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Social Health Insurance: A Quantitative Exploration

Juergen Jung () and Chung Tran

No 2016-02, Working Papers from Towson University, Department of Economics

Abstract: We quantify the welfare implications of three alternative approaches to providing health insurance: (i) a US-style mix of private and public health insurance, (ii) compulsory universal public health insurance (UPHI) and (iii) private health insurance for workers combined with government subsidies and price regulation. We use a Bewley-Grossman lifecycle model calibrated to match the lifecycle structure of earnings and health risks in the US. For all three systems we find that welfare gains triggered by a combination of improvements in risk sharing and wealth redistribution dominate welfare losses caused by tax distortions and ex-post moral hazard effects. Overall, the UPHI system outperforms the other two systems in terms of welfare gains if the coinsurance rate is properly designed. A direct comparison between the US system to a well-designed UPHI system reveals that large welfare gains are possible in the long-run. However, such a radical reform faces political impediments due to opposing welfare effects across different income groups.

Keywords: Health capital; lifecycle health risk; incomplete insurance markets; social insurance; optimal policy; dynamic general equilibrium with idiosyncratic shocks. (search for similar items in EconPapers)
JEL-codes: I13 D52 E62 H31 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge, nep-hea, nep-ias and nep-pbe
Date: 2016-02, Revised 2016-06
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Working Paper: Social Health Insurance: A Quantitative Exploration (2015) Downloads
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