Macroeconomic Consequences of Alternative Reforms to the Health Insurance System in the U.S

Zhigang Feng

No 908, Working Papers from University of Miami, Department of Economics

Abstract: This paper examines the macroeconomic and welfare implications of alternative re- forms to the U.S. health insurance system. In particular, I study the effect of the expansion of Medicare to the entire population, the expansion of Medicaid, an individ- ual mandate, the removal of the tax break to purchase group insurance and providing a refundable tax credit for insurance purchases. To do so, I develop a stochastic OLG model with heterogenous agents facing uncertain health shocks. In this model individ- uals make optimal labor supply, health insurance, and medical usage decisions. Since buying insurance is endogenous, my model captures how the reforms may affect the characteristics of the insured as well as health insurance premiums. I use the Medi- cal Expenditure Panel Survey to calibrate the model and succeed in closely matching the current pattern of health expenditure and insurance demand as observed in the data. Numerical simulations indicate that reforming the health insurance system has a quantitatively relevant impact on the number of uninsured, hours worked, and welfare.

Keywords: Health insurance reform; Heterogeneous agent model; Welfare analysis (search for similar items in EconPapers)
JEL-codes: E21 E62 I10 (search for similar items in EconPapers)
Pages: 40 pages
Date: 2009-01-12
New Economics Papers: this item is included in nep-dge, nep-hea, nep-ias and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (32)

Forthcoming: Working Paper

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