Social health insurance: a quantitative exploration
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https://ideas.repec.org/p/tow/wpaper/2016-02.htmlPermanent Link
http://hdl.handle.net/11603/10747Metadata
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2016-06Type of Work
application/pdf51 pages
Text
working papers
Department
Towson University. Department of EconomicsCitation of Original Publication
Juergen Jung & Chung Tran, 2016. "Social Health Insurance: A Quantitative Exploration," Working Papers 2016-02, Towson University, Department of Economics, revised Jun 2016.Subjects
Health capitalLifescycle health risk
Incomplete insurance markets
Social security
Social insurance
Optimal policy
Dynamic general equilibrium with idiosyncratic shocks
Equilibrium (Economics)
Abstract
We quantify the welfare implications of three alternative approaches to providing health insurance: (i) a US-style mix of private and public health insurance, (ii) compulsory univer- sal public health insurance (UPHI) and (iii) private health insurance for workers combined with government subsidies and price regulation. We use a Bewley-Grossman lifecycle model calibrated to match the lifecycle structure of earnings and health risks in the US. For all three systems we find that welfare gains triggered by a combination of improvements in risk sharing and wealth redistribution dominate welfare losses caused by tax distortions and ex-post moral hazard effects. Overall, the UPHI system outperforms the other two systems in terms of welfare gains if the coinsurance rate is properly designed. A direct comparison between the US system to a well-designed UPHI system reveals that large welfare gains are possible in the long-run. However, such a radical reform faces political impediments due to opposing welfare effects across different income groups.