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The provision of public universal health insurance: impacts on private insurance, asset holdings and welfare


  • Minchung, Hsu
  • Junsang, Lee


This paper aims to investigate impacts of public provision of universal health insurance (UHI) in an environment with household heterogeneity and financial market incompleteness. Various UHI polices with both distortionary (payroll-tax) and non-distortionary (lump-sum tax) financing methods are compared to address the trade-off between risk reduction and tax distortion as well as corresponding welfare implications. We undertake a dynamic equilibrium model with endogenous insurance choice and labor supply decisions to perform quantitative analyses. The results suggest that the UHI expenditure coverage rate would be too high in most OECD countries when the distortion effect is considered. We find a clear crowding out effect on asset holdings. Implications for private health insurance (PHI) purchases when UHI is introduced depend on the pricing and the design of coverage. We find the rich are sensitive to the price of PHI, and would prefer a supplemental plan when UHI is introduced.

Suggested Citation

  • Minchung, Hsu & Junsang, Lee, 2011. "The provision of public universal health insurance: impacts on private insurance, asset holdings and welfare," MPRA Paper 32974, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:32974

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    References listed on IDEAS

    1. Jonathan Heathcote, 2005. "Fiscal Policy with Heterogeneous Agents and Incomplete Markets," Review of Economic Studies, Oxford University Press, vol. 72(1), pages 161-188.
    2. Hansen, Gary D & Imrohoroglu, Ayse, 1992. "The Role of Unemployment Insurance in an Economy with Liquidity Constraints and Moral Hazard," Journal of Political Economy, University of Chicago Press, vol. 100(1), pages 118-142, February.
    3. Storesletten, Kjetil & Telmer, Chris I. & Yaron, Amir, 1999. "The risk-sharing implications of alternative social security arrangements," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 50(1), pages 213-259, June.
    4. Jeske, Karsten & Kitao, Sagiri, 2009. "U.S. tax policy and health insurance demand: Can a regressive policy improve welfare?," Journal of Monetary Economics, Elsevier, vol. 56(2), pages 210-221, March.
    5. Orazio Attanasio & Sagiri Kitao & Giovanni L. Violante, 2010. "Financing Medicare: A General Equilibrium Analysis," NBER Chapters,in: Demography and the Economy, pages 333-366 National Bureau of Economic Research, Inc.
    6. Mark Huggett & Gustavo Ventura, 1999. "On the Distributional Effects of Social Security Reform," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 2(3), pages 498-531, July.
    7. 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, May.
    8. Shinichi Nishiyama & Kent Smetters, 2005. "Consumption Taxes and Economic Efficiency with Idiosyncratic Wage Shocks," Journal of Political Economy, University of Chicago Press, vol. 113(5), pages 1088-1115, October.
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    Cited by:

    1. Pashchenko, Svetlana & Porapakkarm, Ponpoje, 2010. "Quantitative Analysis of Health Insurance Reform: Separating Community Rating from Income Redistribution," MPRA Paper 26158, University Library of Munich, Germany.
    2. Shuyun May Li, Solmaz Moslehi, Siew Ling Yew, 2012. "Public-Private Mix of Health Expenditure: A Political Economy Approach and A Quantitative Exercise," Department of Economics - Working Papers Series 1157, The University of Melbourne.
    3. Lim Kyoung Mook, 2016. "Public provision of health insurance and welfare," The B.E. Journal of Macroeconomics, De Gruyter, vol. 16(2), pages 439-483, June.
    4. repec:eee:dyncon:v:79:y:2017:i:c:p:126-153 is not listed on IDEAS
    5. Ferreira, Pedro Cavalcanti & Gomes, Diego B.P., 2017. "Health care reform or more affordable health care?," Journal of Economic Dynamics and Control, Elsevier, vol. 79(C), pages 126-153.

    More about this item


    universal health insurance; complementary/supplemental health insurance;

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • H51 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Health

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