研究领域： Medical innovation is vital for enhancing human health, but its rising costs raise concerns about cost-effectiveness. However, how to mitigate its economic impact often goes unaddressed. To address this issue, this study explores the impact of medical innovation on population health and healthcare spending, and examines the role of medical innovation competition in these effects. Using an instrumental variable approach with provincial-level panel data from China (2002–2019), we find that medical innovation significantly improves population health, with innovation competition enhancing this effect. Medical innovation also contributes to a higher share of healthcare consumption in GDP while reducing the financial burden on urban employee medical insurance funds, particularly when innovation competition is stronger. These findings have important policy implications, indicating that fostering a supportive environment for medical innovation and competition can enhance national health, stimulate healthcare consumption, and ease the financial pressures on medical insurance funds, especially for urban employees.