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The provision of public universal health insurance: impacts on private insurance, asset holdings and welfare

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  • Minchung, Hsu
  • Junsang, Lee

Abstract

This paper aims to investigate impacts of public provision of universal health insurance (UHI) in an environment with household heterogeneity and financial market incompleteness. Various UHI polices with both distortionary (payroll-tax) and non-distortionary (lump-sum tax) financing methods are compared to address the trade-off between risk reduction and tax distortion as well as corresponding welfare implications. We undertake a dynamic equilibrium model with endogenous insurance choice and labor supply decisions to perform quantitative analyses. The results suggest that the UHI expenditure coverage rate would be too high in most OECD countries when the distortion effect is considered. We find a clear crowding out effect on asset holdings. Implications for private health insurance (PHI) purchases when UHI is introduced depend on the pricing and the design of coverage. We find the rich are sensitive to the price of PHI, and would prefer a supplemental plan when UHI is introduced.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 32974.

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Date of creation: 2011
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Handle: RePEc:pra:mprapa:32974

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Keywords: universal health insurance; complementary/supplemental health insurance;

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  1. David Domeij & Jonathan Heathcote, 2004. "On The Distributional Effects Of Reducing Capital Taxes," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 45(2), pages 523-554, 05.
  2. Mark Huggett & Gustavo Ventura, 1999. "On the Distributional Effects of Social Security Reform," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 2(3), pages 498-531, July.
  3. Jonathan Heathcote, 2003. "Fiscal Policy with Heterogeneous Agents and Incomplete Markets," Working Papers, Georgetown University, Department of Economics gueconwpa~03-03-23, Georgetown University, Department of Economics.
  4. Hansen, G.D. & Imrohoroglu, A., 1990. "The Role Of Unemployment Insurance In An Economy With Liquidity Constraints And Moral Hazard," Papers, California Los Angeles - Applied Econometrics 21, California Los Angeles - Applied Econometrics.
  5. Storesletten, Kjetil & Telmer, Chris I. & Yaron, Amir, 1999. "The risk-sharing implications of alternative social security arrangements," Carnegie-Rochester Conference Series on Public Policy, Elsevier, Elsevier, vol. 50(1), pages 213-259, June.
  6. Shinichi Nishiyama & Kent Smetters, 2005. "Consumption Taxes and Economic Efficiency with Idiosyncratic Wage Shocks," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 113(5), pages 1088-1115, October.
  7. Orazio Attanasio & Sagiri Kitao & Giovanni L. Violante, 2010. "Financing Medicare: A General Equilibrium Analysis," NBER Chapters, National Bureau of Economic Research, Inc, in: Demography and the Economy, pages 333-366 National Bureau of Economic Research, Inc.
  8. Jeske, Karsten & Kitao, Sagiri, 2009. "U.S. tax policy and health insurance demand: Can a regressive policy improve welfare?," Journal of Monetary Economics, Elsevier, Elsevier, vol. 56(2), pages 210-221, March.
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Cited by:
  1. Ponpoje Porapakkarm & Svetlana Pashchenko, 2011. "Quantitative Analysis of Health Insurance Reform: Separating Community Rating from Income Redistribution," 2011 Meeting Papers, Society for Economic Dynamics 1254, Society for Economic Dynamics.

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