Implicit Budget Deficits: The Case of a Mandated Shift to Community-Rated Health Insurance
In: Tax Policy and the Economy, Volume 11
AbstractSince a typical regulatory mandate can be equated in its economic effect to a combination of an expenditure program and a tax program, observers have often suggested that it would serve consistent public policy to bring regulatory decisions into the same budgetary framework. This paper concerns an important example of a regulatory program that would mimic deficit financing in effecting a transfer of fiscal burdens toward younger and future generations, the mandated purchase of (or provision by employers of) health care insurance under a system of community rating, under which the same price is charged for health insurance for all comers, regardless of age, sex, or health condition. Such a shift would result in redistributions of burdens across birth cohorts, in this case from existing, especially middle-aged birth cohorts toward future generations. Using data from a variety of sources we conclude the effect would be substantial. For our central-case assumptions about discount, health care cost, and productivity growth rates, and about the locus of responsibility for paying health care bills, a shift to community rating is estimated to generate gains for people over age 30 in 1994, $16,700 per person aged 50 for example, at the cost to younger cohorts. Those born in 1994 would acquire an extra payment obligation with a discounted value of $7,100 each. The burden passed along to future generations can be described by a $9,300 per capita tax at birth (growing with productivity). The analysis makes clear that the regula- tory policy shift, with no direct budgetary implications, would have an intergenerational transfer effect comparable to what would be considered a major change in on-budget tax or transfer programs.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
This chapter was published in:
This item is provided by National Bureau of Economic Research, Inc in its series NBER Chapters with number 10907.
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Web page: http://www.nber.org
More information through EDIRC
Other versions of this item:
- David F. Bradford & Derrick A. Max, 1996. "Implicit Budget Deficits: The Case of a Mandated Shift to Community-Rated Health Insurance," NBER Working Papers 5514, National Bureau of Economic Research, Inc.
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- David F. Bradford, 2001.
"Reforming Budgetary Language,"
128, Princeton University, Department of Economics, Center for Economic Policy Studies..
- Tadashi Fukui & Yasushi Iwamoto, 2006.
"Policy Options for Financing the Future Health and Long-term Care Costs in Japan,"
CIRJE-F-432, CIRJE, Faculty of Economics, University of Tokyo.
- Tadashi Fukui & Yasushi Iwamoto, 2006. "Policy Options for Financing the Future Health and Long-Term Care Costs in Japan," NBER Working Papers 12427, National Bureau of Economic Research, Inc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.