Bankruptcy as Implicit Health Insurance

Neale Mahoney

American Economic Review, 2015, vol. 105, issue 2, 710-46

Abstract: This paper examines the implicit health insurance that households receive from the ability to declare bankruptcy. Exploiting multiple sources of variation in asset exemption law, I show that uninsured households with a greater financial cost of bankruptcy make higher out-of-pocket medical payments, conditional on the amount of care received. In turn, I find that households with greater wealth at risk are more likely to hold health insurance. The implicit insurance from bankruptcy distorts the insurance coverage decision. Using a microsimulation model, I calculate that the optimal Pigovian penalties are three-quarters as large as the average penalties under the Affordable Care Act. (JEL D14, H51, I13, K35)

JEL-codes: D14 H51 I13 K35 (search for similar items in EconPapers)
Date: 2015
Note: DOI: 10.1257/aer.20131408
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Citations: View citations in EconPapers (82)

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