IDEAS home Printed from https://ideas.repec.org/p/xrp/wpaper/creap2006-12.html
   My bibliography  Save this paper

Changes in the demand for private medical insurance following a shift in tax incentives

Author

Listed:
  • Marisol Rodríguez

    () (Grup de Recerca en Economia del Benestar (CREB, Departament de Política Econòmica i Estructura Econòmica Mundial, Universitat de Barcelona)

  • Alexandrina Stoyanova

    () (Grup de Recerca en Economia del Benestar (CREB), Departament d'Economia i Empresa, Universitat de Barcelona)

Abstract

The 1998 Spanish reform of the Personal Income Tax eliminated the 15% deduction for private medical expenditures including payments on private health insurance (PHI) policies. To avoid an undesirable increase in the demand for publicly funded health care, tax incentives to buy PHI were not completely removed but basically shifted from individual to group employer-paid policies. In a unique fiscal experiment, at the same time that the tax relief for individually purchased policies was abolished, the government provided for tax allowances on policies taken out through employment. Using a bivariate probit model on data from National Health Surveys, we estimate the impact of said reform on the demand for PHI and the changes occurred within it. Our findings suggest that the total probability of buying PHI was not significantly affected. Indeed, the fall in the demand for individual policies (by 10% between 1997 and 2001) was offset by an increase in the demand for group employer-paid ones, so that the overall size of the market remained virtually unchanged. We also briefly discuss the welfare effects on the state budget, the industry and society at large.

Suggested Citation

  • Marisol Rodríguez & Alexandrina Stoyanova, 2006. "Changes in the demand for private medical insurance following a shift in tax incentives," Working Papers CREAP2006-12, Xarxa de Referència en Economia Aplicada (XREAP), revised Dec 2006.
  • Handle: RePEc:xrp:wpaper:creap2006-12
    as

    Download full text from publisher

    File URL: http://www.xreap.cat/RePEc/xrp/pdf/CREAP2006-12.pdf
    File Function: First version, 2006
    Download Restriction: no

    File URL: http://www.xreap.cat/RePEc/xrp/pdf/CREAP2006-12.pdf
    File Function: Revised version, 2006
    Download Restriction: no

    References listed on IDEAS

    as
    1. Hoel, Michael & Saether, Erik Magnus, 2003. "Public health care with waiting time: the role of supplementary private health care," Journal of Health Economics, Elsevier, vol. 22(4), pages 599-616, July.
    2. Johannesson, Magnus & Johansson, Per-Olov & Soderqvist, Tore, 1998. "Time spent on waiting lists for medical care: an insurance approach," Journal of Health Economics, Elsevier, vol. 17(5), pages 627-644, October.
    3. Danzon, Patricia M., 2002. "Welfare effects of supplementary insurance: a comment," Journal of Health Economics, Elsevier, vol. 21(5), pages 923-926, September.
    4. Beenstock, Michael & Rahav, Giora, 2002. "Testing Gateway Theory: do cigarette prices affect illicit drug use?," Journal of Health Economics, Elsevier, vol. 21(4), pages 679-698, July.
    5. H.E. Frech Iii & Sandra Hopkins & Garry Macdonald, 2003. "The Australian Private Health Insurance Boom: Was It Subsidies Or Liberalised Regulation?," Economic Papers, The Economic Society of Australia, vol. 22(1), pages 58-64, March.
    6. Besley, Timothy & Hall, John & Preston, Ian, 1999. "The demand for private health insurance: do waiting lists matter?," Journal of Public Economics, Elsevier, vol. 72(2), pages 155-181, May.
    7. Gertler, Paul & Sturm, Roland, 1997. "Private health insurance and public expenditures in Jamaica," Journal of Econometrics, Elsevier, vol. 77(1), pages 237-257, March.
    8. Van de Ven, Wynand P. M. M. & Van Praag, Bernard M. S., 1981. "The demand for deductibles in private health insurance : A probit model with sample selection," Journal of Econometrics, Elsevier, vol. 17(2), pages 229-252, November.
    9. Mireia Jofre-Bonet, 2000. "Public health care and private insurance demand: The waiting time as a link," Health Care Management Science, Springer, vol. 3(1), pages 51-71, January.
    10. Joan Costa & Jaume Garcia, 2003. "Demand for private health insurance: how important is the quality gap?," Health Economics, John Wiley & Sons, Ltd., vol. 12(7), pages 587-599.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Anna Matas Prats & José Luís Raymond Bara & José Luís Raymond Bara, 2008. "Job accessibility and employment probability," Working Papers XREAP2008-05, Xarxa de Referència en Economia Aplicada (XREAP), revised May 2008.
    2. Matas, Anna & Raymond, José-Luis & Roig, José-Luis, 2009. "Car ownership and access to jobs in Spain," Transportation Research Part A: Policy and Practice, Elsevier, vol. 43(6), pages 607-617, July.
    3. Christian Durán Weitkamp & Mónica Martín Bofarull & Federico Pablo Martí, 2008. "Economic effects of road accessibility in the Pyrenees: user perspective," Working Papers XREAP2008-01, Xarxa de Referència en Economia Aplicada (XREAP), revised Jan 2008.

    More about this item

    Keywords

    Private health insurance; tax reform; Spain.;

    JEL classification:

    • I10 - Health, Education, and Welfare - - Health - - - General
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:xrp:wpaper:creap2006-12. 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: (XREAP). General contact details of provider: http://edirc.repec.org/data/xreapes.html .

    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 CitEc recognized a reference but did not link an item in RePEc 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.