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Taxing Health Insurance: How Much Is Enough?

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  • CHARLES E. PHELPS

Abstract

The Reagan administration has again proposed in 1984 to limit the tax exemption on health‐insurance premiums. Objectives of the proposal are to curtail rising health costs by reducing insurance coverage—and hence medical‐care use—and to raise revenues to offset the large federal deficit. The change would have little effect on either dimension. Most likely, consumer response would reduce dental, drug, and eyeglass insurance, but would leave coverage for hospital and doctor care—the most bothersome health‐cost sectors—essentially unaffected. Larger tax changes which are structured differently possibly could reduce health costs dramatically and raise up to $27 billion a year in new tax revenues.

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  • Charles E. Phelps, 1984. "Taxing Health Insurance: How Much Is Enough?," Contemporary Economic Policy, Western Economic Association International, vol. 3(2), pages 47-54, December.
    • Handle: RePEc:bla:coecpo:v:3:y:1984:i:2:p:47-54
    DOI: 10.1111/j.1465-7287.1984.tb00796.x
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    References listed on IDEAS

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    1. Feldstein, Martin S, 1973. "The Welfare Loss of Excess Health Insurance," Journal of Political Economy, University of Chicago Press, vol. 81(2), pages 251-280, Part I, M.
    2. Mitchell, Bridger M & Phelps, Charles E, 1976. "National Health Insurance: Some Costs and Effects of Mandated Employee Coverage," Journal of Political Economy, University of Chicago Press, vol. 84(3), pages 553-571, June.
    3. Phelps, Charles E & Newhouse, Joseph P, 1974. "Coinsurance, the Price of Time, and the Demand for Medical Services," The Review of Economics and Statistics, MIT Press, vol. 56(3), pages 334-342, August.
    4. Keeler, Emmett B & Newhouse, Joseph P & Phelps, C E, 1977. "Deductibles and the Demand for Medical Care Services: The Theory of a Consumer Facing a Variable Price Schedule under Uncertainty," Econometrica, Econometric Society, vol. 45(3), pages 641-655, April.
    5. Feldstein, Martin & Friedman, Bernard, 1977. "Tax subsidies, the rational demand for insurance and the health care crisis," Journal of Public Economics, Elsevier, vol. 7(2), pages 155-178, April.
    6. Zeckhauser, Richard, 1970. "Medical insurance: A case study of the tradeoff between risk spreading and appropriate incentives," Journal of Economic Theory, Elsevier, vol. 2(1), pages 10-26, March.
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    Cited by:

    1. Louis De Alessi, 1989. "The Effect of Institutions on the Choices of Consumers and Providers of Health Care," Journal of Theoretical Politics, , vol. 1(4), pages 427-458, October.

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