TY - JOUR
T1 - U.S. tax policy and health insurance demand
T2 - Can a regressive policy improve welfare?
AU - Jeske, Karsten
AU - Kitao, Sagiri
N1 - Copyright:
Copyright 2009 Elsevier B.V., All rights reserved.
PY - 2009/3
Y1 - 2009/3
N2 - The U.S. tax policy on health insurance is regressive because it subsidizes only those offered group insurance through their employers, who also tend to have a relatively high income. Moreover, the subsidy takes the form of deductions from the progressive income tax system giving high income earners a larger subsidy. To understand the effect of the policy, we construct a dynamic general equilibrium model with heterogenous agents and an endogenous demand for health insurance. A complete removal of the subsidy may lead to a partial collapse of the group insurance market, reduce the insurance coverage and deteriorate welfare. There is, however, room for improving the coverage and welfare by extending a refundable credit to the individual insurance market.
AB - The U.S. tax policy on health insurance is regressive because it subsidizes only those offered group insurance through their employers, who also tend to have a relatively high income. Moreover, the subsidy takes the form of deductions from the progressive income tax system giving high income earners a larger subsidy. To understand the effect of the policy, we construct a dynamic general equilibrium model with heterogenous agents and an endogenous demand for health insurance. A complete removal of the subsidy may lead to a partial collapse of the group insurance market, reduce the insurance coverage and deteriorate welfare. There is, however, room for improving the coverage and welfare by extending a refundable credit to the individual insurance market.
KW - Health insurance
KW - Risk-sharing
KW - Tax policy
UR - http://www.scopus.com/inward/record.url?scp=61649127275&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=61649127275&partnerID=8YFLogxK
U2 - 10.1016/j.jmoneco.2008.12.004
DO - 10.1016/j.jmoneco.2008.12.004
M3 - Article
AN - SCOPUS:61649127275
VL - 56
SP - 210
EP - 221
JO - Journal of Monetary Economics
JF - Journal of Monetary Economics
SN - 0304-3932
IS - 2
ER -