Is Health Insurance Progressive? The Distributional Incidence of Insurance Expansions

Abstract

What is public health insurance for? The health policy community have long diverged from economists on this fundamental issue. Health policy frames insurance as promoting access to care, especially for the poor who cannot otherwise afford it. Economists frame insurance as a financial product, providing greater benefits to those with greater spending and risk absent insurance, typically richer and sicker people. We provide a new framework that synthesizes both views by allowing for access to care ‘wedges’ in the social welfare function. We apply the framework empirically to a major increase in the generosity of the US Medicare prescription drug program. We find that this reform was financially regressive but access progressive. We model several versions of access wedges and consider their implications for the progressivity and optimal design of public health insurance. (Joint with Mark Shepard, Timothy Layton, Jingwei Sun)