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Are Tax Subsidies for Private Medical Insurance Self-financing? Evidence from a Microsimulation Model for Outpatient and Inpatient Episodes

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Author Info
Ángel López-Nicolás
Marcos Vera-Hernández

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Abstract

This paper analyses whether or not tax subsidies to private medical insurance are self-financing by means of a structural approach. We construct a simulation routine based on a microeconometric discrete choice model that allows us to evaluate the impact of premium changes on the utilisation of outpatient and inpatient health care services. We simulate the 1999 Spanish tax reform that abolished the tax deduction for expenditures on private health insurance using a representative sample of the Catalan population. Prior to this reform, foregone tax revenue arising from deductions after the purchase of private insurance amounted to €69.2 M. per year. In contrast, the elimination of the subsidies to private policies is estimated to generate an extra cost for the public sector of about €8.9 M. per year.

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Paper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 632.

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Date of creation: Jul 2002
Date of revision: Oct 2004
Handle: RePEc:upf:upfgen:632

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Related research
Keywords: Health care utilisation; structural modelling; tax reform evaluation;

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Find related papers by JEL classification:
H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Epple, Dennis & Romano, Richard E, 1996. "Public Provision of Private Goods," Journal of Political Economy, University of Chicago Press, vol. 104(1), pages 57-84, February. [Downloadable!] (restricted)
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    Other versions:
  3. Gruber, Jonathan & Poterba, James, 1994. "Tax Incentives and the Decision to Purchase Health Insurance: Evidence from the Self-Employed," The Quarterly Journal of Economics, MIT Press, vol. 109(3), pages 701-33, August. [Downloadable!] (restricted)
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  4. Besley, Timothy & Hall, John & Preston, Ian, 1999. "The demand for private health insurance: do waiting lists matter?," Journal of Public Economics, Elsevier, vol. 72(2), pages 155-181, May. [Downloadable!] (restricted)
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  5. Propper, Carol, 1989. "An Econometric Analysis of the Demand for Private Health Insurance in England and Wales," Applied Economics, Taylor and Francis Journals, vol. 21(6), pages 777-92, June.
  6. Propper, Carol, 1993. "Constrained choice sets in the U.K. demand for private medical insurance," Journal of Public Economics, Elsevier, vol. 51(3), pages 287-307, July. [Downloadable!] (restricted)
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  9. Bingley, Paul & Walker, Ian, 2001. "Housing Subsidies and Work Incentives in Great Britain," Economic Journal, Royal Economic Society, vol. 111(471), pages C86-103, May. [Downloadable!] (restricted)
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  10. Mireia Jofre-Bonet, 2000. "Public health care and private insurance demand: The waiting time as a link," Health Care Management Science, Springer, vol. 3(1), pages 51-71, January. [Downloadable!] (restricted)
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  12. Heckman, James J, 1979. "Sample Selection Bias as a Specification Error," Econometrica, Econometric Society, vol. 47(1), pages 153-61, January. [Downloadable!] (restricted)
  13. Keane, Michael P, 1992. "A Note on Identification in the Multinomial Probit Model," Journal of Business & Economic Statistics, American Statistical Association, vol. 10(2), pages 193-200, April.
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  15. Besley, Timothy & Hall, John & Preston, Ian, 1998. "Private and public health insurance in the UK," European Economic Review, Elsevier, vol. 42(3-5), pages 491-497, May. [Downloadable!] (restricted)
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  17. Propper, Carol, 2000. "The demand for private health care in the UK," Journal of Health Economics, Elsevier, vol. 19(6), pages 855-876, November. [Downloadable!] (restricted)
  18. Besley, Timothy & Coate, Stephen, 1991. "Public Provision of Private Goods and the Redistribution of Income," American Economic Review, American Economic Association, vol. 81(4), pages 979-84, September. [Downloadable!] (restricted)
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  19. Propper, Carol & Rees, Hedley & Green, Katherine, 2001. "The Demand for Private Medical Insurance in the UK: A Cohort Analysis," Economic Journal, Royal Economic Society, vol. 111(471), pages C180-200, May. [Downloadable!] (restricted)
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Pilar García Gómez & Ángel López, 2004. "The Evolution of Inequity in the Access to Health Care in Spain: 1987-2001," Economics Working Papers 756, Department of Economics and Business, Universitat Pompeu Fabra, revised Oct 2006. [Downloadable!]
  2. Pilar García Gómez & Ángel López, 2004. "The Evolution of Inequity in the Access to Health Care in Spain: 1987-2001," Working Papers, Research Center on Health and Economics 756, Department of Economics and Business, Universitat Pompeu Fabra, revised Oct 2006. [Downloadable!]
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