Health insurance reform and bankruptcy

Michal Kuklik

MPRA Paper from University Library of Munich, Germany

Abstract: Abstract Medical bankruptcy was at the heart of the health care reform debate. According to Himmelstein et al. (2009), 62.1 percent of bankruptcies in the United States in 2007 were due to medical reasons. At the same time over 15 percent of Americans had no health insurance. The 2010 health care reform was designed to address the lack of health coverage and medical bankruptcies. In this paper, we employ a dynamic stochastic general equilibrium overlapping generations model with incomplete markets to quantitatively evaluate the impact of the health care reform on the health insurance market and the bankruptcy rate. We find that (i) the reform fails to address the bankruptcy problem as it cuts the bankruptcy rate by only 0.06 percentage point to 0.94 percent and the medical bankruptcy rate by 0.07 percentage point to 0.70 percent; (ii) the reform succeeds in providing almost universal insurance coverage with only 4.1 percent remaining uninsured; (iii) the average tax rate has to increase by 1.1 percent to finance the reform; (iv) the reform increases welfare by 5.2 percent; (v) the redistribution component of the reform drives the welfare gain by 5.8 percent, and the insurance market restructuring decreases welfare by 1.6 percent.

Keywords: unsecured credit; bankruptcy; default; health insurance; health care reform; risk sharing; dynamic stochastic general equilibrium model; overlapping generations; heterogeneous agents (search for similar items in EconPapers)
JEL-codes: D52 D60 E21 E60 G22 G33 I11 (search for similar items in EconPapers)
Date: 2010, Revised 2011
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Citations: View citations in EconPapers (1)

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