Implicit Budget Deficits: The Case of a Mandated Shift to Community-Rated Health Insurance
Since a typical regulatory mandate can be equated in its economic effect to a combination of an expenditure program and a tax program, observers have often suggested that it would serve consistent public policy to bring regulatory decisions into the same budgetary framework. This paper concerns an important example of a regulatory program that would mimic deficit financing in effecting a transfer of fiscal burdens toward younger and future generations, the mandated purchase of (or provision by employers of) health care insurance under a system of community rating, under which the same price is charged for health insurance for all comers, regardless of age, sex, or health condition. Such a shift would result in redistributions of burdens across birth cohorts, in this case from existing, especially middle-aged birth cohorts toward future generations. Using data from a variety of sources we conclude the effect would be substantial. For our central-case assumptions about discount, health care cost, and productivity growth rates, and about the locus of responsibility for paying health care bills, a shift to community rating is estimated to generate gains for people over age 30 in 1994, $16,700 per person aged 50 for example, at the cost to younger cohorts. Those born in 1994 would acquire an extra payment obligation with a discounted value of $7,100 each. The burden passed along to future generations can be described by a $9,300 per capita tax at birth (growing with productivity). The analysis makes clear that the regula- tory policy shift, with no direct budgetary implications, would have an intergenerational transfer effect comparable to what would be considered a major change in on-budget tax or transfer programs.
Year of publication: |
1996-03
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Authors: | Bradford, David F. ; Max, Derrick A. |
Institutions: | National Bureau of Economic Research (NBER) |
Saved in:
Online Resource
Extent: | application/pdf |
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Series: | |
Type of publication: | Book / Working Paper |
Notes: | PE HC published as <a href="http://www.nber.org/chapters/c10907">Implicit Budget Deficits: The Case of a Mandated Shift to Community-Rated Health Insurance</a>, David F. Bradford, Derrick A. Max. in <a href="http://www.nber.org/books/pote97-1">Tax Policy and the Economy, Volume 11</a>, Poterba. 1997 Number 5514 |
Source: |
Persistent link: https://www.econbiz.de/10005778110
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