Social health insurance: a quantitative exploration
Links to Fileshttps://ideas.repec.org/p/tow/wpaper/2016-02.html
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Type of Workapplication/pdf
DepartmentTowson University. Department of Economics
Citation of Original PublicationJuergen Jung & Chung Tran, 2016. "Social Health Insurance: A Quantitative Exploration," Working Papers 2016-02, Towson University, Department of Economics, revised Jun 2016.
Lifescycle health risk
Incomplete insurance markets
Dynamic general equilibrium with idiosyncratic shocks
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.