Abstract: Based on the panel data of China’s 12 provinces (cities) from 2003 to 2014, this paper employs the panel fixed effect model and the panel threshold model to empirically study the difference of the impact of medical insurance on the medical expenses of different income groups. The results of the study indicate that medical insurance is on the whole playing a positive role in promoting the medical expenses, but this role is different for different income groups. When income is staying at a lower level or a medium to high level, medical insurance has no significant effect on the medical expenses. When income is staying at a medium level or a higher level, the medical insurance can significantly promote the growth of medical expenses.

Key words: medical insurance; medical expenses; level of income; panel threshold model