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Market Inefficiency, Insurance Mandate and Welfare: U.S. Health Care Reform 2010

Juergen Jung () and Chung Tran

No 2014-01, Working Papers from Towson University, Department of Economics

Abstract: We quantify the effects of the Affordable Care Act (ACA) using a stochastic general equilibrium overlapping generations model with endogenous health capital accumulation calibrated to match U.S. data on health spending and insurance take-up rates. We find that the introduction of an insurance mandate and the expansion of Medicaid which are at the core of the ACA increase the insurance take-up rate of workers to almost universal coverage but decrease capital accumulation, labor supply and aggregate output. The penalties and subsidies do reduce the adverse selection problem in private health insurance markets and do counteract the crowding-out effect of the Medicaid expansion. The redistributional measures embedded in the ACA result in welfare gains of low income individuals in poor health, and conversely, in welfare losses of high income individuals in good health. The overall welfare effect depends on the size of the ex-post moral hazard effect and general equilibrium price adjustments.

Keywords: Affordable Care Act 2010; insurance mandate; Medicaid; endogenous health capital; life-cycle health spending and financing; dynamic stochastic general equilibrium model; Grossman health capital. (search for similar items in EconPapers)
JEL-codes: H51 I18 I38 E21 E62 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge, nep-hea, nep-ias, nep-mac and nep-sog
Date: 2014-02, Revised 2016-01
References: View references in EconPapers View complete reference list from CitEc
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http://webapps.towson.edu/cbe/economics/workingpapers/2014-01.pdf First version, 2014 (application/pdf)

Related works:
Journal Article: Market Inefficiency, Insurance Mandate and Welfare: U.S. Health Care Reform 2010 (2016) Downloads
Working Paper: Market Inefficiency, Insurance Mandate and Welfare: U.S. Health Care Reform 2010 (2011) Downloads
Working Paper: Market Inefficiency, Insurance Mandate and Welfare: U.S. Health Care Reform 2010 (2011) Downloads
Working Paper: Market Inefficiency, Insurance Mandate and Welfare: U.S. Health Care Reform 2010 (2010) Downloads
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