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Hypertension and diabetes are highly prevalent in China and pose significant health and economic burdens, but large gaps in care remain for people with such conditions. In this article, drawing on administrative insurance claim data from China’s Urban Employee Basic Medical Insurance (UEBMI), we use an interrupted time series design to examine whether an increase in the monthly reimbursement cap for outpatient visits using chronic disease coverage affects healthcare utilization. The cap was increased by 50 yuan per chronic disease on 1 January 2016, in one of the largest cities in China. Compared with the year before the increase, patients with only hypertension increased their spending using chronic disease coverage by 17.8 yuan (P < 0.001) or 11.6%, and those with only diabetes increased their spending using chronic disease coverage by 19.5 yuan (P < 0.001) or 10.6%, with the differences almost entirely driven by spending on drugs. In addition, these two groups of patients reduced their spending using standard outpatient coverage by 13.9 yuan (P < 0.001) or 5.7% and 14.9 yuan (P = 0.03) or 5.2%, respectively, and thus had no changes in total outpatient spending. Patients with both hypertension and diabetes, meanwhile, increased their spending using chronic disease coverage by 54.8 yuan (P < 0.001) or 18.1% and decreased their spending using standard outpatient coverage by 16.1 yuan (P = 0.002) or 6.1%, with no changes in their probability of hospitalization. Among patients with both hypertension and diabetes who had fewer-than-average outpatient visits in 2015, the hospitalization rate decreased after the 2016 reimbursement cap increase (adjusted odds ratio = 0.702, P = 0.01). These findings suggest that increasing financial protection for patients with hypertension and diabetes may be an important strategy for reducing adverse health events, such as hospitalization, in China.