In April 2023, the World Health Organization initiated the Health Inequality Database, tracking the evolving health disparities among different populations over time. It called on nations to adopt routine monitoring of health inequality, incorporating it into global and national objectives. The health inequality discussed in the academic circle and in this article refer to health opportunity inequality, a concept derived from the theory of equal opportunity (1). This theory divides inequality based on responsible entities into “inequality caused by individually controllable factors” and “inequality resulting from factors beyond individual (2), responsibility, namely, opportunity inequality.” Health opportunity inequality can lead to impoverished and low-income populations being unable to accumulate health capital, perpetually trapped in a cycle of poverty, exacerbating socio-economic inequality. Scholars, after calculating concentration indices for some countries or regions, have found varying degrees of health inequality (3–5). Uneven supply of public resources and socioeconomic status are the main factors influencing health inequality (6). Insufficient total healthcare resources, irrational structural distribution, and a lack of quality resources on the healthcare supply side are significant contributors to unfair medical services and exacerbate health inequality (7). Meanwhile, the essence of socioeconomic status factors is to create unequal access to resources among different groups, thereby affecting the utilization of healthcare services and leading to health inequality (2). Socioeconomic status factors include direct factors such as personal or parental income gap (8), housing (9), pressure (10), education (11, 12), as well as indirect differences such as internet function utilization (13), Self-Efficacy (14), and residency requirements (2).

Health opportunity inequality is susceptible to policy intervention (15). In 2009, China embarked on a new phase of healthcare system reform, implementing a series of measures to continually enhance the distribution of medical resources, reduce the out-of-pocket expenses for residents, and improve the accessibility of healthcare services. The reform has yielded significant results. According to data from the National Health Commission’s Health Development Statistics Bulletin, the preliminary estimate of China’s total health expenditure in 2022 is 84,846.7 billion yuan, accounting for 7.0% of the GDP, representing a 0.5% increase from 2021. Notably, government health expenditure reached 23,916.4 billion yuan, constituting 28.2% of the total health expenditure. In rural areas, the number of practicing (assistant) physicians per thousand people increased to 2.32, narrowing the urban–rural gap from 1.66 people in 2021 to 1.38 people. By the end of 2022, China had established 17 national medical centers across 10 categories, piloting the construction of 26 national regional medical centers, thereby progressively expanding high-quality medical resources to underserved areas. Within the series of healthcare reform policies, the effectiveness of the new rural cooperative medical care policy is unclear and may even contribute to widening wealth disparities (16), and the equalization of basic public health services has narrowed the health gap between the mobile population and the local population, but has exacerbated health inequalities among the mobile population (17). Further refinement of the institutional design is needed in this regard. Conversely, policies such as the integration and coordination of urban and rural residents’ medical insurance; and hierarchical diagnosis and treatment demonstrate a positive impact on promoting health equity (18–21).

As a cornerstone of China’s healthcare system, the comprehensive reform and development of public hospitals are crucial components of healthcare system reforms. In February 2010, the pilot for public hospital reform was initiated, identifying 16 national-level and 37 provincial-level pilot projects to explore reforms in separation of hospital management from operations; separation of medical services from drug sales; separation of hospital from public institutions and separation of for-profit privately-financed from non-profit publicly-financed aspects of hospital operations. In 2017, the comprehensive reform pilot of urban public hospitals was fully implemented. By the end of 2017, 93.9% of urban public hospitals had abolished the drug mark-up. Scholars’ discussions on the effectiveness of public hospital reform mainly revolve around two aspects: medical expenses and the quality of medical services. The Jiangsu Provincial Price Bureau research team compared the data of 14 sample hospitals in Jiangsu Province, China, before and after the reform of public hospitals (2014–2016). They found that the surplus rate of drug income and expenditure in sample hospitals decreased by 16.05%, and the proportion of drug income decreased from 46.59 to 40.52% (22). Chen et al. (23) based on medical insurance reimbursement data from a provincial capital city in China and estimated using a difference-in-differences model, observed that the separation of medicine and medical treatment improved the income structure of public hospitals, but the effect on reducing patients’ medical costs was not significant. Scholar He et al. (24) investigation, employing annual statistical data from medical and health institutions in Sichuan Province spanning 2014 to 2018, indicated that following the division of medicine and medical treatment, there was a short-term reduction in both outpatient and inpatient total costs, yet the long-term alterations were not notable. Wang and Zha (25) based on municipal-level data from 2006 to 2018, used a progressive double difference method and a mediation effect model, concluding that per capita fiscal expenditure on medical and health care is an important mechanism for improving the service capacity of medical and health care under the pilot reform. Li et al. (26) believe that the pilot reform mainly improves the quality of medical and health care services by increasing the income of medical and nursing staff and reducing the cost of drug procurement.

Overall, current research on the pathways through which policies affect health inequality among residents mainly focuses on macro-level aspects such as the accessibility of medical services. There have been no studies by scholars on the impact of China’s public hospital reform on health inequality, nor have they explored the pathways through which these effects are generated from the micro perspective of household consumption. Although this reform primarily targets individual medical expenses, it is important to recognize that consumption decisions affecting individual health are not solely individual decisions. On the one hand, family members rely on each other financially. Individual consumption decisions, especially in disease treatment, are influenced by the family’s financial situation (27, 28). Moreover, individual medical expenses may increase family financial vulnerability (29, 30) and reduce the budget available for discretionary consumption (31), thereby affecting the health and quality of life of family members (32). On the other hand, the family is often the core unit for health consumption decisions. These decisions, covering aspects such as travel, purchase of over-the-counter drugs, medical equipment, and fitness equipment, typically prioritize the long-term health and well-being of family members and are based on consideration of the overall health of the family. Selecting indicators of household health consumption allows us to explore the bridging role of such consumption from a more comprehensive and long-term perspective between public hospital reform and individual health inequality. Therefore, investigating whether the comprehensive reform of urban public hospitals contributes to the improvement of health opportunity inequality and understanding how this reform operates at the level of each family unit to influence individual health is essential.

Health consumption refers to the expenditures and purchasing behaviors of individuals or families aimed at maintaining and enhancing their health and well-being. This encompasses preventive, diagnostic, therapeutic, and rehabilitative medical expenditures, as well as various leisure activities that promote physical and mental health (33). We define health consumption upgrade as gradually increasing expenditures on activities such as sports and leisure travel within daily household life, while ensuring a budget for medical expenses related to disease treatment and health restoration. Utilizing data from CFPS and provincial-level data, the author employed the re-centralized influence function model (RIF-CI-OLS) with various robust estimation methods and found that the reform of public hospitals in China effectively mitigates residents’ health inequality indices. Heterogeneity analysis indicates that this impact is particularly pronounced among individuals with higher educational levels and less pronounced aging. The results of the chained mediation effects model indicate that the reform, by altering the structure of health consumption in Chinese households—reducing the proportion of medical expenses and increasing the proportion of expenditures on healthy leisure activities—affects the health inequality situation among residents.

This paper extends previous research by proposing that public hospital reform may influence residents’ health consumption structures, enabling them to derive additional health benefits from increased healthy leisure expenditures, thereby altering their health inequality situations. This micro-level empirical support provides insights for China’s ongoing healthcare reforms, emphasizing the need for multifaceted coordination and increased policy intervention to reduce health opportunity inequality. Moreover, it offers empirical lessons for other countries grappling with policies aimed at improving health inequality. The structure of this study is as follows: Part 2 outlines the data, sample selection process, and research methods. Part 3 presents the research findings. Parts 4 and 5 offer discussions and conclusions.

Table 3 reports the estimation results of the RIF–CI-OLS regression and instrumental variables regression. Controlling for individual and provincial characteristics, we gradually introduce control variables to examine the policy effects of urban public hospital reform on health inequality in China. The first column of Table 3 controls for survey year fixed effects and provincial fixed effects. The regression results show that the implementation of public hospital reform has a significantly negative impact on the health inequality situation. After the reform, the health inequality index decreases by 0.205 standard deviations at a significant level of 0.01. Columns 2–4 of Table 3 progressively add demographic variables, family and social status variables, and regional variables to the regression. The estimated coefficients of the core explanatory variables in each column show little change and are statistically significant at the 1% level. This suggests a clear negative correlation between the implementation of urban public hospital reform and the health inequality index.

Our study employs the cumulative balance of the previous year’s basic medical insurance as the instrumental variable for the urban public hospital reform policy. In the first stage, the regression coefficient of the cumulative balance of the previous year’s basic medical insurance on public hospital reform is significant at the 1% level, with a weak instrumental variable test F-value of 1305.94, far exceeding the critical value provided by Stock et al. (43) at the 10% level. At the same time, the Kleibergen-Paap rk LM test p-value is 0, passing both the weak identification test and the underidentification test. The results of the second-stage regression show that after replacing the core explanatory variable with the instrumental variable, the sign and significance of the regression coefficient remain unchanged, preliminarily proving the effectiveness of selecting the cumulative surplus of the previous year’s urban employee basic medical insurance as the instrumental variable for public hospital reform. However, as a suitable alternative instrumental variable for public hospital reform, this variable must not only explain the differences in public hospital reform across provinces but also meet the requirements of exogeneity. The data sample type in this study is an unbalanced panel. When using time and province double fixed effects along with cluster clustering, there are cases where the sample size of certain units is too small, resulting in the estimation process not being full rank, and the overidentification test not reported. Therefore, only a single instrumental variable was used to explain public hospital reform in this case and it cannot verify the exogeneity of the instrumental variable through the “overidentification assumption.” Following the approach of Fang and Zhao (44), potential path variables are used for instrumental variable regression. If the coefficient of the regression is not significant, it indicates that the instrumental variable does not change the health inequality index through that path. Using the “whether residents participate in urban employee basic medical insurance” in the CFPS database as the explanatory variable and the logarithm of the cumulative surplus of the previous year’s urban employee basic medical insurance as the explained variable for regression, the results in the sixth column of Table 3 show that the impact is not significant. In columns 3–4 of Table 3, when estimating the mitigating effect of public hospital reform on health inequality, we also include “whether residents participate in basic medical insurance” as a control variable and still find that the effect of the reform is consistently significant. This further validates the exogeneity of the instrumental variable.

Table 4 further reports the regression results of robustness tests. After matching the reform time at the municipal level, the regression coefficient of the reform on residents’ health inequality is −0.216, and it is significant at the 1% level, consistent with the main regression results. In the second column, adding county-level fixed effects does not significantly change the coefficient ( α 1 = −0.203) and significance (p < 0.01) of the regression. In column (3), after deleting data from provinces with the most and least samples, the sample size is 104,811, and the regression coefficient is −0.26, but it does not affect the sign and significance of the regression (p < 0.01).

Using this sample to calculate CI, the CI for the control group is 0.0153, and for the treatment group, it is 0.0118, showing a decrease of 22.87 percentage points before and after the reform. The health concentration curves for the control group and the treatment group are shown in Figure 2, indicating an improvement in health inequality in China after the separation of medical services from drug sales. The values of CI are greater than 0 before and after the reform, indicating a health inequality that favors the rich among Chinese residents. However, with the progress of the reform, the health disparities favoring higher-income groups are narrowing. In conclusion, the findings of the baseline regression are further strengthened, and research hypothesis 1 is once again confirmed.

The regression results for the chained mediation effects are presented in Table 5. In column (1), it is observed that public hospital reform contributes to a reduction in family medical expenses ( β 1 = − 0.033, p < 0.05). In column (2), the coefficients for the impact of public hospital reform (H) and household medical consumption (MC) on family leisure health consumption (HLC) are 0.09 and −0.034, respectively, both significant at the 1% level. This suggests that both medical reform and the decrease in household medical consumption significantly lead to an increase in family leisure health consumption. Column (3) indicates that the upgrading of the structure of family health consumption has a positive effect on reducing residents’ health inequality ( δ 1 = −0.164, p < 0.01). The effect value of independent mediation 1 ( β 1 δ 2 ) is − 4.62 ∗ 10 − 4 , and for independent mediation 2 ( γ 1 δ 3 ), it is − 1.22 ∗ 10 − 2 . The chained mediation effect value of public hospital reform on health inequality ( β 1 δ 2 δ 3 ) is − 1.53 ∗ 10 − 4 . Figure 3 represents the path diagram (including significance levels) illustrating the effect of chain mediation, with clustered individual level standard errors **p < 0.01, *p < 0.05.

The results of the heterogeneity analysis, as shown in Tables 6A,B, indicate that regardless of whether the educational level is higher or lower, public hospital reform can improve the health inequality status of the target groups. However, the coefficient for the level of improvement among the higher-educated group ( α 1 = −1.199, p < 0.01) is greater than that of the lower-educated group ( α 1 = −0.530, p < 0.01). In regions with a lower degree of aging, the coefficient for the impact of public hospital reform on health inequality is −0.088 at the 1% significance level. However, in areas with a higher degree of aging, this coefficient is not statistically significant.

We used China’s public hospital reform, which was piloted in 2010 and fully rolled out in 2017, as a natural experiment to study the impact and microscopic mechanism of public hospital reform on the health inequality of Chinese residents. By utilizing the CFPS database, we matched the reform timelines of urban public hospitals in each province and accounted for the policy’s temporality. The calculated results indicate a 22.87% decrease in CI of health inequality before and after the reform. Using RIF to recenter the CI of health inequality and conducting an OLS panel regression, we found that the reform led to a 20.3% decrease in the Residents’ Inequality Index (RIF_CI). The paper proposes a tri-pathway chain mediation mechanism to explain the improvement in health inequality due to public hospital reform from a micro perspective of household consumption: (1) Public Hospital Reform – Family Medical Consumption – Health Inequality. Our research findings indicate that the reform, which abolished drug markups, significantly reduced household expenditures on purchasing medical services for daily needs. This finding differs somewhat from previous research conclusions discussed in the introduction (22–24). Differences in the time span, regions, and data sources of sample selection may account for the disparities in conclusions. The reduction in household medical expenses due to the reform lowering medicine prices has led to a decrease in household expenditures on purchasing medical services for daily needs, thereby enhancing the economic accessibility of medical service purchases for households and reducing the health inequality index faced by household members. (2) Public Hospital Reform – Healthy Leisure Consumption – Health Inequality. The overall reduction in the price of medical services alleviates precautionary savings motives induced by expenditure uncertainty and health uncertainty. This promotes consumer spending among residents (45), releasing budgets for other household expenditures. With the continuous improvement in the living standards of Chinese residents and the gradual increase in health awareness, the demand for health-related consumption has risen rapidly. The share of family healthy leisure consumption has also increased. For individuals with higher socioeconomic status, changes in medical expenses might not significantly impact household purchasing power or alter the household consumption structure. However, for ordinary families, the decrease in medical expenses not only expands total purchasing power but also reduces precautionary savings. This results in an increase in the budget for healthy leisure consumption, releasing demand for enjoyment-oriented consumption. In the absence of changes in existing medical services, the increased healthy leisure consumption contributes to enhancing individual health and reducing health disparities (46). (3) Public Hospital Reform – Family Medical Consumption – Family Healthy Leisure Consumption – Health Inequality. The increasingly diverse structure of household consumption is showing a trend of evolution from “basic” to “developmental” and “enjoyment” consumption upgrades (47). Therefore, the decrease in household medical expenses will also directly lead to an increase in leisure health consumption.

In the aforementioned indirect effects, the contribution of the increase in leisure health consumption is relatively larger. This conclusion is similar to previous research on the relationship between hierarchical health consumption and health inequality. For example, a study conducted using data from the 2015 survey on the living conditions of residents in large cities analyzed the actual effects of the new healthcare system reform on health economics. They concluded that health status is mainly determined by two aspects of health economic behavior: medical expenditure and leisure health consumption. Leisure health consumption is more likely than medical expenditure to be an effective pathway to promote health (46). However, the authors did not explore the chained relationship between household medical expenditure and leisure health consumption in relation to reform and health inequality. And we have enhanced this part of the research.

Additionally, we further demonstrated that the impact of reform on health inequality varies with education levels and regional population structures. In the rapidly evolving digital economy and the catalysis of the COVID-19 pandemic, the integration of healthcare and the internet has formed a unified service system encompassing both online and offline medical services. Public hospital reform, facilitated by telemedicine and initiatives such as the establishment of internet hospitals and provision of online diagnostic services, employs digital means to deliver high-quality medical services to the public. However, the effectiveness of the process from the improvement in healthcare service supply to the enhancement of residents’ access to health resources depends on residents’ abilities to access, assess, and utilize medical information. These abilities are typically determined by education levels. Empirical results (Table 6A) validate our hypothesis. The different demographic structures also affect the impact of public hospital reform on the health inequality index. Household medical service expenditures are expected to significantly increase with the trend of population aging (48). Public hospital reform can benefit families in regions with a high degree of aging. Moreover, studies suggest that older adults have significant potential demand in areas such as education, culture, entertainment, and health products (49). The increase in healthy leisure activities, such as tourism, has a significant impact on the physical and mental health of older adults (50). But the research results (Table 6B) do not align with our discussion. In regions with a severe aging population, public hospital reform does not effectively suppress health inequality. Possible reasons include the fact that, although the older adult are the main consumers of health, their willingness for pleasure-oriented consumption is limited, and they prioritize preventive savings against risks. Additionally, the development of the health industry is still in its early stages, limiting its ability to provide high-quality health products and services, which, in turn, constrains the demand for health consumption.

As far as we know, this is the latest interpretation of the policy effects of China’s public hospital reform on improving residents’ health inequality using household data from 2012 to 2020, along with the micro-level impact pathways. This finding suggests that the healthcare reform measures, which reduce out-of-pocket medical expenses for residents and enhance the rational allocation of medical resources, are a correct and feasible direction for reform, with a positive impact on reducing the residents’ health inequality index. Furthermore, this study decomposes family health consumption into medical expenditure and healthy leisure consumption. The process of transforming the budget for medical expenses into a budget for healthy leisure expenses is defined as the upgrading of the family health consumption structure. The study uses a chain mediation model to verify the micro-pathway of “public hospital reform – upgrading family health consumption – reducing health inequality.” Finally, we examines the changes in the coefficient α 1 in different education groups and regions with varying degrees of aging. It finds that basic education is one of the thresholds for Chinese residents to gain opportunities for health equity from the reform. Meanwhile, the excessive preventive savings mindset and the insufficient development of the health industry limit the ability of the older adult population to obtain health equity from public hospital reform measures. Based on this, the paper suggests that reform policies in the healthcare sector should be combined with policies to promote universal basic education, develop the silver economy, and drive the health industry. Only through coordinated efforts can better results be achieved. This provides a theoretical basis for China to further deepen healthcare reform, strengthen multi-path collaboration, and enhance policy efforts to improve health opportunity inequality. It also offers experiential insights for other countries in formulating policies related to improving health inequality.

Our study has some limitations. Firstly, residents may underreport or misreport sensitive issues such as income and expenditure during the interviews, leading to errors in calculating the CI and RIF_CI of per capita net income and family consumption expenditure. However, the official data undergoes preliminary cleaning, and our large sample size helps mitigate some of these concerns. Secondly, both the CI and the RIF of health inequality are functions of residents’ health levels and income. This study uses self-assessed health scores of respondents in the CFPS as a measure of residents’ health levels. However, self-assessment scores are subjective evaluations and expectations of individuals about their health status (including physiological and psychological aspects), carrying the risk of overestimation or underestimation. Future research could consider using a combination of subjective and objective health indicators, such as the Quality of Well-Being scale (QWB), to reduce potential biases in the data. Thirdly, the empirical analysis lacks control for stable differences between provinces. After data cleaning, age range selection, and removal of samples with missing or outlier information, the remaining 121,447 valid samples are unevenly distributed among provinces and cities. Some provinces or cities have either no samples or only a few samples in a particular interview year. While our study does not directly compare differences between provinces or cities and uses various methods to demonstrate the robustness of the results, this issue could still introduce potential biases in the observed associations between the core explanatory variables and the dependent variables. Future research with a longer and more comprehensive dataset would help address this limitation.

In summary, our study concludes that the reform of China’s public hospitals has positively contributed to the improvement of residents’ health inequality, with one effective pathway being the alteration of the structure of family health consumption, resulting in additional health benefits for residents. Our findings also underscore the importance of universal higher education and the development of the health industry in the context of global digitization and the dual challenges of an aging population for addressing health inequality. We propose that reform policies in the medical field should integrate with policies promoting basic education, developing the silver economy, and advancing the health industry to work synergistically for better outcomes. To provide more targeted and effective strategies for local governments, future research could explore the evolving spatial patterns of health inequality in China and investigate the changes in key influencing factors.

The raw data supporting the conclusions of this article will be made available by the authors, without undue reservation.

LJ: Writing – review & editing, Writing – original draft, Funding acquisition, Data curation, Conceptualization. YH: Writing – review & editing, Validation, Supervision, Funding acquisition, Conceptualization. CH: Writing – review & editing, Visualization, Data curation, Conceptualization.