Tax Subsidies for Health Insurance: Evaluating the Costs and Benefits
AbstractThe continued rise in the number of non-elderly Americans without health insurance has led to considerable interest in tax-based policies to raise the level of insurance coverage. This paper describes a detailed microsimulation model that has been developed to evaluate such tax-based polices, and its findings for the impact of polices on government costs and insurance coverage. I find that while tax subsidies could significantly increase insurance coverage, even very generous tax policies could not cover more than a sizable minority of the uninsured population. But there are several design features which can clearly make tax policy more effective: using tax credits rather than deductions; making credits refundable; and addressing the timing mismatch between when insurance purchases are made and tax refunds are received. I also document a clear tradeoff between the scope of tax subsidies and their efficiency.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 7553.
Date of creation: Feb 2000
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Find related papers by JEL classification:
- I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
- H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
This paper has been announced in the following NEP Reports:
- NEP-ALL-2000-02-21 (All new papers)
- NEP-HEA-2000-02-21 (Health Economics)
- NEP-IAS-2000-02-21 (Insurance Economics)
- NEP-PBE-2000-02-21 (Public Economics)
- NEP-PUB-2000-02-21 (Public Finance)
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