EconPapers    
Economics at your fingertips  
 

Tax Incentives and the Demand for Private Health Insurance

Olena Stavrunova () and Oleg Yerokhin

No 16, Working Paper Series from Economics Discipline Group, UTS Business School, University of Technology, Sydney

Abstract: This paper studies the effect of an individual insurance mandate (Medicare Levy Surcharge) on the demand for private health insurance (PHI) in Australia. It uses the administrative income tax returns data to show that mandate has several distinct effects on taxpayers' behavior. First, despite the large size of the tax penalty for not having PHI cover relative to the cost of the cheapest eligible insurance policy, the compliance with mandate is relatively low: the proportion of population with PHI cover increases by 6.5 percentage points (15.6%) at the income threshold at which the tax penalty starts to apply. This effect is most pronounced for young age taxpayers, while the middle aged people seem to be least responsive to this specific tax incentive. Second, the discontinuous increase in the average tax rate at the income threshold created by the policy generates a strong incentive for tax avoidance which manifests itself through bunching in the taxable income distribution below the threshold. Finally, after imposing some plausible assumptions the effect of the policy is extrapolated to other income levels to show that overall this policy hasn't had a significant impact on the demand for private health insurance in Australia.

Pages: 54
Date: 2013-11-01
New Economics Papers: this item is included in nep-hea, nep-ias and nep-pbe
References: Add references at CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed

Downloads: (external link)
http://www.uts.edu.au/sites/default/files/edg_wp16.pdf (application/pdf)

Related works:
Journal Article: Tax incentives and the demand for private health insurance (2014) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:uts:ecowps:16

Access Statistics for this paper

More papers in Working Paper Series from Economics Discipline Group, UTS Business School, University of Technology, Sydney PO Box 123, Broadway, NSW 2007, Australia. Contact information at EDIRC.
Bibliographic data for series maintained by Duncan Ford ().

 
Page updated 2020-01-21
Handle: RePEc:uts:ecowps:16