Pashchenko, Svetlana and Porapakkarm, Ponpoje (2012): Quantitative analysis of health insurance reform: separating regulation from redistribution.
Download (371kB) | Preview
Two key components of the upcoming health reform in the U.S. are a new regulation of the individual health insurance market and an increase in income redistribution in the economy. Which component contributes more to the welfare outcome of the reform? We address this question by constructing a general equilibrium life cycle model that incorporates both medical expenses and labor income risks. We replicate the key features of the current health insurance system in the U.S. and calibrate the model using the Medical Expenditures Panel Survey dataset. We find that the reform decreases the number of uninsured more than twice and generates substantial welfare gains. However, these welfare gains mostly come from the redistributive measures embedded in the reform. If the reform only reorganizes the individual market, introduces individual mandates but does not include any income-based transfers, the welfare gains are much smaller. This result is mostly driven by the fact that most uninsured people have low income.
|Item Type:||MPRA Paper|
|Original Title:||Quantitative analysis of health insurance reform: separating regulation from redistribution|
|Keywords:||health insurance, health reform, risk sharing, general equilibrium|
|Subjects:||E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, Macroeconomic Policy, and General Outlook > E65 - Studies of Particular Policy Episodes
D - Microeconomics > D9 - Intertemporal Choice and Growth > D91 - Intertemporal Consumer Choice; Life Cycle Models and Saving
D - Microeconomics > D5 - General Equilibrium and Disequilibrium > D52 - Incomplete Markets
E - Macroeconomics and Monetary Economics > E2 - Macroeconomics: Consumption, Saving, Production, Employment, and Investment > E21 - Consumption; Saving; Wealth
I - Health, Education, and Welfare > I1 - Health > I10 - General
|Depositing User:||Svetlana Pashchenko|
|Date Deposited:||13. Sep 2012 06:04|
|Last Modified:||12. Feb 2013 01:28|
 Aiyagari, S. R., 1994. Uninsured Idiosyncratic Risk and Aggregate Saving. Quarterly Journal of Economics 109(3), 659-684.
 Attanasio, O., Kitao, S., Violante G., 2011. Financing Medicare: A General Equilibrium Analysis. In Shoven, J.B. (Ed.), Demography and the Economy, University of Chicago Press.
 Bewley T. F., 1986. Stationary Monetary Equilibrium with a Continuum of Independently Fluctuating Consumers. In Hildenbrand, W., Mas-Colell, A. (Eds.), Contributions to Mathematical Economics in Honor of Gerald Debreu, Amsterdam: North-Holland, pp 79-102.
 Brugemann, B., Manovskii, I., 2010. Fragility: A Quantitative Analysis of the US Health Insurance System. Manuscript, Yale University
 Capatina, E., 2011. ”Life-cycle Effects of Health Risk”. Mimeo, University of New South Wales.
 Clemens, J., 2012. ”Regulatory Redistribution in the Market for Health Insurance”. Mimeo, Stanford University.
 Conesa, J. C., Krueger, D., 2006. On the Optimal Progressivity of the Income Tax Code. Journal of Monetary Economics 53(7), 1425-1450.
 Congressional Budget Office, 2009. An Analysis of Health Insurance Premiums Under the Patient Protection and Affordable Care Act. Letter to the Honorable Evan Bayh. November 30, 2009.
 Congressional Budget Office. An Estimate of the Budgetary Effects of the Reconciliation Proposal. Letter to the Honorable Nancy Pelosi. March 20, 2010.
 Cutler, D., Gruber, J., 1996. Does Public Insurance Crowd Out Private Insurance? Quarterly Journal of Economics 111(2), 391-430.
 De Nardi, M., French, E., Jones, J., 2010. Why Do the Elderly Save? Journal of Political Economy, 118(1), 39-75.
 Erosa, A., Fuster, L., Kambourov, G. 2011 Towards a micro-founded theory of aggregate labor supply. IMDEA Working Papers N 2011-13
 Feng, Z., 2009. Macroeconomic Consequences of Alternative Reforms to the Health Insurance System in the U.S. Mimeo, University of Zurich.
 Floden, M., 2008. A Note on the Accuracy of Markov-chain Approximations to Highly Persistent AR(1) Processes. Economic Letters 99(3), 516-520.
 French, E., 2005. The Effects of Health, Wealth, and Wages on Labor Supply and Retirement Behaviour. Review of Economic Studies, 72(2), pages 395-427.
 Gouveia, M., Strauss, R., 1994. Effective Federal Individual Income Tax Functions: An Exploratory Empirical Analysis. National Tax Journal, 47(2), 317-339.
 Grossman, M., 1972. On the Concept of Health Capital and the Demand for Health. Journal of Political Economy, 80, 223-255.
 Gruber, J., McKnight, R., 2003. Why Did Employee Health Insurance Contributions Rise? Journal of Health Economics, 22(5), 1085-1104.
 Hansen, G., Hsu, M., Lee, J., 2011. Health Insurance Reform: The impact of a Medicare Buy-In. Mimeo, GRIPS.
 Heathcote, J., Storesletten, K., Violante, G. 2010 The Macroeconomic Implications of Rising Wage Inequality in the United States. Journal of Political Economy, vol. 118(4), pages 681-722
 Hubbard, G., Skinner, J., Zeldes, S., 1994. The Importance of Precautionary Motives in Explaining Individual and Aggregate Saving. Carnegie-Rochester Conference Series on Public Policy 40(1), 59-125.
 Hugget, R., 1993. The Risk-free Rate in Heterogeneous-Agent Incomplete-insurance Economies. Journal of Economic Dynamics and Control 17, 953-969
 Imrohoroglu, A., 1989. Cost of Business Cycles with Individibilities and Liquidity Constraints. Journal of Political Econoomy, 97(6), 1364-1383.
 Imrohoroglu, S., Kitao, S., 2011. Social Security Reforms: Benefit Claiming, Labor Force Participation and Long-run Sustainability. American Economic Journal: Macroeconomics, forthcoming.
 Janicki, H., 2011. Distributional Effects of Public Health Insurance Reform. Manuscript, Arizona State University.
 Jeske, K., Kitao, S., 2009. U.S. Tax Policy and Health Insurance Demand: Can a Regressive Policy ImproveWelfare? Journal of Monetary Economics, 56(2), 210-221.
 Jung, J., Tran, C., 2011. Market Inefficiency, Insurance Mandate and Welfare: U.S. Health Care Reform 2010. Mimeo, University of New South Wales.
 Kaiser Family Foundation, 2004. The Cost of Care for the Uninsured. What Do We Spend, Who Pays, and What Would Full Coverage Add to Medical Spending? Available at http://www.kff.org/uninsured/upload/The-Cost-of-Care-for-the- Uninsured-What-Do-We-Spend-Who-Pays-and-What-Would-Full-Coverage-Addto- Medical-Spending.pdf
 Kaiser Family Foundation, 2008. Tax Subsidies for Health Insurance: An Issue Brief. Available at http://www.kff.org/insurance/upload/7779.pdf
 Kaiser Family Foundation, 2009. Employer Health Benefits Survey. Available at http://ehbs.kff.org/2009.html
 Kaiser Family Foundation, 2010. Medicaid: A Primer. Available at www.kff.org/medicaid/upload/7334-04.pdf
 Kaiser Family Foundation, 2011. Summary of New Health Reform Law. Available at www.kff.org/healthreform/upload/8061.pdf
 Kahn, J., Kronick, R., Kreger, M., Gans, D. 2005. The Cost of Health Insurance Administration in Califarnia: estimates for insurers, physicians, and hospitals. Health Affairs 24.
 Kennickel, A., 2006. Currents and undercurrents: Changes in the distribution of wealth, 1989-2004. Mimeo, Federal Reserve Board.
 Kolstad, J., Kowalski, A., 2010. The Impact of Health Care Reform on Hospital and Preventive Care: Evidence from Massachusetts. NBER Working Paper N 16012.
 Kopecky, K., Koreshkova, T., 2011. The Impact of Medical and Nursing Home Expenses and Social Insurance Policies on Savings and Inequality. Mimeo, Federal Reserve Bank of Atlanta.
 Miller, S., 2011. The Effect of Insurance on Emergency Room Visits: An Analysis of the 2006 Massachusetts Health Reform. Mimeo, University Of Illinois At Urbana- Champaign.
 Ozkan, S., 2011. Income Differences and Health Care Expenditures over the Life Cycle. Mimeo, Federal Reserve Board.
 Pashchenko, S., Porapakkarm, P., 2011. Quantitative Analysis of Health Insurance Reform: Separating Community Rating from Income Redistribution. Mimeo, University of Virginia.
 Pohl, V., 2011. Medicaid and the Labor Supply of Single Mothers: Implications for Health Care Reform. Mimeo, Yale University.
 Ross, D., Jarlenski, J., Artiga, S., Marks, C., 2009. A Foundation for Health Reform: Findings of a 50 State Survey of Eligibility Rules, Enrollment and Renewal Procedures, and Cost-Sharing Practices in Medicaid and CHIP for Children and Parents During 2009. Kaiser Commission on Mediaid and the Uninsured.
 Sing, M., Banthin,J., Selden,T., Cowan, C., Keehan,S. 2006. Reconciling Medical Expenditure Estimates from the MEPS and NHEA, 2002. Health Care Financing Review, Vol 28(1)
 Storesletten, K., Telmer, C., Yaron, Y., 2004. Consumption and Risk Sharing Over the Life Cycle. Journal of Monetary Economics 51(3), 609-633.
 Tauchen, G., Hussey, R., 1991. Quadrature-Based Methods for Obtaining Approximate Solutions to Nonlinear Asset Pricing Models. Econometrica 59(2), 371-396.
 Wolff, E., 2010. Recent Trends in Household Wealth in the United States: Rising Debt and the Middle-Class Squeeze—an Update to 2007. Levy Economics Institute of Bard College Working Paper No. 589.
 Young, E., 2010. Solving the Incomplete Markets Model with Aggregate Uncertainty Using the Krusell-Smith Algorithm and Non-Stochastic Simulations. Journal of Economic Dynamics and Control, 34(1), 36-41.