The Impact of Air Pollution on Medical Expenditure : Evidence from Beijing

We identify the contemporaneous effects of PM2.5 concentrations on medical costs in Beijing by analyzing datasets that combine daily air quality indexes over a four-year period with detailed records of all hospital visits and medical transactions of beneficiaries of a government medical insurance program that covers the vast majority of the city's residents. We find that higher levels of air pollution significantly increase daily hospital visits and medical costs. The elderly bear larger percentage of increases in hospital treatment and expenditures, especially through out-of-pocket costs. Analysis of pollution episodes that extend for more than a single day suggest that the duration of air pollution also plays an important role in marginal health costs. Once high levels of air pollution continue to a second day and after, marginal responses of hospital visits and medical costs start to increase significantly. Our findings suggest that preventing long-lasting pollution events should be prioritized