Abstract Background Although public medical insurance covers over 95% of the population in China, disparities in health service use and out-of-pocket (OOP) health expenditure across income groups are still widely observed. This study aims to investigate the socio-economic disparities in perceived healthcare needs, informal care, formal care and payment for healthcare and explore their equity implication. Methods We assessed healthcare needs, service use and payment in 400 households in rural and urban areas in Jiangsu, China, and included only the adult sample (N = 925). One baseline survey and 10 follow-up surveys were conducted during the 7-month monitoring period, and the Affordability Ladder Program (ALP) framework was adopted for data analysis. Negative binomial/zero-inflated negative binomial and logit regression models were used to explore factors associated with perceived needs of care and with the use of self-treatment, outpatient and inpatient care respectively. Two-part model and logit regression modeling were conducted to explore factors associated with OOP health expenditure and with the likelihood of incurring catastrophic health expenditure (CHE). Results After adjusting for covariates, rural residence was significantly associated with more perceived healthcare needs, more self-treatment, higher probability of using outpatient and inpatient service, more OOP health expenditure and higher likelihood of incurring catastrophic expenditure (P