Public Insurance Provision Research Articles

Unemployment risks and intra-household insurance

To study the constrained efficient public insurance provision against unemployment risks, we build a directed search model with households where a spouse's ability to provide consumption insurance determines the risks job-seekers take on. The planner's transfers to the unemployed fall with the spouse's income because of concave preferences with limited complementarity between consumption and the spouse's labor. Due to the absence of such a transfers scheme in the laissez-faire equilibrium, too many too-low-wage jobs are created as jobless workers seek insurance in the labor market. Social welfare-maximizing policies with simple tax schemes exhibit unemployment benefits falling with spouse's income, and nearly fill up the welfare gap.

1446Forgoing needed medical care among long-term survivors of childhood cancer: Racial/ethnic-insurance disparities

Abstract Background Among adult childhood cancer survivors, the relationship between race/ethnicity and health insurance status, as a contributor to disparities in healthcare utilization, is poorly understood. Methods We examined racial/ethnic-related disparities by insurance status in “forgoing needed medical care in the last year due to finances” using 3,964 adult childhood cancer survivors (3310 non-Hispanic/Latinx White, 562 non-Hispanic/Latinx Black, and 92 Hispanic/Latinx) participating in the St. Jude Lifetime Cohort Study (SJLIFE). Multivariable logistic regression analyses, guided by Andersen’s Healthcare Utilization Model, were adjusted for “predisposing” (age, sex, childhood cancer diagnosis, cancer treatment, surgery, and treatment era) and “need” (perceived health status) factors. Additional adjustment for income/education and chronic health conditions was considered. Results The risk of forgoing care was highest among non-Hispanic/Latinx Blacks and lowest among Hispanics/Latinxs for each insurance status. Among privately-insured survivors, relative to non-Hispanic/Latinx Whites, non-Hispanic/Latinx Blacks were more likely to forgo care (adjusted OR: 1.82, 95% CI: 1.30–2.54): this disparity remained despite additional adjustment for income/education (adjusted OR: 1.43, 95% CI: 1.01–2.01). In contrast, publicly-insured survivors, regardless of race/ethnicity, had similar risk of forgoing care as privately-insured non-Hispanic/Latinx Whites. All uninsured survivors had high risk of forgoing care. Additional adjustment for chronic health conditions did not alter these results. Conclusions The findings of this study show that provision of public insurance to all childhood cancer survivors may diminish racial/ethnic disparities in forgoing care that exist among the privately-insured and reduce the risk of forgoing care among uninsured survivors to that of privately-insured non-Hispanic/Latinx Whites. Key messages Providing publicly funded health insurance coverage to childhood cancer survivors can reduce disparities in forgoing medical care.

Forgoing needed medical care among long-term survivors of childhood cancer: racial/ethnic-insurance disparities.

To investigate racial/ethnic-related disparities by insurance status in "forgoing needed medical care in the last year due to finances" in childhood cancer survivors. Our study included 3310 non-Hispanic/Latinx White, 562 non-Hispanic/Latinx Black, and 92 Hispanic/Latinx survivors from the St. Jude Lifetime Cohort Study. Logistic regression analyses, guided by Andersen's Healthcare Utilization Model, were adjusted for "predisposing" (survey age, sex, childhood cancer diagnosis and treatment, and treatment era) and "need" (perceived health status) factors. Additional adjustment for household income/education and chronic health conditions was considered. Risk of forgoing care was highest among non-Hispanic/Latinx Blacks and lowest among Hispanics/Latinxs for each insurance status. Among privately insured survivors, relative to non-Hispanic/Latinx Whites, non-Hispanic/Latinx Blacks were more likely to forgo care (adjusted OR: 1.82, 95% CI: 1.30-2.54): this disparity remained despite additional adjustment for household income/education (adjusted OR: 1.43, 95% CI: 1.01-2.01). In contrast, publicly insured survivors, regardless of race/ethnicity, had similar risk of forgoing care as privately insured non-Hispanic/Latinx Whites. All uninsured survivors had high risk of forgoing care. Additional chronic health condition adjustment did not alter these results. Provision of public insurance to all childhood cancer survivors may diminish racial/ethnic disparities in forgoing care that exist among the privately insured and reduce the risk of forgoing care among uninsured survivors to that of privately insured non-Hispanic/Latinx Whites. Under public insurance, childhood cancer survivors had low risk of forgoing care, at the similar level to privately insured non-Hispanic/Latinx Whites, regardless of race/ethnicity.

Treatment flows after outsourcing public insurance provision: Evidence from Florida Medicaid.

While politics can determine what public goods are available, elected officials must decide on the method of allocation. Commonly, governments provide public health insurance directly or pay private parties to administer it on their behalf. Such contracting can leverage private sector expertise but also raises agency concerns. In particular, little is known about how private provision of public health insurance impacts medical decision-making and treatment flows for low-income populations. An example comes from the Medicaid program, which has increasingly relied on outside insurers to deliver health services to enrollees. We exploit a large legislative intervention in Florida to show that Medicaid managed care (MMC) organizations generally do not skimp on short-run treatment delivery in the inpatient setting. In fact, patients with severe and chronic illnesses receive more inpatient services under these contracts, especially in relation to managing care transitions. We also document increased competition in the MMC market following the state's policy intervention.

WORKER TURNOVER AND UNEMPLOYMENT INSURANCE

AbstractThis article studies a competitive search model of the labor market with learning about match‐specific productivity in which risk‐averse workers factor present and future unemployment risks in their search decisions. We examine internally efficient equilibrium allocations in which match termination occurs only if the joint value of a worker–firm pair is negative. Internal efficiency poses a trade‐off between present and future risks. Public insurance provision also affects this trade‐off and, hence, worker turnover and job composition. In addition to unemployment benefits, the implementation of the planner's allocation requires a negative income tax and a 0 layoff tax.

An Examination of Adverse Selection in the Public Provision of Insurance

Using a unique data set from Florida's residual property insurer, we test for adverse selection in the public provision of homeowners’ insurance in Florida. We find a significant relationship between the losses and deductible choices of insureds in Florida's residual homeowners’ insurance market. This relationship provides strong evidence of the existence of an adverse selection problem in Florida's residual property insurance market. While this relationship is important to Florida regulators (and taxpayers) specifically, a finding of an adverse selection problem in residual markets in general has implications more broadly for government providers of insurance as an adverse selection problem in these settings will impact the public policy debates and decisions involving these markets.

A Generic Model for Public Provision of Insurance in the Presence of Externalities

Emerging markets are subject to exogenous shocks that are more frequent and bigger in size compared to the developed countries. Structural weaknesses such as currency mismatches in their balance sheets make these shocks even costlier. Yet, often times these countries are found having insufficient coverage against such shocks. Using a general equilibrium framework this paper looks at alternative government policies to encourage adequate provision of insurance when private decisions are not optimum socially. It also studies the impact of such policies on growth performance of the economy. A tax cum transfer scheme is found to be more effective in encouraging private provision of insurance compared to direct supply of hedging against shocks by the government. The optimal tax rate in our model depends on the extent to which decentralized level of insurance is socially sub-optimal.

Perspectives on the Correlates of Positive and Negative Spillover between Work and Family: a Study of Selected Banks in Port Harcourt, Rivers State Nigeria

The work-family interface is a systematically defined and measured attempt to evaluate a medium through which promotion of work-family synergistic relationship can thrive. It centres on providing a unique methodology into the work micro-system, family micro-system and individual characteristics. To actualize this, OLS regression analysis was used on data elicited from five (5) commercial banks in Port Harcourt. The study revealed that personality factor alone does not account for the propensities of individuals to experience or report work and family conflict. However, the study recommends that provision of public insurance guaranteeing paid leave for families is necessary for unification of positive or negative spillover effect between work and family.

Welfare Effects of Privatizing Public Education When Human Capital Investments Are Risky

In an overlapping-generations model with risky human capital investment, borrowing constraints, and intergenerational transmission of abilities, I examine the effects of a change from publicly to privately funded college education. I find that from this reform, college graduates are better off compared to other workers since the college wage premium increases by around 50 percent. The reform deteriorates aggregate efficiency by (i) enforcing liquidity constraints, (ii) abolishing public insurance provision against educational risk, and (iii) increasing utility costs of college education via intergenerational spillovers. A success-dependent student loan system can offset efficiency losses but fails to generate efficiency gains.

Labor supply responses to government subsidized health insurance: evidence from kidney transplant patients

Between 1993 and 1995 Medicare increased the coverage of immunosuppression medication for kidney transplant recipients from 1 to 3years following transplantation. The universal Medicare eligibility among kidney transplant patients provides a unique opportunity to explore labor supply responses to public insurance provision among a large number of men and women of prime working age and of all income levels. Although these patients are likely to be less healthy than the general population, upon receiving a kidney transplant, the main health problem of an individual with kidney failure, the lack of functioning kidneys, is removed. The income effects associated with the large transfer payment may discourage labor supply, while the potential health benefits of the coverage extension may promote labor supply. Results indicate that Medicare's increased medication coverage led to decreases in labor force participation among part time workers. These results suggest that potential labor supply reducing income effects should be taken into account when discussing the possibility of expanded public health insurance coverage, particularly for other groups of individuals with high expected medical expenditures, such as the elderly, or those with chronic conditions, such as diabetes. These results are useful considering the forthcoming expansion of government aid to purchase health insurance.

Public versus private risk sharing

Can public income insurance through progressive income taxation improve the allocation of risk in an economy where private risk sharing is incomplete? The answer depends crucially on the fundamental friction that limits private risk sharing in the first place. If risk sharing is limited because insurance markets are missing for model-exogenous reasons (as in Bewley (1986) [8]) publicly provided risk sharing improves on the allocation of risk. If instead private insurance markets exist but their use is limited by limited enforcement (as in Kehoe and Levine (1993) [23]) then the provision of public insurance interacts with equilibrium private insurance, as, by providing risk sharing, the government affects the value of exclusion from private insurance markets and thus the enforcement mechanism of these contracts. We characterize consumption allocations in an economy with limited enforcement and a continuum of agents facing plausible income risk and tax systems with various degrees of progressivity (public risk sharing). We provide conditions under which more publicly provided insurance actually reduces total insurance for agents (excess crowding-out), or under which more public insurance increases total insurance (partial crowding-out).

Expanded guarantees for banks

This article argues that the expansion of existing and the introduction of new guarantees for financial institutions has been a key element of the policy response to the recent financial crisis. Essentially, the government expanded its role as the provider of the safety net for banks by adopting the function of a guarantor of last resort. Among the various policy response measures, the expansion of guarantees has the benefit of entailing lower upfront fiscal costs relative to other options. Guarantees are not without cost however. Even if they do not generate significant upfront fiscal costs, they create contingent fiscal liabilities. Other potential costs include those arising from distortions to competition and incentives (moral hazard). For example, there may be a perception that similar guarantees will always be made available at low costs. The fact that the expansion of guarantees has not been as closely co-ordinated across borders as might have been desired has resulted in additional costs. To avoid additional costs arising from inconsistencies in exit strategies, close communication and coordination regarding pricing and timing issues is required, especially as a more formal framework for the public provision of insurance would still need to be developed.

TWO COMPUTATIONS TO FUND SOCIAL SECURITY

We use a general equilibrium model to study the impact of fully funding social security on the distribution of consumption across cohorts and over time. In an initial stationary equilibrium with an unfunded social security system, the capital/output ratio, debt/output ratio, and rate of return to capital are 3.2, 0.6, and 6.8%, respectively. In our first experiment, we suddenly terminate social security payments but compensate entitled generations by a massive one-time increase in government debt. Eventually, the aggregate physical capital stock rises by 40%, the return on capital falls to 4.4%, and the labor income tax rate falls from 33.9 to 14%. We estimate the size of the entitlement debt to be 2.7 times real GDP, which is paid off by levying a 38% labor income tax rate during the first 40 years of the transition. In our second experiment, we leave social security benefits untouched but force the government temporarily to increase the tax on labor income so as gradually to accumulate private physical capital, from the proceeds of which it eventually finances social security payments. This particular government-run funding scheme delivers larger efficiency gains (in both the exogenous and endogenous price cases) than privatization, an outcome stemming from the scheme's public provision of insurance both against life-span risk and labor income volatility.

Social Protection and Private Insurance: Reassessing the Role of Public Sector Versus Private Sector in Insurance

This paper first discusses the standard reasons why private insurance cannot be expected to function well and why public intervention in or public provision of insurance can improve on private market outcomes. These arguments are based on efficiency but also on equity considerations. Then the paper turns to new developments in modern societies that might affect the balance between social and private insurance. They pertain to the current working of labor markets, to the openness of our economies and the ensuing fiscal competition, and to the crediblity and commitment problems faced by the state. The paper concludes that the public sector will find it less and less affordable to provide both insurance and assistance and recommends that it focus on the latter objective by awarding tax-financed uniform benefits on the basis of specified contingencies.

Public Insurance Provision and Non-Market Failures

It is a common observation of microeconomic theory that there are numerous cases where private insurance markets cannot be expected to function well. This is frequently used as the basis for an argument that public intervention in or provision of insurance can improve on private market outcomes. Though we agree that there are many imperfections of private insurance markets, we argue that this is not at all the same thing as the statement that public provision will be an improvement. There are features that appear to be inherent in public provision of insurance that constitute what we call non-market failures ; in many cases, these are more severe than the private market failures public provision is alleged to address. In particular, we note that public provision is subject to many of the same incentive problems that lead to private market failure. Moreover, it is subject to a political sociology that often leads, over time, to a diversion of public insurance programs from their original goals, and thus to substantial inefficiency and inequity. We conclude that while there may be cases where public insurance is desirable, there are many others where less attractive in application than it appears in principle it will be inferior to even poorly functioning private insurance arrangements.

Overinsurance and Public Provision of Insurance: Comment

I. Moral hazard, 693. — II. Adverse selection, 694.

Overinsurance and Public Provision of Insurance: The Roles of Moral Hazard and Adverse Selection

I. The competitive allocation of insurance under moral hazard, 45. — II. “Competitive” equilibrium, 50. — III. Moral hazard and public provision, 52. — IV. Adverse selection and the competitive market, 54. — V. Alternative devices for dealing with adverse selection and moral hazard from overinsurance, 60.

The Measurement of Moral Hazard

Insurance that lowers the cost of insured services to the insured may increase the usage of those services. This phenomenon is called in the insurance literature. This paper demonstrates how price elasticities of demand can be utilized to provide quantitative estimates of moral hazard. Empirical estimates of moral hazard, which are based on hospital patients in Iowa and their demand for hospital services, are presented. It is shown that the amount of moral hazard varied significantly with age class, type of illness, type of accommodation, and whether there were complications, but not with the sex of the patient. Recent papers by K. J. Arrow,' H. G. Grubel,2 and M. V. Pauly3 have been concerned with the question of how the existence of moral hazard may affect the welfare case for public provision of insurance in some instances. All three agree that the quantitative importance of moral hazard depends crucially on the price elasticities of demand for the insured

Risk, Uncertainty and Moral Hazard

This paper gives precision to the meaning of the term hazard. It then analyses the implications which the phenomenon of moral hazard has on the welfare effects of public insurance schemes and the present shortage of medical doctors and hospitals in the United States. It concludes that the existence of moral hazard does not necessarily invalidate the case for welfare increasing public provision of insurance as Pauly has claimed in his criticism of Arrow. Finally, the analysis explores the implications the phenomenon of moral hazard has for Knight's famous distinction between risk and uncertainty. analysis of the conditions under which compulsory government insurance schemes raise public welfare is of considerable theoretical and practical significance. One aspect of Arrow's important contributions to this issuel has recently been challenged by Pauly,2 who argued that Arrow's formal demonstration of the welfare raising effects of compulsory insurance is invalidated by the proper consideration of an empirical phenomenon Grateful acknowledgment is made for the helpful comments Herbert S. Denenberg and Mark V. Pauly made on an earlier draft of this paper. However, since all of their advice was not followed, remaining errors and ambiguities are solely the responsibility of the author. Herbert G. Grubel, Ph.D., is Associate Professor of Finance in the University of Pennsylvania. In 1969, Dr. Grubel was Visiting Fellow, Australian National University, Institute of Advanced Studies. His previous teaching includes service at Yale, Stanford, and the University of Chicago. This paper was submitted in April, 1970. 1 K. J. Arrow, Aspects of the Theory of RiskBearing, Helsinki, 1965; Uncertainty and the Welfare Economics of Medical Care, American Economic Review, December 1963, 53, 941-73; The Economics of Moral Hazard: Further Comments, American Economic Review, June 1968, 58, 537-39. 2 M. V. Pauly, The Economics of Moral Hazard: Comment, American Economic Review, June 1968, 58, 531-37. known in the literature of insurance economics as hazard. paper is designed to give greater precision to the concept of moral hazard than has hitherto been available and to analyze its cause in some detail, in the process shedding light on the Arrow-Pauly controversy. concept is shown to have very important implications for current and future decision-making about public insurance schemes and the alleged present shortage of medical doctors and hospital space in the United States. second part of the paper develops a criterion allowing the judgment to be made whether or not a given compulsory public insurance scheme improves welfare even when moral hazard exists. In the last part, it is shown that the concept of moral hazard and the previously developed decision-making criteria add to an understanding of Frank H. Knight's famous distinction between risk and un-