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Health insurance reform and bankruptcy

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  • Kuklik, Michal

Abstract

Abstract Medical bankruptcy was at the heart of the health care reform debate. According to Himmelstein et al. (2009), 62.1 percent of bankruptcies in the United States in 2007 were due to medical reasons. At the same time over 15 percent of Americans had no health insurance. The 2010 health care reform was designed to address the lack of health coverage and medical bankruptcies. In this paper, we employ a dynamic stochastic general equilibrium overlapping generations model with incomplete markets to quantitatively evaluate the impact of the health care reform on the health insurance market and the bankruptcy rate. We find that (i) the reform fails to address the bankruptcy problem as it cuts the bankruptcy rate by only 0.06 percentage point to 0.94 percent and the medical bankruptcy rate by 0.07 percentage point to 0.70 percent; (ii) the reform succeeds in providing almost universal insurance coverage with only 4.1 percent remaining uninsured; (iii) the average tax rate has to increase by 1.1 percent to finance the reform; (iv) the reform increases welfare by 5.2 percent; (v) the redistribution component of the reform drives the welfare gain by 5.8 percent, and the insurance market restructuring decreases welfare by 1.6 percent.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 39196.

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Date of creation: 2010
Date of revision: 2011
Handle: RePEc:pra:mprapa:39196

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Related research

Keywords: unsecured credit; bankruptcy; default; health insurance; health care reform; risk sharing; dynamic stochastic general equilibrium model; overlapping generations; heterogeneous agents;

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  1. Gouveia, Miguel & Strauss, Robert P., 1994. "Effective Federal Individual Tax Functions: An Exploratory Empirical Analysis," National Tax Journal, National Tax Association, vol. 47(2), pages 317-39, June.
  2. Athreya, Kartik B., 2008. "Default, insurance, and debt over the life-cycle," Journal of Monetary Economics, Elsevier, Elsevier, vol. 55(4), pages 752-774, May.
  3. Scott Fay & Erik Hurst & Michelle J. White, 2002. "The Household Bankruptcy Decision," American Economic Review, American Economic Association, American Economic Association, vol. 92(3), pages 706-718, June.
  4. Satyajit Chatterjee & Dean Corbae & Makoto Nakajima & Jose-Victor Rios-Rull, 2007. "A quantitative theory of unsecured consumer credit with risk of default," Working Papers 07-16, Federal Reserve Bank of Philadelphia.
  5. Athreya, Kartik B., 2002. "Welfare implications of the Bankruptcy Reform Act of 1999," Journal of Monetary Economics, Elsevier, Elsevier, vol. 49(8), pages 1567-1595, November.
  6. Athreya, Kartik & Tam, Xuan S. & Young, Eric R., 2009. "Unsecured credit markets are not insurance markets," Journal of Monetary Economics, Elsevier, Elsevier, vol. 56(1), pages 83-103, January.
  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. Frijters, Paul & Haisken-DeNew, John P. & Shields, Michael A., 2005. "The causal effect of income on health: Evidence from German reunification," Journal of Health Economics, Elsevier, Elsevier, vol. 24(5), pages 997-1017, September.
  9. Ana Castaneda & Javier Diaz-Gimenez & Jose-Victor Rios-Rull, 2003. "Accounting for the U.S. Earnings and Wealth Inequality," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 111(4), pages 818-857, August.
  10. Grossman, Michael, 1972. "On the Concept of Health Capital and the Demand for Health," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 80(2), pages 223-55, March-Apr.
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