Affiliation:
1. Terry College of Business, University of Georgia, 620 South Lumpkin Street, Athens, GA 30602 (email: )
2. National Graduate Institute for Policy Studies (GRIPS), 7-22-1 Roppongi, Minato-ku, Tokyo 106-8677 (email: )
Abstract
Individuals’ medical spending has both necessary and discretionary components, which are not, however, separately observable. This paper studies ways to improve upon existing public health insurance policies by using a framework where both the discretionary and necessary components of medical spending are explicitly modeled. First, using a simple theoretical framework, the paper shows that the key to reducing discretionary medical spending is to introduce a trade-off between nonmedical and medical consumption. Next, using a rich quantitative life-cycle model, the paper shows that this trade-off can be successfully implemented by introducing an option to substitute public health insurance with cash transfers. (JEL D91, G22, H51, I13, I18, I38)
Publisher
American Economic Association
Subject
General Economics, Econometrics and Finance
Cited by
4 articles.
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