Background: The disparity between government health expenditures across regions is more severe in developing countries than it is in developed countries. The capitation subsidy method has been proven effective in developed countries in reducing this disparity, but it has not been tested in China, the world's largest developing country. Methods: The convergence method of neoclassical economics was adopted to test the convergence of China's regional government health expenditure. Data were obtained from Provinces, Prefectures and Counties Fiscal Statistical Yearbook (2003-2007) edited by the Chinese Ministry of Finance, and published by the Chinese Finance & Economics Publishing House. Results: The existence of sigma-convergence and long-term and short-term beta-convergence indicated the effectiveness of the capitation subsidy method in the New Rural Cooperative Medical Scheme on narrowing county government health expenditure disparities. The supply-side variables contributed the most to the county government health expenditure convergence, and factors contributing to convergence of county government health expenditures per capita were different in three regions. Conclusion: The narrowing disparity between county government health expenditures across regions supports the effectiveness of the capitation subsidy method adopted by China's New Rural Cooperative Scheme. However, subsidy policy still requires further improvement.