The development of universal health insurance coverage in Thailand: Challenges of population aging and informal economy

Abstract

This paper quantitatively investigates the sustainability of the universal health insurance coverage (UHI) system in Thailand while taking into account the country's rapidly aging population and large informal labor sector. We examine the effects of population aging and informal employment across three tax options for financing the UHI. A modern dynamic general equilibrium framework is utilized to conduct policy experiments and welfare analysis. In the case of labor income tax being used to finance the cost of UHI, an additional 11–15% of labor tax will be required with the 2050 population age structure, compared with the 2005 benchmark economy. We also find that an expansion of income tax base to the informal sector can substantially alleviate the tax burden. Based on welfare comparisons across the alternative tax options, the labor income tax is the most preferred because the inequality between formal/informal sectors is large. If the informal sector cannot avoid labor income tax, capital tax will be preferred over labor and consumption taxes.