Impact of Long-Term Care Insurance on health out-of-pocket expenditure ratios for older adults

Background China's rapidly aging population has intensified the demand for long-term care (LTC), resulting in higher out-of-pocket expenditure (OOPE) ratios and financial strain among older adults. To mitigate these burdens, Long-Term Care Insurance (LTCI) has been piloted across selected cities. However, its effectiveness in reducing financial burden-particularly OOPE ratios-remains insufficiently evaluated. This study assesses the causal impact of LTCI on OOPE ratios and explores subgroup heterogeneity.Methods We used panel data from the China Health and Retirement Longitudinal Study (CHARLS, 2015-2020), applying difference-in-differences (DID), dynamic DID, and propensity score matching DID (PSM-DID) approaches. The treatment group consisted of older adults living in 12 LTCI pilot cities, while controls were drawn from non-pilot areas. We adjusted for socio-demographic and health covariates and conducted robustness and parallel trend tests.Results DID results show that LTCI significantly reduced OOPE ratios (coefficient = -0.035, p < 0.01), with dynamic DID confirming a 5.6% reduction in the post-treatment period. PSM-DID estimates remained consistent (coefficient = -0.019, p < 0.05). Subgroup analysis revealed stronger effects among relatively younger individuals within the older adult population (70-79), rural residents, and individuals with lower education or chronic conditions. In contrast, minimal impact was observed among those aged >= 80 and highly educated individuals. Notably, OOPE ratios continued to increase over time, indicating that inflation and systemic cost pressures may offset policy gains.Conclusions While LTCI has demonstrable short-term benefits in reducing OOPE ratios and improving equity, long-term sustainability remains at risk due to persistent cost escalation. Targeted policy design and enhanced integration with broader health financing mechanisms are needed to strengthen its long-term impact.