On November 14, 2012, "Opinions of the Ministry of Human Resources and Social Security, the Ministry of Finance, and the Ministry of Health on the Control of the Total Payment of Basic Medical Insurance" (Human and Social Ministry issued  No. 70) was promulgated. All regions in China have since launched the Total Budget Management Reform for the payment of medical insurance. In 2019, 97.5% of the medical insurance coordinating areas across the country have completed the Total Budget Management Reform. In order to verify whether the Total Budget Management Reform has improved the efficiency of medical services, based on the theoretical analysis of relevant economics models, this paper takes the natural experiment of a provincial employee medical insurance changing from the Fee for Services System to the Total Budget Management Reform as the research object. Empirical tests are conducted through OLS mixed models, static individual effect panel models and regression discontinuity models. Results show that the Total Budget Management Reform does not lead to a general decline in hospitalizations, and does not cause an increase in hospitalizations for minor illnesses, and effectively reduces the overall average hospital stay, especially the average hospital stay for severe diseases. It proves that the Total Budget Management Reform has achieved good results in improving the efficiency of medical services. However, the Total Budget Management Reform alone is not perfect as a medical insurance payment method. For example, the Total Budget Management Reform has led to a decrease in the hospitalizations for severe diseases to a certain extent, indicating that patients with severe diseases might have been refused for hospitalization.