Are Tax Subsidies for Private Medical Insurance Self-Financing? Evidence from a NHS Outpatient Microsimulation Model

UPF Economics and Business Working Paper No. 632

25 Pages Posted: 26 Jun 2003

See all articles by Ángel López Nicolás

Ángel López Nicolás

Universitat Pompeu Fabra

Marcos Vera‐Hernández

Department of Economics. University College London; The Institute for Fiscal Studies (IFS)

Date Written: July 2002

Abstract

This paper analyses whether tax subsidies to private medical insurance are self-financing by means of a structural approach. We construct a simulation routine based on a microeconometric discrete choice model that allows us to evaluate the impact of premium changes on outpatient health care utilisation. We simulate the 1999 Spanish tax reform that abolished the tax deduction for expenditures on private health insurance using a representative sample of the Catalan population. Prior to this reform, foregone tax revenue arising from deductions after the purchase of private insurance amounted to 69.2 M. per year. In contrast, the elimination of the subsidies to private policies is estimated to generate an extra cost of about 5.6 M. per year.

Keywords: Health care utilisation, structural modelling, tax reform evaluation

JEL Classification: H24, I18, C25

Suggested Citation

López Nicolás, Ángel and Vera-Hernández, Marcos, Are Tax Subsidies for Private Medical Insurance Self-Financing? Evidence from a NHS Outpatient Microsimulation Model (July 2002). UPF Economics and Business Working Paper No. 632, Available at SSRN: https://ssrn.com/abstract=394285 or http://dx.doi.org/10.2139/ssrn.394285

Ángel López Nicolás (Contact Author)

Universitat Pompeu Fabra ( email )

Ramon Trias Fargas 25-27
Barcelona, 08005
Spain
(34-3) 542 27 08 (Phone)
(34-3) 542 17 46 (Fax)

Marcos Vera-Hernández

Department of Economics. University College London ( email )

Gower Street
London, WC1E 6BT
United Kingdom

The Institute for Fiscal Studies (IFS) ( email )

7 Ridgmount Street
London, WC1E 7AE
United Kingdom

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