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THE PROVISION OF PUBLIC UNIVERSAL HEALTH INSURANCE: IMPACTS ON PRIVATE INSURANCE, ASSET HOLDINGS, AND WELFARE

Published online by Cambridge University Press:  30 August 2012

Minchung Hsu  and
Junsang Lee
Minchung Hsu
Affiliation:
National Graduate Institute for Policy Studies
Junsang Lee*
Affiliation:
Korea Development Institute
*
Address correspondence to: Junsang Lee, School of Economics, Sungkyunkwan University, Seoul, Korea; e-mail: junsanglee@skku.edu.
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Abstract

This paper aims to investigate impacts of public provision of universal health insurance (UHI) in an environment with household heterogeneity and financial market incompleteness. Various UHI polices with both distortionary and nondistortionary financing methods are compared to address the trade-off between risk reduction and tax distortion, as well as the corresponding welfare implications. We use a dynamic equilibrium model with endogenous insurance choice and labor supply decisions to perform quantitative analysis. The results suggest that the UHI expenditure coverage rate is too high in most OECD countries when the distortion effect is considered. We find a clear crowding-out effect on asset holdings. Implications for private health insurance (PHI) purchases when UHI is introduced depend on the pricing and the design of coverage. We find that the rich are sensitive to the price of PHI, and would prefer a supplemental plan when UHI is introduced.

Keywords

Health InsurancePublic PolicyTaxes
Type
Articles
Information
Macroeconomic Dynamics , Volume 17 , Special Issue 6: Equality, Public Insurance, and Monetary Policy , September 2013 , pp. 1252 - 1280
Copyright
Copyright © Cambridge University Press 2012 

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