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Social insurance, private health insurance and individual welfare

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  • Zhao, Kai

Abstract

This paper studies the impact of social insurance on individual choices and welfare in a dynamic general equilibrium model with uncertain medical expenses and individual health insurance choices. I find that social insurance (modeled as the combination of a minimum consumption floor and the Medicaid program) does not only distort saving and labor supply decisions, but also has a large crowding out effect on the demand for private health insurance. However, despite the distorting effects, the net welfare consequence of eliminating social insurance is still negative in most cases. In addition, the large crowding out effect on private health insurance suggests that the existence of social insurance programs may be one reason why some Americans do not buy any health insurance.

Suggested Citation

  • Zhao, Kai, 2017. "Social insurance, private health insurance and individual welfare," Journal of Economic Dynamics and Control, Elsevier, vol. 78(C), pages 102-117.
  • Handle: RePEc:eee:dyncon:v:78:y:2017:i:c:p:102-117
    DOI: 10.1016/j.jedc.2017.03.004
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    References listed on IDEAS

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    Cited by:

    1. Zhao, Kai, 2015. "The impact of the correlation between health expenditure and survival probability on the demand for insurance," European Economic Review, Elsevier, vol. 75(C), pages 98-111.

    More about this item

    Keywords

    Saving; Uncertain medical expenses; Health insurance; Means testing;

    JEL classification:

    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
    • I13 - Health, Education, and Welfare - - Health - - - Health Insurance, Public and Private

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