What Does (Formal) Health Insurance Do, and for Whom?

Posted: 7 Sep 2018

See all articles by Amy Finkelstein

Amy Finkelstein

Massachusetts Institute of Technology (MIT) - Department of Economics; National Bureau of Economic Research (NBER)

Neale Mahoney

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

Matthew Notowidigdo

University of Chicago - Booth School of Business

Multiple version iconThere are 3 versions of this paper

Date Written: August 2018

Abstract

Health insurance confers benefits to the previously uninsured, including improvements in health, reductions in out-of-pocket spending, and reduced medical debt. However, because the nominally uninsured pay only a small share of their medical expenses, health insurance also provides substantial transfers to nonrecipient parties who would otherwise bear the costs of providing uncompensated care to the uninsured. The prevalence of uncompensated care helps explain the limited take-up of heavily subsidized public health insurance and the evidence that many recipients value formal health insurance at substantially less than the cost to insurers of providing that coverage. The distributional implications of public subsidies for health insurance depend critically on the ultimate economic incidence of the transfers that they deliver to providers of uncompensated care.

Suggested Citation

Finkelstein, Amy and Mahoney, Neale and Notowidigdo, Matthew, What Does (Formal) Health Insurance Do, and for Whom? (August 2018). Annual Review of Economics, Vol. 10, pp. 261-286, 2018. Available at SSRN: https://ssrn.com/abstract=3245114 or http://dx.doi.org/10.1146/annurev-economics-080217-053608

Amy Finkelstein (Contact Author)

Massachusetts Institute of Technology (MIT) - Department of Economics ( email )

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Neale Mahoney

University of Chicago Booth School of Business ( email )

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National Bureau of Economic Research (NBER) ( email )

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Matthew Notowidigdo

University of Chicago - Booth School of Business ( email )

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