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CHAPTER 1. BANKRUPTCY 5 insurance (?). There are deadweight costs to negotiation and collections under the threat-point of bankruptcy. And the fact that uninsured households are not exposed to the social cost of this implicit insurance means that too many households choose to be uninsured. Yet conventional health insurance has inefficiencies of its own. A particularly interesting inefficiency relative to bankruptcy insurance is moral hazard. With conventional insurance, medical providers and patients often have incentives to supply and demand excess medical care. Under the implicit insurance from bankruptcy, however, physicians are more likely to be exposed to the social cost of their deci- sions and patients have little leverage to demand excess treatment. The result is that bankruptcy may be a lower moral hazard form of social insurance. 5 While a comprehensive analysis of the costs and benefits of bankruptcy is overly ambitious, I can examine one key tension between these forms of insurance with the micro-simulation model. In particular, the model allows me to trade off the benefit of bankruptcy as a lower moral hazard form of insurance against the inefficiency due to households not facing the full social cost from being uninsured. This tradeoff suggests a corrective system of “Pigovian penalties” that expose households to the full social cost of the implicit insurance they receive. 6 With the optimal penalty of $218 per person on average, about 7 percent of the uninsured take up coverage and aggregate surplus increases by a small $4 to $5 per person. Analyzed in this framework, the penalties under the Patient Projection and Affordable Care Act (PPACA), which average $418 per person, are too large, decreasing aggregate surplus by $9 to $13 per person on average. By effectively eliminating the low moral hazard option, the counterfactual of making medical debt non-dischargeable in bankruptcy reduces surplus by an average of $36 to $43 per person. While the exact welfare numbers should be viewed with some caution, the exercise suggests that dramatically reducing bankruptcy insurance—while having the 5 Estimates of the moral hazard effects from conventional health insurance, when identified off large medical costs, are incremental to any moral hazard effects from the implicit insurance from bankruptcy. 6 For this exercise, I assume that uninsured households are not already subsidized through the tax code or some other channel.
CHAPTER 1. BANKRUPTCY 6 superficial benefit of increasing conventional coverage—may not be socially desirable. By studying the interaction between implicit and conventional insurance, this paper is closely related to the literature on long-term care insurance and the implicit insurance from spending down assets and qualifying for Medicare, such as ?. Like them, I find that implicit insurance can cause substantial crowd-out. It is more gen- erally related to a literature in macroeconomics that assesses the equilibrium effects of bankruptcy as a form of consumption insurance against a range of different shocks, including those related to earnings, divorce, childbearing, lawsuits, and medical bills (??). By examining unpaid care, this paper is also related to ? and ?, who find a negative association between measures of charity care and insurance coverage. And this paper shares similarities with a literature that examines the effect of medical debt on bankruptcy filings (e.g., ???), although unlike these papers, I treat bankruptcy as threat-point, not a dependent variable to be explained. In this, my approach more closely resembles the “informal bankruptcy” viewpoint advanced by ?, who show that credit card debt is charged off without a bankruptcy filing in the majority of cases. The rest of the paper proceeds as follows: Section 2 presents the institutional background and a simple model. Section 3 provides an overview of the data. Sections 4 discusses the identification strategy. The main empirical results are presented in Sections 5 and 6. The micro-simulation model is presented in Section 7. Section 8 discusses puzzles in the literature and policy implications. Section 9 concludes. 1.2 Bankruptcy as a Form of High-Deductible Health Insurance 1.2.1 Institutional Background The implicit insurance from bankruptcy arises from the combination of three institutional features: the fact that most medical care is provided on credit even when repayment is unlikely, the ability of households to discharge this debt in bankruptcy, and the incentive for households and creditors to come to a negotiated solution to avoid the deadweight loss from a formal bankruptcy filing.
Page 1 and 2: ESSAYS IN PUBLIC FINANCE AND INDUST
Page 3 and 4: I certify that I have read this dis
Page 5 and 6: insurance choice. Among other thing
Page 7 and 8: Acknowledgements I am deeply thankf
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Chapter 3 Private Coverage and Publ
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CHAPTER 3. MEDIGAP 119 be of intere
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CHAPTER 3. MEDIGAP 121 hazard for i
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CHAPTER 3. MEDIGAP 123 have benefit
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CHAPTER 3. MEDIGAP 128 We use boots
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CHAPTER 3. MEDIGAP 130 of costs and
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CHAPTER 3. MEDIGAP 134 3.6.2 Causal
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CHAPTER 3. MEDIGAP 140 (10000,11000
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