<p>Utilizing data from the China Family Panel Studies (CFPS) from 2010 to 2022, this study employs a multi-period difference-in-differences approach to estimate the impact of Carbon Emissions Trading Scheme (ETS) on residents’ medical expenses. The results demonstrate that it has significantly reduced residents’ total medical expenses and out-of-pocket expenses. Regressions using different samples show that the ETS reduces residents’ average total medical expenses by 442 RMB and average out-of-pocket medical expenses by 1207 RMB. A finding that remains robust across a series of tests, including placebo checks. Mechanism analyses indicate that the reduction is primarily driven by lower carbon emissions and environmental improvements, which contribute to decreasing the frequency of hospitalizations among residents, thereby reducing both overall and out-of-pocket medical expenses. Heterogeneity analysis reveals that the negative effect of the ETS on total medical expenses is attenuated among older individuals, those who are married, those with chronic diseases, and those in self-rated poor health. However, marital status and chronic conditions do not moderate the policy’s effect on out-of-pocket expenses. The findings of this paper are of great significance in promoting the deep integration of Carbon Peaking and Carbon Neutrality Goals and the Healthy China initiative.</p>