IDEAS home Printed from
MyIDEAS: Login to save this paper or follow this series

Health insurance and tax policy

  • Karsten Jeske
  • Sagiri Kitao

The U.S. tax policy on health insurance favors only those offered a group insurance through their employers. This policy is highly regressive since the subsidy takes the form of deductions from the progressive tax system. The paper investigates alternatives to the current policy. We find that the complete removal of the subsidy results in a significant reduction in the insurance coverage and serious welfare deterioration. However, eliminating regressiveness in the group insurance subsidy and extending benefits to the private insurance market improve welfare and raise the coverage. Our work is the first in highlighting the importance of studying health policy in a general equilibrium framework with an endogenous demand for the health insurance. We use the Medical Expenditure Panel Survey (MEPS) to calibrate the process for income, health expenditure shocks, and health insurance offer status and succeed in producing the pattern of insurance demand as observed in the data, which serve as a solid benchmark for the policy experiments.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: no

Paper provided by Federal Reserve Bank of Atlanta in its series FRB Atlanta Working Paper with number 2005-14.

in new window

Date of creation: 2005
Date of revision:
Handle: RePEc:fip:fedawp:2005-14
Contact details of provider: Postal: 1000 Peachtree St., N.E., Atlanta, Georgia 30309
Phone: 404-521-8500
Web page:

More information through EDIRC

Order Information: Email:

References listed on IDEAS
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.:

as in new window
  1. Huggett, Mark, 1993. "The risk-free rate in heterogeneous-agent incomplete-insurance economies," Journal of Economic Dynamics and Control, Elsevier, vol. 17(5-6), pages 953-969.
  2. Grossman, Michael, 1972. "On the Concept of Health Capital and the Demand for Health," Journal of Political Economy, University of Chicago Press, vol. 80(2), pages 223-55, March-Apr.
  3. Heathcote, Jonathan & Storesletten, Kjetil & Violante, Giovanni L, 2004. "The Cross-Sectional Implications of Rising Wage Inequality in the United States," CEPR Discussion Papers 4296, C.E.P.R. Discussion Papers.
  4. Satyajit Chatterjee & Dean Corbae & Makoto Nakajima & Jose-Victor Rios-Rull, 2002. "A Quantitative Theory of Unsecured Consumer Credit with Risk of Default," Centro de Alti­simos Estudios Ri­os Pe©rez(CAERP) 2, Centro de Altisimos Estudios Rios Perez (CAERP).
  5. Domeij David & Johannesson Magnus, 2006. "Consumption and Health," The B.E. Journal of Macroeconomics, De Gruyter, vol. 6(1), pages 1-30, May.
  6. S. Rao Aiyagari, 1994. "Uninsured Idiosyncratic Risk and Aggregate Saving," The Quarterly Journal of Economics, Oxford University Press, vol. 109(3), pages 659-684.
  7. Igor Livshits & James MacGee & Michele Tertilt, 2005. "Consumer Bankruptcy: A Fresh Start," Discussion Papers 04-011, Stanford Institute for Economic Policy Research.
  8. Conesa, Juan Carlos & Krueger, Dirk, 2005. "On the optimal progressivity of the income tax code," CFS Working Paper Series 2005/10, Center for Financial Studies (CFS).
  9. Glenn R. Hubbard & Jonathan Skinner & Stephen P. Zeldes, . "Precautionary Saving and Social Insurance," Rodney L. White Center for Financial Research Working Papers 03-95, Wharton School Rodney L. White Center for Financial Research.
  10. 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, vol. 45(2), pages 523-554, 05.
  11. Jonathan Gruber, 2004. "Tax Policy for Health Insurance," NBER Working Papers 10977, National Bureau of Economic Research, Inc.
  12. Tauchen, George, 1986. "Finite state markov-chain approximations to univariate and vector autoregressions," Economics Letters, Elsevier, vol. 20(2), pages 177-181.
  13. Edward R. Whitehouse, 2003. "The Value of Pension Entitlements: A Model of Nine OECD Countries," OECD Social, Employment and Migration Working Papers 9, OECD Publishing.
  14. Kjetil Storesletten & Chris I. Telmer & Amir Yaron, 2004. "Cyclical Dynamics in Idiosyncratic Labor Market Risk," Journal of Political Economy, University of Chicago Press, vol. 112(3), pages 695-717, June.
  15. repec:oup:qjecon:v:90:y:1976:i:4:p:630-49 is not listed on IDEAS
  16. Pierre-Olivier Gourinchas & Jonathan A. Parker, 1999. "Consumption Over the Life Cycle," NBER Working Papers 7271, National Bureau of Economic Research, Inc.
  17. Jesus Fernandez-Villaverde & Dirk Krueger, 2002. "Consumption over the Life Cycle: Some Facts from Consumer Expenditure Survey Data," Centro de Alti­simos Estudios Ri­os Pe©rez(CAERP) 7, Centro de Altisimos Estudios Rios Perez (CAERP).
  18. 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.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:fip:fedawp:2005-14. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Elaine Clokey)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.