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Health insurance reform and bankruptcy

Author

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  • Kuklik, Michal

Abstract

Abstract Medical bankruptcy was at the heart of the health care reform debate. According to Himmelstein et al. (2009), 62.1 percent of bankruptcies in the United States in 2007 were due to medical reasons. At the same time over 15 percent of Americans had no health insurance. The 2010 health care reform was designed to address the lack of health coverage and medical bankruptcies. In this paper, we employ a dynamic stochastic general equilibrium overlapping generations model with incomplete markets to quantitatively evaluate the impact of the health care reform on the health insurance market and the bankruptcy rate. We find that (i) the reform fails to address the bankruptcy problem as it cuts the bankruptcy rate by only 0.06 percentage point to 0.94 percent and the medical bankruptcy rate by 0.07 percentage point to 0.70 percent; (ii) the reform succeeds in providing almost universal insurance coverage with only 4.1 percent remaining uninsured; (iii) the average tax rate has to increase by 1.1 percent to finance the reform; (iv) the reform increases welfare by 5.2 percent; (v) the redistribution component of the reform drives the welfare gain by 5.8 percent, and the insurance market restructuring decreases welfare by 1.6 percent.

Suggested Citation

  • Kuklik, Michal, 2010. "Health insurance reform and bankruptcy," MPRA Paper 39196, University Library of Munich, Germany, revised 2011.
  • Handle: RePEc:pra:mprapa:39196
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    File URL: https://mpra.ub.uni-muenchen.de/39196/3/MPRA_paper_39196.pdf
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    References listed on IDEAS

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    Cited by:

    1. Youngsoo Jang, 2016. "Income Inequality, Medical Conditions, and Household Bankruptcy," Proceedings of Economics and Finance Conferences 4206835, International Institute of Social and Economic Sciences.

    More about this item

    Keywords

    unsecured credit; bankruptcy; default; health insurance; health care reform; risk sharing; dynamic stochastic general equilibrium model; overlapping generations; heterogeneous agents;

    JEL classification:

    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • D52 - Microeconomics - - General Equilibrium and Disequilibrium - - - Incomplete Markets
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
    • D60 - Microeconomics - - Welfare Economics - - - General
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General

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