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This article discusses what in international literature has commonly been termed the ‘vicious circle’ of poverty and disability. Our aim is to shed light on recent policies that attempt to break the vicious circle in rural areas in the People’s Republic of China. Drawing on data produced from fieldwork conducted in the Inner Mongolia Autonomous Region, People’s Republic of China, our approach is to explore experiences that households with people with disabilities have had with a newly implemented rural health insurance reform. The introduction of this reform is significant as lack of insurance and high healthcare expenses are currently perceived as crucial to causing poverty in rural China. We show that people with disabilities have been able to access this new insurance. At the same time, as currently practised, the new insurance does not prevent poor households from sinking deeper into poverty when using healthcare services as healthcare expenses increase. [ABSTRACT FROM PUBLISHER]