Social Health Insurance: A Quantitative Exploration

52 Pages Posted: 27 Mar 2017

See all articles by Juergen Jung

Juergen Jung

Towson University - Department of Economics

Chung Tran

Australian National University (ANU) - School of Economics

Date Written: June 7, 2016

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

JEL Classification: I13, D52, E62, H31

Suggested Citation

Jung, Juergen and Tran, Chung, Social Health Insurance: A Quantitative Exploration (June 7, 2016). Available at SSRN: https://ssrn.com/abstract=2940457 or http://dx.doi.org/10.2139/ssrn.2940457

Juergen Jung (Contact Author)

Towson University - Department of Economics ( email )

Baltimore, MD
United States
812-345-9182 (Phone)

HOME PAGE: http://https://juejung.github.io/

Chung Tran

Australian National University (ANU) - School of Economics ( email )

Arndt Building 25B
Canberra, Australian Capital Territory 0200
Australia

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