 Changes in the demand for private medical insurance following a shift in tax incentivesMarisol Rodríguez and Alexandrina Stoyanova Health Economics, 2008, vol. 17, issue 2, 185-202 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 undesired 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 indicate that the total probability of buying PHI was not significantly affected by the reform. 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. We also briefly discuss the welfare effects on the state budget, the industry and society at large. Copyright © 2007 John Wiley & Sons, Ltd. Date: 2008 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:wly:hlthec:v:17:y:2008:i:2:p:185-202 Access Statistics for this article Health Economics is currently edited by Alan Maynard, John Hutton and Andrew Jones More articles in Health Economics from John Wiley & Sons, Ltd. |
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