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Public provision of health insurance and welfare

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  • Lim Kyoung Mook

    (Department of Economics, Washington College, Chestertown, MD 21620, USA, Tel.: +1-410-810-5002)

Abstract

This paper examines the effects of expanding public health insurance benefits on individuals’ welfare in a highly old-age dependent economy. On the one hand, such a policy would benefit the older generations in the population by improving their health status. On the other hand, an economy that has a high share of the elderly may sharply increase the tax rate that finances the public health insurance program, which is mainly financed by working-age generations. Due to the trade-off, the impact of the policy on average welfare is ambiguous. To quantify this effect, I examine the South Korean plan to expand its public health insurance despite the country’s rapidly aging population. I build an overlapping-generations model and track the effect of the proposed public health insurance expansion on welfare over a transition path. The results suggest that the proposed expansion not only increases average welfare, but also the welfare of the working-age generations who would be more likely to resort to preventative medicine. However, such welfare gains can be lost if implementation of the policy were to be postponed to a later highly old-age dependent economy.

Suggested Citation

  • Lim Kyoung Mook, 2016. "Public provision of health insurance and welfare," The B.E. Journal of Macroeconomics, De Gruyter, vol. 16(2), pages 439-483, June.
    • Handle: RePEc:bpj:bejmac:v:16:y:2016:i:2:p:439-483:n:8
    DOI: 10.1515/bejm-2015-0094
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    References listed on IDEAS

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    1. Juergen Jung & Chung Tran, 2009. "Health Care Financing over the Life Cycle, Universal Medical Vouchers and Welfare," Discussion Papers 2009-12, School of Economics, The University of New South Wales.
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    6. Svetlana Pashchenko & Ponpoje Porapakkarm, 2013. "Quantitative Analysis of Health Insurance Reform: Separating Regulation from Redistribution," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 16(3), pages 383-404, July.
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    Cited by:

    1. Burkhard Heer & Alfred Maußner, 2024. "Dynamic General Equilibrium Modeling," Springer Texts in Business and Economics, Springer, edition 3, number 978-3-031-51681-8, August.

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