Bankruptcy as Implicit Health Insurance

62 Pages Posted: 25 May 2012

See all articles by Neale Mahoney

Neale Mahoney

University of Chicago Booth School of Business; National Bureau of Economic Research (NBER)

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Date Written: May 2012

Abstract

This paper examines the implicit health insurance households receive from the ability to declare bankruptcy. Exploiting cross-state and within-state variation in asset exemption law, I show that uninsured households with greater seizable assets make higher out-of-pocket medical payments, conditional on the amount of care received. In turn, I find that households with greater wealth-at-risk are more likely to hold health insurance. The implicit insurance from bankruptcy distorts the insurance coverage decision. Using a microsimulation model, I calculate that the optimal Pigovian penalties are similar on average to the penalties under the Affordable Care Act (ACA).

Suggested Citation

Mahoney, Neale, Bankruptcy as Implicit Health Insurance (May 2012). NBER Working Paper No. w18105, Available at SSRN: https://ssrn.com/abstract=2066402

Neale Mahoney (Contact Author)

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