American Economic Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
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