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Quantitative Analysis of Health Insurance Reform: Separating Regulation from Redistribution

42 Pages Posted: 23 Oct 2010 Last revised: 21 Jul 2016

Svetlana Pashchenko

University of Georgia

Ponpoje Porapakkarm

National Graduate Institute for Policy Studies (GRIPS, Tokyo)

Date Written: August 17, 2012

Abstract

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.

Keywords: Health Insurance, Health Reform, Risk Sharing, General Equilibrium

JEL Classification: D52, D91, E21, E65, I10

Suggested Citation

Pashchenko, Svetlana and Porapakkarm, Ponpoje, Quantitative Analysis of Health Insurance Reform: Separating Regulation from Redistribution (August 17, 2012). Available at SSRN: https://ssrn.com/abstract=1696048 or http://dx.doi.org/10.2139/ssrn.1696048

Svetlana Pashchenko (Contact Author)

University of Georgia ( email )

Athens, GA 30602-6254
United States

Ponpoje Porapakkarm

National Graduate Institute for Policy Studies (GRIPS, Tokyo) ( email )

7-22-1 Roppongi, Minato-Ku
Tokyo 106-8677, Tokyo 106-8677
Japan
+818095248741 (Phone)

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