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Comments on Burman et al.

Comments on Burman et al. A. Malani Brookings, 2.29.08. Burman et al. findings. Inefficiencies in health insurance markets Tax breaks favor the rich Eliminating breaks would increase uninsured. Inefficiencies. Disconnect between inefficiencies identified and health insurance

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Comments on Burman et al.

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  1. Comments on Burman et al. A. Malani Brookings, 2.29.08

  2. Burman et al. findings • Inefficiencies in health insurance markets • Tax breaks favor the rich • Eliminating breaks would increase uninsured

  3. Inefficiencies • Disconnect between inefficiencies identified and health insurance • E.g., insurance limited effect on doctor-patient agency, may create own agency problems • Little discussion of incentives for innovation • Insurance may reduce DWL from using patents (Lakdawalla/Sood 2007, Newhouse 1992) • But insurance may enable “sickness externalities”: sickness has greater effect on innovation • Value of innovation depends on ability to ration innovation • Efficiency effect of distribution • Altruism externality (Medicaid, ER) • Provides context for free-riding: altruism is a public good

  4. Tax breaks favor rich • If include social security, disparity falls: from 53-97% to 63-85% • Can’t look at tax policy in isolation: Medicaid, EMTALA, etc. • Medicaid may entail ~$150b in pure transfers • Income tax break costs $159-211b, including poor and excluding behavioral response • How much does more insurance help poor • Elasticity high (Gruber/Lettau 2004): -0.25, tax price on number of firms offering insurance, -0.7 on firm spending on insurance • How much does insurance increase health? How much do poor value health? • RAND Experiment: insurance improves health for most vulnerable; Doyle (2005): uninsured motorists have 1.5% higher mortality; Levy/Meltzer (2001) • Levy/DeLeire (2003): uninsured poor have higher housing prices than poor • If exclusion doesn’t benefit poor, then elimination hurts poor the least. Flat-of-the-curve literature suggests most to gain from raising prices for rich (if elastic)

  5. Eliminating breaks increases uninsured • What is the proper counterfactual? • Congress would not just eliminate tax breaks (political market response) • Tax credit would be more fair: issue is cost of lower breaks for rich • Even if eliminate tax breaks, there are other safety nets (ER care) which would automatically expand • Is uninsured or health the proper outcome?

  6. Comments on Helms • Causality v. reverse causality • Effect on health, utility of the poor • Tax expenditures grew from $140-$240b in 200-2006 • Is there a matching decrease in wage growth?

  7. Context

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