Get 20M+ Full-Text Papers For Less Than $1.50/day. Start a 14-Day Trial for You or Your Team.

Learn More →

Externalities and Taxation of Supplemental Insurance: A Study of Medicare and Medigap†

Externalities and Taxation of Supplemental Insurance: A Study of Medicare and Medigap† AbstractMost health insurance uses cost-sharing to reduce excess utilization. Supplemental insurance can blunt the impact of this cost-sharing, increasing utilization and exerting a negative externality on the primary insurer. This paper estimates the effect of private Medigap supplemental insurance on public Medicare spending using Medigap premium discontinuities in local medical markets that span state boundaries. Using administrative data on the universe of Medicare beneficiaries, we estimate that Medigap increases an individual’s Medicare spending by 22.2 percent. We calculate that a 15 percent tax on Medigap premiums generates savings of $12.9 billion annually with a standard error of $4.9 billion. (JEL G22, H24, H51, I13, J14) http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png American Economic Journal: Applied Economics American Economic Association

Externalities and Taxation of Supplemental Insurance: A Study of Medicare and Medigap†

Download PDF
37 pages

Loading next page...
 
/lp/american-economic-association/externalities-and-taxation-of-supplemental-insurance-a-study-of-ncsSS2BY4h
Publisher
American Economic Association
Copyright
Copyright © 2019 © American Economic Association
ISSN
1945-7790
DOI
10.1257/app.20160350
Publisher site
See Article on Publisher Site

Abstract

AbstractMost health insurance uses cost-sharing to reduce excess utilization. Supplemental insurance can blunt the impact of this cost-sharing, increasing utilization and exerting a negative externality on the primary insurer. This paper estimates the effect of private Medigap supplemental insurance on public Medicare spending using Medigap premium discontinuities in local medical markets that span state boundaries. Using administrative data on the universe of Medicare beneficiaries, we estimate that Medigap increases an individual’s Medicare spending by 22.2 percent. We calculate that a 15 percent tax on Medigap premiums generates savings of $12.9 billion annually with a standard error of $4.9 billion. (JEL G22, H24, H51, I13, J14)

Journal

American Economic Journal: Applied Economics – American Economic Association

Published: Apr 1, 2019

There are no references for this article.