Financial Relief and Health Effects of Urban–Rural Health Insurance Integration on Older Rural Adults: A Causal Analysis of Age-Based Heterogeneity

Objective: To evaluate the impact of urban–rural health insurance integration on the health outcomes and financial burden of rural older adults. Methods: Utilizing panel data from the China Health and Retirement Longitudinal Study (CHARLS) spanning 2013 to 2018, we employed a staggered difference-in-differences model coupled with propensity score matching (PSM-DID) for rigorous causal identification. Results: The policy significantly reduced out-of-pocket medical expenditures for rural households by approximately 5.6% (p = 0.034). Concurrently, significant improvements were observed in both physical health (a 0.092-point reduction in ADL impairment scores) and mental health (a 0.725-point reduction in CES-D depression scores). Mechanism analyses revealed that the integration did not significantly increase the probability of outpatient or inpatient visits—thereby ruling out supplier-induced demand and moral hazard—while effectively reducing the incidence of catastrophic health expenditure by 1.9% (p = 0.004). Heterogeneity analyses indicated that while the financial relief was universally distributed across varying educational levels, the policy dividends were predominantly captured by the younger-old demographic. Notably, the reduction in financial burden was not statistically significant for the oldest-old cohort (aged 75 and older). Conclusions: The urban–rural health insurance integration has achieved a dual dividend of financial protection and health enhancement without triggering the overutilization of medical services. Nevertheless, the unmet care expenses for older adults with severe disabilities underscore the urgent necessity for a secondary safety net, such as long-term care insurance.