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Health Insurance Reform: The impact of a Medicare Buy-In

Author

Listed:
  • Minchung Hsu

    (GRIPS)

  • Junsang Lee

    (Australian National University)

  • Gary D. Hansen

    (UCLA)

Abstract

Current U.S. policy extends medical insurance in the form of Medicare to individuals aged 65 and over. Younger individuals may have group health insurance through their employer, purchase individual health insurance, or go without. The fact that many individuals have no insurance, or have relatively expensive individual insurance, is a motivation for health insurance reform. This paper evaluates the general equilibrium and welfare consequences of health insurance reform in a calibrated life-cycle economy with incomplete markets, uncertain lifespans, and endogenous labor supply. In particular, we consider a policy reform that would allow younger workers (aged 55-64) to purchase Medicare coverage. In our model, working age individuals face idiosyncratic productivity shocks, choose whether or not to work (labor is indivisible), accumulate claims to capital, and can purchase private health insurance if they do not receive group health insurance through their employer. Retired individuals receive social security and Medicare which, along with accumulated savings, is used to finance consumption and medical expenditures. Preliminary results indicate that adverse selection renders a Medicare buy-in program infeasible unless at least 40 percent of the costs of the program are financed through government subsidy.

Suggested Citation

  • Minchung Hsu & Junsang Lee & Gary D. Hansen, 2011. "Health Insurance Reform: The impact of a Medicare Buy-In," 2011 Meeting Papers 699, Society for Economic Dynamics.
  • Handle: RePEc:red:sed011:699
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Ponpoje (Poe) Porapakkarm & Svetlana Pashchenko, 2013. "Cross-subsidization in employer-based health insurance and the effects of tax subsidy reform," 2013 Meeting Papers 1086, Society for Economic Dynamics.
    2. French, Eric & Jones, John Bailey, 2017. "Health, Health Insurance, and Retirement: A Survey," Working Paper 17-3, Federal Reserve Bank of Richmond.
    3. Harold L. Cole & Soojin Kim & Dirk Krueger, 2012. "Analyzing the Effects of Insuring Health Risks: On the Trade-off between Short Run Insurance Benefits vs. Long Run Incentive Costs," NBER Working Papers 18572, National Bureau of Economic Research, Inc.
    4. Didem Tuzemen & Makoto Nakajima, 2014. "Health Care Reform or Labor Market Reform? A Quantitative Analysis of the Affordable Care Act," 2014 Meeting Papers 1325, Society for Economic Dynamics.
    5. Pashchenko, Svetlana & Porapakkarm, Ponpoje, 2015. "Welfare costs of reclassification risk in the health insurance market," Journal of Macroeconomics, Elsevier, pages 21-44.
    6. repec:anr:reveco:v:9:y:2017:p:383-409 is not listed on IDEAS
    7. Svetlana Pashchenko & Ponpoje (Poe) Porapakkarm & Mariacristina De Nardi, 2017. "The Lifetime Costs of Bad Health," 2017 Meeting Papers 533, Society for Economic Dynamics.
    8. Mariacristina De Nardi & Eric French & John Bailey Jones, 2016. "Medicaid Insurance in Old Age," American Economic Review, American Economic Association, pages 3480-3520.
    9. Zhao, Kai, 2017. "Social insurance, private health insurance and individual welfare," Journal of Economic Dynamics and Control, Elsevier, pages 102-117.
    10. Pashchenko, Svetlana & Porapakkarm, Ponpoje, 2013. "Work Incentives of Medicaid Beneficiaries and The Role of Asset Testing," MPRA Paper 49730, University Library of Munich, Germany.
    11. Svetlana Pashchenko & Ponpoje Porapakkarm, 2016. "Cross-Subsidization in Employer-Based Health Insurance and the Effects of Tax Subsidy Reform," National Tax Journal, National Tax Association, pages 583-612.
    12. HSU Minchung & YAMADA Tomoaki, 2017. "Population Aging, Health Care, and Fiscal Policy Reform: The challenges for Japan," Discussion papers 17038, Research Institute of Economy, Trade and Industry (RIETI).
    13. Ponpoje (Poe) Porapakkarm & Svetlana Pashchenko, 2013. "Labor Supply Incentives of Medicaid," 2013 Meeting Papers 1082, Society for Economic Dynamics.
    14. repec:eee:hapoch:v1_457 is not listed on IDEAS
    15. Bastani, Spencer & Selin, Håkan, 2014. "Bunching and non-bunching at kink points of the Swedish tax schedule," Journal of Public Economics, Elsevier, pages 36-49.
    16. Pashchenko, Svetlana & Porapakkarm, Ponpoje, 2015. "Welfare costs of reclassification risk in the health insurance market," Journal of Macroeconomics, Elsevier, pages 21-44.
    17. Hsu, Minchung & Huang, Xianguo & Yupho, Somrasri, 2015. "The development of universal health insurance coverage in Thailand: Challenges of population aging and informal economy," Social Science & Medicine, Elsevier, pages 227-236.
    18. Janicki, Hubert P., 2014. "The role of asset testing in public health insurance reform," Journal of Economic Dynamics and Control, Elsevier, vol. 44(C), pages 169-195.
    19. repec:eee:dyncon:v:79:y:2017:i:c:p:126-153 is not listed on IDEAS
    20. Ferreira, Pedro Cavalcanti & Gomes, Diego B.P., 2017. "Health care reform or more affordable health care?," Journal of Economic Dynamics and Control, Elsevier, pages 126-153.
    21. David Chivers & Zhigang Feng & Anne Villamil, 2017. "Employment-based Health Insurance and Misallocation: Implications for the Macroeconomy," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 23, pages 125-149, January.

    More about this item

    JEL classification:

    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • H51 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Health
    • I13 - Health, Education, and Welfare - - Health - - - Health Insurance, Public and Private

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