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Cooperative medical systems (CMS) were developed in rural China as the primary method of delivering and financing health care. At their peak, they provided limited health coverage for 85 to 90 percent of the population. But the CMS system has broken down, probably because of agricultural and market reforms that had a disruptive impact on the village welfare funds that supported CMS. Many cooperative systems disbanded, leaving many people uninsured. The primary purpose of the China Rural Health Insurance Experiment project is to provide a sound analytic basis for designing sustainable health care financing mechanisms for China’s rural population. The model of health care financing used in this project is a form of “managed care” in which a health insurance mechanism is integrated into the existing primary care system. Using the model, the authors estimate changes in per-patient expenditures for such a plan.

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