death and disability globally, remains a significant health threat, with persistently high incidence and mortality rates [36]. This disease not only poses substantial health risks to individuals but also places considerable economic strain on societies. Given its widespread public health impact, investigating cancer is critical for enhancing population health and mitigating the pressure on healthcare systems. As such, cancer has been prioritized as a central focus of this research.

Inpatient data from cancer patients belonging to ethnic minority groups were collected across multiple regions in China between 2013 and 2024. The dataset consists of cross-sectional observations pooled from different years rather than a panel tracking the same individuals over time. During this period, the FFS payment system was in effect from 2013 to 2020, followed by the implementation of the DRG payment system from 2021 to 2024. The total sample size used in the main analysis was 59,622 with 29,135 individuals covered under employee health insurance and 30,487 covered under resident health insurance. To assess the effects of health insurance payment reforms on healthcare outcomes for ethnic minority patients, it was essential to differentiate between self-paying, uninsured patients and those insured under China’s employee and resident health insurance schemes. Self-paying patients (3949 individuals) were excluded from the main analysis, as they are not directly influenced by the insurance policies, and the reforms primarily target insured populations. These self-paying households are considered in additional subsample analyses. This approach allows the study to focus on insured individuals, enabling a detailed examination of the differing impacts of employee and resident insurance schemes on healthcare outcomes.

Variables

Dependent variable

The dependent variable in this study measures healthcare outcomes and financial protection for ethnic minority patients. Drawing on the health production function theory, healthcare outcomes and financial protection are critical components in assessing patient health benefits [37]. Consequently, this study employs hospitalization costs and cost-sharing as the primary dependent variables. Hospitalization costs encompass the total medical expenses incurred during a patient’s hospital stay, including hospitalization, drug, and treatment expenses, calculated by summing all recorded expenditures throughout the hospitalization period.

To evaluate cost-sharing, two indicators are utilized: public health insurance fund contributions and out-of-pocket payments. These indicators are pivotal in evaluating healthcare equity and the potential for catastrophic health expenditure. From the perspective of Rawls’ theory of justice [38], the ratio between public health insurance contributions and patient out-of-pocket payments serves as an essential measure of healthcare equity. This ratio reflects the fairness of resource distribution and plays a crucial role in preventing catastrophic health expenditures. A high proportion of out-of-pocket payments may lead to severe financial distress for families, potentially disrupting patients’ ongoing treatment and recovery. Additionally, in this study, out-of-pocket expenditures refer strictly to inpatient medical expenses that remain after deducting reimbursements from health insurance schemes. This definition ensures that the analysis focuses exclusively on direct medical costs incurred by patients, without including any non-medical expenses such as transportation, accommodation, caregiver costs, or other indirect expenditures associated with hospitalization.

Independent variable

The independent variable in this study is the reform of the health insurance payment system, specifically measured by evaluating changes in payment methods. In the broader context of China’s healthcare reforms, health insurance payment reform has been identified as a critical strategy for optimizing resource allocation and enhancing healthcare service efficiency. Since 2010, China has piloted the DRG payment system in Beijing, and it was widely implemented nationwide by 2021. This study examines the impact of this reform on ethnic minority patients, employing a dummy variable (DRG) to capture the time-specific effects of the reform. The data for this study are derived from hospitals that fully implemented the DRG payment system starting in 2021, although the exact month of implementation varied across hospitals. To account for this variation, the dummy variable DRG is coded as 1 for hospitalizations occurring after the implementation of DRG (post- reform) and 0 for those occurring between 2013 and 2020 (pre-reform).

Control variables

Previous research has demonstrated that individual characteristics can influence healthcare outcomes [11, 12]. For example, age may affect disease severity and recovery, gender may be associated with the prevalence and response to certain diseases, ethnicity may influence healthcare practices and resource utilization, marital status can impact psychological well-being and social support, employment type may relate to insurance coverage and healthcare needs, and the type of insurance is directly linked to the share of medical expenses borne by the patient [5, 34]. Therefore, this study includes age, gender, ethnicity, marital status, employment type, length of stay, and insurance type as control variables.

Furthermore, socioeconomic and healthcare environments play significant roles in affecting ethnic minority patients [39, 40]. Indicators such as per capita GDP, healthcare expenditure, and the number of health institutions collectively reflect a region’s economic development and investment in healthcare, which, in turn, influence the distribution of healthcare resources and patients’ access to quality services [12, 40]. Additionally, this study also incorporates per capita GDP, per capita healthcare expenditure, the number of healthcare institutions, and per capita income as macro-level control variables.

Statistical analysis

To examine the impact of health insurance payment reforms on the medical outcomes and financial protection of ethnic minority patients with major diseases, this study employs an ordinary least squares (OLS) linear regression model. Recognizing the potential for heteroscedasticity in medical expenses and cost-sharing variables, as well as the possible influence of outliers on model results, each of these variables was log-transformed for analysis. Additionally, regional factors, which are closely linked to economic development and healthcare accessibility, may confound the effects of payment reforms on minority patients. Similarly, hospital-specific in medical expertise, service quality, and cost structures could introduce biases. To mitigate these concerns, fixed effects for region and hospital are included in the model. The study received approval from the Ethnic Committee of the Guangxi Academy of Medical Sciences. All analyses were conducted using Stata 17 software.

Results

Descriptive data

This study included hospitalization data from 59,622 ethnic minority patients. In terms of ethnic composition, Zhuang patients represented 43.63% (26,019 patients), Hui patients accounted for 52.13% (31,091 patients), and Manchu patients represented 4.24% (2529 patients). Regarding demographics characteristics, female patients comprised 52.69%, while male patients accounted for 47.31%. The average age of patients in the sample was 53 years, and a significant majority (90.16%) being married. In terms of health insurance, more than half (51.13%) of the patients were enrolled in resident insurance, while 48.87% had employee insurance. The average medical expenses were as follows, total hospitalization expenses averaged CNY 15,456.27, drug expenses averaged CNY 5766.87, and treatment expenses averaged CNY 4058.79. Notably, public insurance fund covered CNY 5262.70, while out-of-pocket costs amounted to CNY 9087.49. The proportion of out-of-pocket expenses relative to the total hospitalization cost was relatively high. Detailed statistical descriptions of all variables can be found in Table 1.

Table 1 Descriptive statistic of the samples. This table presents the statistical descriptions of all variables included in this study. DRG is a binary variable representing healthcare payment reforms; a value of 1 indicates the implementation of the DRG payment system, while a value of 0 indicates the use of traditional payment methods. Gender is classified as a categorical variable, with female coded as 1 and male as 2. Ethnicity is also a categorical variable, with the Zhuang ethnicity coded as 1, Hui as 2, and Manchu as 3. The type of health insurance (MF_Type) is represented as a binary variable, where employee insurance is coded as 0 and resident insurance as 1. Marital_status and Occupation are classified as categorical variables used to capture individual characteristics. Length of Stay (LoS) captures the number of days patients are hospitalized. HE_per capita measures the per capita healthcare expenditure within the region. No_Healthcare denotes the number of healthcare institutions in the area

Main results and endogeneity concerns

Table 2 presents the OLS regression results examining the impact of health insurance payment reforms on the medical expenses and financial protection for ethnic minority patients requiring major disease treatment. To comprehensively assess the reforms’ effects, this study analyzes the data across multiple dimensions. Specifically, columns 1 to 3 of Table 2 show the influence of health insurance payment reforms on total hospitalization, drug and treatment expenses, and key indicators of healthcare costs. Columns 4 and 5 depict the effects on cost-sharing, focusing on public insurance funds and out-of-pocket expenses, which reflect the financial protection provided by the reforms. Logarithmic transformations were applied to all dependent variables to meet the regression assumptions. The models controlled for individual characteristics, such as age and gender, as well as macroeconomic factors to ensure accurate estimates. Fixed effects for regions and hospitals were included to account for inherent differences and enable a more precise evaluation of the reforms’ direct effects. Robust standard errors were employed to address heteroscedasticity, with the variance inflation factor (VIF) reported at 4.75, indicating no significant multicollinearity.

Table 2 The impact of healthcare payment reform on healthcare outcomes and financial protection for ethnic minority populations. This table presents the results of the OLS regression analysis. Given the skewed distribution of the data, logarithmic transformations were applied to relevant independent variables and select macroeconomic indicators within the model. ^***, ^**, and ^* denote statistically significant levels of 1%, 5%, and 10% respectively

As shown in Table 2, the coefficients of the healthcare payment reform (DRG) are negatively associated with total hospitalization expenses, drug expenses, and treatment expenses, all of which are statistically significant at the 1% level. This suggests that the implementation of the DRG payment system has effectively reduced overall medical costs for ethnic minority patients requiring major medical services. Further analysis reveals that, from an economic perspective, the absolute value of the coefficient for drug expenses is larger than that for total hospitalization and treatment expenses. This implies that drug expenses are more responsive to healthcare payment reforms. This effect may be attributed to Chinese government interventions in the pharmaceutical market, such as the national centralized drug procurement policy. The reform of healthcare payment methods and the national centralized drug procurement policy are closely interlinked. The centralized drug procurement policy effectively lowers drug prices through centralized and volume-based purchasing, which alleviates the financial burden on health insurance funds and creates space for further healthcare payment reforms.

Regarding cost-sharing, the results indicate a negative correlation between the DRG payment system and insurance fund expenditures, alongside a positive correlation with patients’ out-of-pocket expenses, both statistically significant at the 1% level. This suggests that while the DRG system reduces the financial burden on public insurance funds, it simultaneously increases out-of-pocket costs for ethnic minority patients. Therefore, while the DRG system alleviates pressure on the healthcare insurance fund, it exacerbates the financial burden on patients, particularly those from economically vulnerable minority groups. The rising proportion of out-of-pocket payments may lead some patients to delay or forego necessary treatments due to the high costs, potentially worsening disease outcomes and exacerbating health disparities.

Endogeneity test

To address potential endogeneity concerns in the estimation of the DRG payment system’s impact, a Two-Stage Least Squares (2SLS) model was implemented, using the administrative level of the city where sample hospitals are located (C_Admi_L) as an instrumental variable. Hospitals were categorized based on the administrative level of their location into provincial capital cities and non-provincial capital cities. This variable is assumed to influence the implementation and management of the DRG system, while being unlikely to directly affect patients’ health expenses and cost-sharing outcomes except through its impact on DRG participation. The 2SLS results, shown in Table 3, provide further insight into the effect of the DRG payment reform on healthcare costs and financial protection.

Table 3 Endogeneity concerns: the estimated results by 2SLS. This table presents the results of 2SLS regression analysis. To address potential endogeneity, we identified the administrative level of regions where sample hospitals are located as instrumental variable (C_Admin_L). The first stage regression in the column 1 estimates the relationship between endogenous variables and the instrumental variable; the second stage regression results in columns 2–6 use the predicted values from the first stage as replacements for endogenous variables in the original equation. ^***, ^**, and ^* denote statistically significant levels of 1%, 5%, and 10% respectively^.

The first-stage regression confirms that the instrumental variable (C_Admi_L) is strongly correlated with DRG participation, with an F-statistic well above the threshold of 10, mitigating concerns about weak instruments. The 2SLS results largely mirror the findings from the OLS regression, confirming the robustness of the estimated effects. Specifically, the DRG payment system remains negatively associated with total hospitalization, drug, and treatment expenses, all showing statistical significance, suggesting that the DRG system continues to reduce overall medical costs for ethnic minority patients requiring major medical services. Furthermore, in the cost-sharing dimension, the results show that the DRG system still reduces insurance fund expenditures while increasing out-of-pocket costs for patients, with both effects remaining statistically significant at the 1% level. The consistency of the results across both OLS and 2SLS estimations strengthens the conclusion that the DRG payment system leads to a shift in the financial burden from insurance funds to patients. This trend is particularly concerning for ethnic minority patients, who may face higher out-of-pocket expenses, potentially delaying or forgoing necessary treatments, thereby exacerbating health disparities.

Robustness checks

Additional analysis: addressing early reform instabilities

During the early stages of healthcare reform, various stakeholders within the health system, including hospitals, physicians, patients, and insurance agencies, were adjusting to the new policies. Hospitals, for instance, may have had to restructure their internal cost accounting systems and service delivery processes to align with the new payment methods. Physicians likely needed to modify their treatment protocols and medication choices, potentially causing short-term fluctuations in healthcare-related data. For patients, adapting to new health insurance policies and understanding the revised cost structures may have influenced their healthcare decisions, resulting in atypical variations in healthcare expenditure data.

Given the potential instability of the data during the initial reform phase, we conducted a robustness check by excluding early-stage data from the analysis. The data in this study pertain to the implementation of the DRG payment system, which began in 2023. To mitigate potential anomalies, we excluded 10,401 observations from 2021 and retained 49,221 observations from the subsequent years for the OLS and 2SLS regression analyses.

As shown in panel A of Table 4, the OLS results (columns 1–5) align closely with the 2SLS findings (columns 6–11). After excluding the data influenced by the initial phase of the reform, the DRG payment system continues to exhibit a significant negative correlation with total hospitalization, drug, and treatment costs. These findings suggest that the DRG payment system has effectively reduced medical expenses for patients, even when accounting for the instability observed during the early reform period. Moreover, the analysis of cost-sharing reveals that while the DRG payment system alleviated the burden on public insurance funds, it also led to an increase in out-of-pocket expenses for ethnic minority patients. The consistency of these key relationships, even after removing potentially unstable data from the early reform phase, demonstrates that the baseline results are robust and not driven by anomalies.

Table 4 Robustness tests. This table reports robustness tests. Panel A shows the results of robustness test by addressing early reform instabilities. We removed 10,401 observations from 2021, retaining 49,221 observations from the other years for the OLS regression analysis. Panel B shows the results of robustness test by addressing the disruptive impact of public health emergency. We removed data for 3862 patients from the peak pandemic year, 2020. Columns 1–5 show OLS results, columns 6–11 reports 2SLS results. Given the skewed distribution of the data, logarithmic transformations were applied to relevant independent variables and select macroeconomic indicators within the model. ^***, ^**, and ^* denote statistically significant levels of 1%, 5%, and 10% respectively

Additional analysis: addressing the disruptive impact of public health emergencies

Public health emergencies, such as the COVID-19 pandemic, can profoundly disrupt healthcare systems, often leading to a diversion of medical resources toward crisis management. This reallocation resulted in a relative shortage of resources for routine medical services, thereby limiting the availability of care for non-pandemic-related treatments. As a consequence, distortions in resource allocation occurred, leading to deviations in healthcare expenditure data. For instance, pandemic-related costs differed significantly from non-pandemic periods, with some costs, such as those for testing and personal protective equipment, markedly higher, particularly routine treatment costs, may have been lower due to reduced demand. Public health emergencies also alter patient healthcare-seeking behavior. In response to fears of infection, many patients avoided seeking care, especially for non-urgent conditions. Simultaneously, pandemic control measures, including travel restrictions and limitations on hospital capacity, further restricted access to healthcare services, resulting in delayed or missed treatments. These behavioral changes have likely skewed healthcare expenditure data. For example, the costs of regular treatments for chronic conditions may have declined, while emergency treatment costs could have risen as delayed care led to worsened health conditions.

To address the complexities introduced by the public health crisis on both resource allocation and patient behavior, this study excluded data from the pandemic period to eliminate potential anomalies. Specifically, data for 3862 patients from the peak year of the pandemic, 2020, were removed, leaving a more stable sample for subsequent analysis of the effects of healthcare reform on patient medical expenses and financial protection. As shown in panel B in Table 4, the results reveal that healthcare payment reforms continued to reduce total hospitalization, drug, and treatment costs for ethnic minority patients. Moreover, while public insurance expenditures decreased, out-of-pocket costs for patients increased. These findings align closely with the baseline results that included pandemic data, and the relationships between the variables remained fundamentally unchanged. This further supports the robustness of the baseline results, conforming that the observed effects are not driven by pandemic-related anomalies.

Underlying mechanism: examining the role of insurance type as a potential moderator

In examining the impact of healthcare payment reform on healthcare outcomes, it is crucial to consider the role of health insurance type, particularly the distinction between residents’ health insurance and employees’ health insurance. These two insurance schemes differ significantly in coverage scopes and benefit levels, with profound implications for patients’ healthcare access and financial protection. Employees’ health insurance, typically designed for those with stable employment, involves higher premiums, which in turn allow for more generous reimbursement rates and broader coverage. In contrast, residents’ health insurance, aimed at more vulnerable groups, including children, the elderly, and rural populations, requires lower premiums but provides more limited financial protection. This disparity creates a significant divide, resulting in unequal access to healthcare resources, varying incentives for seeking care, and considerable differences in financial protection. Consequently, these groups respond differently to healthcare payment reforms. Those with employees’ insurance, benefiting from stronger financial support and higher reimbursement rates, are better equipped to manage high medical costs. In contrast, individuals covered by residents’ insurance, who are already living on the financial edge, become acutely vulnerable to even modest increases in healthcare costs, potentially facing catastrophic financial consequences.

This inequity, often operating as an undercurrent, has the potential to undermine the effectiveness of healthcare payment reforms. Recognizing the importance of insurance type as a mediator, this study identifies it as a critical mechanism that shapes the differential impact of healthcare reforms on ethnic minority patients. Additionally, to explore this underlying mechanism, we also include a new subsample of 3949 self-paying households (uninsured patients) for comparative analysis, alongside the insured patients. The sample is stratified into three groups: employees’ insurance, residents’ insurance, and self-paying households. Separate OLS and 2SLS regressions are conducted for each group to capture the heterogeneous effects of the reforms across these subpopulations. Table 5 presents the results of the reform’s impact on healthcare expenditures and financial protection for ethnic minority patients across these three groups. Panel A shows results for the employees’ insurance group, Panel B for the residents’ insurance group, and Panel C for the self-paying households. By including self-paying households as a distinct subsample, we are able to assess and compare the benefits accrued by insured versus self-paying households, providing deeper insights into the program’s effectiveness in shielding households from catastrophic financial impacts.

Table 5 Underlying mechanism: examining the role of insurance type as a potential moderator. This table reports the reform’s impact on healthcare expenditures and financial protection for ethnic minority patients across these three groups, with Panel A showing results for the employees’ insurance group, Panel B for the residents’ insurance group, and Panel C for self-paying households. Columns 1–5 show OLS results, columns 6–11 reports 2SLS results. Given the skewed distribution of the data, logarithmic transformations were applied to relevant independent variables and select macroeconomic indicators within the model. ^***, ^**, and ^* denote statistically significant levels of 1%, 5%, and 10% respectively

The results from Table 5 indicate that the DRG payment reform led to a significant reduction in total hospitalization, drug, and treatment expenses for the three groups. This suggests that, overall, the DRG payment reform effectively reduced healthcare expenditures for these three groups of patients. This effect may be attributed to the payment system’s ability to enhance the efficiency of healthcare resource utilization, reduce necessary medical services, and consequently, lower healthcare costs. Regarding cost-sharing, self-paying patients bear the full healthcare expense on their own, with no cost-sharing mechanism in place. The decline in healthcare expenses under the DRG payment reform directly resulted in a reduction in out-of-pocket expenditures for this group. However, the analysis of insured individuals (panels A and B) reveals a concerning reality. While the reforms significantly reduced the total healthcare expenses and public insurance fund expenditures for both the employees’ insurance and residents’ insurance groups, it also led to a substantial increase in patients’ out-of-pocket costs. Notably, the coefficient for the effect of DRG on patients’ out-of-pocket expenses in the residents’ insurance group (panel B, column 5) is much higher than the corresponding coefficient for the employees’ insurance group (panel A, column 5). This indicates that, under the DRG reform, residents’ insurance group faces a disproportionately high personal financial burden. Ethnic minority patients covered by the residents’ insurance are particularly sensitive to the reforms, and they have been disproportionately and severely impacted.

Healthcare payment reforms, in this context, function as a double-edged sword. On the one hand, they significantly reduce reliance on public insurance funds, but on the other, they place a disproportionate financial burden on patients who are least able to bear it. For ethnic minority patients already facing financial insecurity, these reforms are not merely a policy shift; they represent an existential threat, pushing them further into poverty and deepening existing healthcare inequities. The resulting financial strain for these marginalized groups is not a mere side effect but an aggravation of the very healthcare disparities that these reforms sought to address. In light of these systemic shortcomings, ethnic minority patients with residents’ insurance find themselves in an even more vulnerable position, confronting a healthcare crisis.

Discussion

This study investigates the impact of China’s healthcare payment reforms on the medical expenses and financial protection of ethnic minority patients, particularly those facing major diseases. As the first known evaluation of the effects of healthcare reforms on ethnic minority populations’ access to healthcare, it examines the reforms’ potential to reduce catastrophic expenditures and address healthcare inequities. Our findings suggest that the implementation of the DRG payment system has effectively reduced healthcare costs for ethnic minority patients with severe diseases, such as cancer. However, the results also highlight a concerning issue: while the DRG payment system alleviates the burden on public health insurance funds, it significantly increases out-of-pocket expenses for patients, exacerbating catastrophic expenditures and, ultimately, intensifying health inequities.

In comparison to the traditional FFS payment system, the DRG payment system has demonstrated considerable economic advantages in the treatment of ethnic minority cancer patients, resulting in lower overall medical expenses, including hospitalization, drug, and treatment. This finding aligns with global research, which has highlighted the economic benefits of DRG payment system in regions such as Western and Eastern Europe, Scandinavia, North America, and Australia, which have seen improvements in hospital efficiency, shortened hospital stays, and overall cost control under DRG systems [41,42,43]. Our results also resonate with findings from the WHO, which emphasizes the success of DRG systems in the USA, Germany, and Thailand in reducing overtreatment under FFS payments and controlling healthcare cost [44]. However, our analysis uncovers a critical challenge: while the DRG payment system has reduced the financial burden on public health insurance funds, it has unexpectedly shifted a significant portion of the financial responsibility onto ethnic minority patients. This has led to an increase in their out-of-pocket expenses, further compounding the financial strain on already vulnerable groups. For ethnic minority patients, who are often on the brink of financial insecurity, this shift represents more than a policy change; it is an existential threat that pushes them deeper into poverty, exacerbating healthcare inequities. Therefore, we advocate for the continued optimization of China’s healthcare payment system, with a specific focus on safeguarding vulnerable populations.

In the following sections, we will discuss the implications of these findings and propose strategies to refine healthcare payment reforms, promoting equity and accessibility for ethnic minority groups and ensuring the sustainable operation of the healthcare system.

The high cost of healthcare presents significant barriers to ethnic minority populations, undermining their ability to access healthcare resources and quality care. Persistent challenges, such as geographic isolation, weak economic infrastructure, pervasive poverty, and inadequate healthcare provision, exacerbate these difficulties. When facing serious illnesses, the exorbitant treatment expenses often drive these vulnerable groups into severe hardship or debt, forcing them to sacrifice essential needs like education and retirement. Reducing healthcare costs is therefore critical to alleviating financial pressure, preserving basic living conditions, and protecting the right to health. Our findings indicate that healthcare payment reforms have substantially reduced costs for ethnic minority patients, aligning with the Chinese government’s efforts to alleviate these financial burdens. By implementing centralized procurement of medicines and medical supplies, the government has lowered healthcare costs, providing meaningful financial relief. Therefore, reducing healthcare expenses should be a key strategy in improving access to healthcare, mitigating catastrophic expenditures, and addressing health inequalities faced by ethnic minorities.

Cost-sharing pays a crucial role in health equity by influencing the financial protection mechanisms for ethnic minority patients and embodying the principles of social justice. Globally, health equity aims to ensure all citizens, regardless of race, gender, location, or economic status, can achieve their full potential for health and well-being. However, in remote ethnic minority areas, geographical isolation, cultural differences, and economic hardship create significant disparities in healthcare access. In this context, cost-sharing mechanism are intended to balance the financial burdens across diverse groups, ensuring that vulnerable populations, particularly those in remote regions, are not excluded from healthcare due to limited financial capacity. When faced with catastrophic healthcare expenses, cost-sharing serves as a financial safeguard, protecting ethnic minority patients from severe economic distress. However, our findings suggest that recent healthcare payment reforms have not alleviated the financial burdens as expected. Instead, the proportion of out-of-pocket expenses has increased, further exacerbating the challenges faced by these vulnerable groups. Addressing illness-induced impoverishment among ethnic minorities has thus become a core strategy for reducing health inequalities and a pressing issue for governments globally.

Healthcare payment reform, a key initiative for advancing health equity, aims to establish a comprehensive health protection network that ensures broad accessibility and high-quality health services. Ethnic minority populations, who are particularly vulnerable in the socioeconomic structure, rely heavily on public health insurance. This dependence calls for healthcare payment reforms to prioritize delivering high-quality healthcare tailored to their specific needs. This becomes especially important when healthcare resources are limited and must be distributed efficiently to prevent exacerbating disparities between rich and poor populations. In practice, the healthcare insurance system serves as the primary purchaser of public healthcare services and plays a critical role in financially supporting the development of healthcare institutions. While this expanded role can enhance service quality and efficiency, it may also divert resources from its fundamental mission of protecting public health. Our findings underscore the need for healthcare reform to consistently prioritize equity in healthcare access, optimize the distribution of resources, and promote the sustainable development of the healthcare system, thus ensuring the realization of health equity.

These in-depth discussions offer valuable strategic insights for policymakers, contributing to the global optimization of healthcare systems and the advancement of equitable healthcare access. These strategies will be specifically proposed below.

First, expand healthcare insurance coverage. A primary objective should be to broaden the healthcare reimbursement list, effectively lowering the threshold for healthcare expenses through national coordination mechanisms like centralized procurement. Expanding the reimbursement list means including a wide range of drugs and services, with particular emphasis on leveraging centralized procurement to reduce healthcare costs significantly. This initiative aims to provide a robust financial safety net for economically vulnerable groups, such as ethnic minorities, ensuring that financial pressure no longer prevent them from accessing necessary healthcare. At the same time, it is essential to respect and integrate the unique medical traditions of ethnic minorities. This is not only a matter of cultural recognition but also reflects the importance of offering high-quality, culturally adaptive healthcare. Policymakers should conduct thorough research to identify and incorporate medical practices that align with both ethnic traditions and modern medical standards. Including these culturally adaptive healthcare services in the reimbursement system represents both respect for culture diversity and a commitment to personalized, high-quality healthcare.

Second, strengthen healthcare and financial protection for vulnerable populations to mitigate catastrophic medical expenditures. The central focus here is expanding health insurance reimbursement rates for these groups. This goes beyond simply raising reimbursement levels; it involves a precise identification of diverse healthcare needs to ensure that vulnerable populations receive tangible benefits from health insurance coverage. A comprehensive assessment of the healthcare needs of ethnic minority groups, such as common diseases, chronic disease management, and treatment of rare or specialized conditions, is essential for building a comprehensive healthcare protection system that covers essential medical expenses. Additionally, reimbursement rates should be dynamically adjusted in response to identified health risks. For severe or high-cost conditions, such as rare diseases or cancers, reimbursement caps should be significantly increased, ideally reaching full reimbursement, to reduce the financial burden on ethnic minority communities. Targeted policy measures, such as personalized subsidies for individuals facing extreme economic hardship, are crucial to prevent further impoverishment due to medical expenses. This ensures that vulnerable individuals are protected, maintaining both their fundamental rights and a dignified quality of life.

Third, enhance the primary healthcare system in ethnic minority regions. Refining healthcare reimbursement policies to support coordinated development of prevention and treatment is essential for establishing a robust health protection network. A key strategy involves implementing differentiated reimbursement rates based on disease severity and the tier of healthcare institutions. For minor illnesses or routine checkups, higher reimbursement rates should be allocated to primary healthcare centers to encourage ethnic minority patients to seek initial care locally. For minor illnesses or routine checkups, broader coverage should be available at secondary and tertiary hospitals, ensuring timely and effective treatment. Moreover, it is critical to strengthen the preventive capabilities of primary healthcare institutions in ethnic minority regions. Investments should be increased in preventive services, including health education and chronic disease management. This approach would prioritize a “prevention first” model, integrating prevention with treatment to reduce disease incidence and alleviate overall healthcare burdens. Additionally, community health centers in these regions should be reinforced as key hubs linking primary healthcare facilities with specialized hospitals. These centers should not only provide essential medical services but also coordinate referral processes, ensuring seamless transitions between different levels of care and optimizing healthcare resource utilization.

Fourth, the integration of resident and employee health insurance fund pools. The disparity between resident and employee health insurance schemes, particularly in terms of coverage targets and financing levels, often results in inequitable access to healthcare resources and varying levels of protection for patients under different insurance types. To reduce such healthcare inequities and effectively mitigate moral hazard and adverse selection in healthcare services, it is essential to align the reimbursement scopes for drugs, medical treatment, and other healthcare services between the two schemes. Additionally, given the differences in funding sources and the independent operation of each scheme, the public fund pools for both types of insurance differ in terms of their capacity to absorb costs. Policymakers may consider implementing an integrated fund pool for both employee and resident health insurance, whereby the public funds of the two schemes would be consolidated, managed, and allocated under a unified system. This approach would optimize the allocation of resources and enhance the efficiency of public health insurance fund usage. For example, in certain regions, particularly when addressing high healthcare costs, while the employee health insurance fund is relatively more robust. By integrating the two funds, the overall risk-bearing capacity of the healthcare system would be strengthened, and limited insurance funds would be more reasonably distributed across a wider insured population.

Limitations and future research

This study has several limitations. First, while it represents a pioneering effort in conducting a nationally representative study on healthcare outcomes among ethnic minorities, China’s vast geographical diversity, uneven socioeconomic development, and significant intra-group cultural, lifestyle, and health belief differences among minority subgroups present substantial challenges for sampling. As a result, the sample may not fully capture all ethnic minority subgroups, potentially limiting its representativeness. Furthermore, it is uncertain whether the empirical insights and implications drawn from this study can be broadly applied to other minority regions or countries, such as those in Africa. Second, this study focuses on major diseases that are likely to lead to catastrophic health expenditures among ethnic minorities but does not address chronic diseases. Chronic conditions among ethnic minorities are significant and involve multiple complex factors, with different reimbursement mechanisms compared to major diseases, such as outpatient reimbursement and the designation of special disease categories. While this limitation may prevent the study from fully reflecting the overall impact of health insurance payment reforms on medical outcomes and financial protection for ethnic minorities, focusing on major diseases provides a solid foundation for examining the reforms’ effects on critical healthcare expenses and paves the way for future research into chronic disease care. Additionally, the healthcare needs and access to services for ethnic minority populations are influenced by various cultural, religions, and traditional factors. This study primarily focuses on the impact of health insurance payment reforms on healthcare costs and cost-sharing for ethnic minority patients. Future research could expand on these dimensions, exploring the role of cultural beliefs, customs, and religious practices in shaping healthcare demand and access. By integrating these factors, future studies could provide a more comprehensive understanding of how to improve health equity for ethnic minorities. Given the limited availability of health insurance data, we have utilized what appears to be the best available instrument for addressing endogeneity concerns using the 2SLS technique. However, we remain cautious about the potential imperfections of this instrument. As data accessibility improves and more comprehensive datasets become available, future studies could leverage better instruments to more robustly validate our conclusions. Lastly, as China is in the early stages of health insurance payment reform, this study only captures the initial outcomes of these reforms. The inherent instability in the early implementation phase may limit the generalizability of the data. Future research should focus on the long-term effects to validate and expand upon the findings of this study. Nonetheless, conducting this research during the initial reform period offers a unique contribution, laying an important foundation for future studies on long-term outcomes.

Conclusions

Healthcare equity for ethnic minority populations has become a critical issue on the global health agenda. This study investigates the impact of healthcare payment reforms on the healthcare expenses and financial protection of ethnic minority patients facing severe health conditions. Through rigorous analysis, the research demonstrates the significant effects of these reforms on both healthcare costs and the financial safeguards available to this vulnerable group. The findings provide valuable insights for policymakers, offering evidence to support the development of targeted strategies aimed at addressing healthcare access disparities and mitigating catastrophic medical expenditures. Ultimately, these efforts will play a crucial role in advancing UHC and achieving the broader goals of sustainable healthcare development.