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Social Health Insurance: A Quantitative Exploration

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  • Juergen Jung
  • Chung Tran

Abstract

We quantify the welfare implications of three alternative approaches to providing social health insurance: (i) a mix of private and public health insurance (US-style), (ii) compulsory universal public health insurance (UPHI), and (iii) private health insurance for workers combined with government subsidies and price regulation. We use a Bewley-Grossman lifecycle model calibrated to match the lifecycle structure of earnings and health risks in the US. For all three systems we find that welfare gains triggered by a combination of improvements in risk sharing and wealth redistribution dominate welfare losses caused by tax distortions and ex-post moral hazard effects. Overall, the UPHI system outperforms the other two systems in terms of welfare gains if the coinsurance rate is properly designed. A switch from the US system to a well-designed UPHI system results in large welfare gains. However, such a radical reform faces political impediments due to opposing welfare effects across different income groups.

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  • Juergen Jung & Chung Tran, 2015. "Social Health Insurance: A Quantitative Exploration," ANU Working Papers in Economics and Econometrics 2015-629, Australian National University, College of Business and Economics, School of Economics.
  • Handle: RePEc:acb:cbeeco:2015-629
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    File URL: https://www.cbe.anu.edu.au/researchpapers/econ/wp629.pdf
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    1. Juergen Jung & Chung Tran, 2017. "Health Risk, Insurance and Optimal Progressive Income Taxation," Working Papers 2017-01, Towson University, Department of Economics, revised Mar 2020.
    2. Vegard M. Nygaard & Gajendran Raveendranathan, 2021. "The impact of U.S. employer-sponsored insurance in the 20th century," Department of Economics Working Papers 2021-11, McMaster University.

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    More about this item

    Keywords

    Health capital; lifecycle health risk; incomplete insurance markets; social insurance; optimal policy; dynamic general equilibrium with idiosyncratic shocks;
    All these keywords.

    JEL classification:

    • I13 - Health, Education, and Welfare - - Health - - - Health Insurance, Public and Private
    • D52 - Microeconomics - - General Equilibrium and Disequilibrium - - - Incomplete Markets
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household

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