This paper explores the impact of the New Cooperative Medical Scheme (NCMS), a newly adopted public health insurance program in rural China. Using a longitudinal sample drawn from the China Health and Nutrition Survey (CHNS), we employed multiple estimation strategies (individual fixed-effect models, instrumental variable estimation, and difference‐in‐differences estimation with propensity score matching) to correct the potential selection bias. We find that participating in the NCMS significantly decreases the use of traditional Chinese folk doctors and increases the utilization of preventive care, particularly general physical examinations. However, we do not find that the NCMS decreases out‐of‐pocket expenditure nor do we find that it increases utilization of formal medical service or improves health status, as measured by self‐reported health status and by sickness or injury in the past four weeks. Our study indicates that despite the wide expansion of coverage, the impact of the NCMS is still limited. Copyright (C) 2009 John Wiley & Sons, Ltd.