A New Approach to Risk-Spreading via Coverage-Expansion Subsidies
American Economic Review
vol. 93,
no. 2, May 2003
(pp. 277-282)
Abstract
The persistently large number of uninsured, roughly 40 million per year since 1993, continues to elicit bipartisan policy interest. Coverage-expansion proposals without mandates, by far the most common since the defeat of the Clinton plan, must address risk-pooling realities in private markets. Insurers have strong financial incentives to segment risks and minimize pooling of heterogeneous risks, and narrow risk-pooling will diminish the adequacy of premium subsidies based on income alone, at least for higher-risk individuals. The current debate over flat tax credits and the non-group market is a case in point (Blumberg, 2001; Center for Studying Health System Change, 2002; Jack Hadley and James D. Reschovsky, 2002). We, along with nine other teams, were asked to develop a proposal that would expand coverage in a large and creative way (see Holahan et al., 2001). The proposal we developed would subsidize low-income individuals and families but also addresses the issue of inefficient and inequitable risk-pooling.Citation
Holahan, John, Len M. Nichols, Linda J. Blumberg, and Yu-Chu Shen. 2003. "A New Approach to Risk-Spreading via Coverage-Expansion Subsidies ." American Economic Review, 93 (2): 277-282. DOI: 10.1257/000282803321947191JEL Classification
- I18 Health: Government Policy; Regulation; Public Health
- G22 Insurance; Insurance Companies; Actuarial Studies
- H23 Taxation and Subsidies: Externalities; Redistributive Effects; Environmental Taxes and Subsidies
- I11 Analysis of Health Care Markets