American Economic Review: Vol. 93 No. 2 (May 2003)

Gruber, Jonathan. 2003. "Evaluating Alternative Approaches to Incremental Health-Insurance Expansion ." The American Economic Review, 93(2): 271-276.

DOI: 10.1257/000282803321947182

After a small decline, the number of uninsured persons in the United States is on the rise again, at over 41 million (Center on Budget and Policy Priorities, 2002). This increase is likely to spur efforts to cover the uninsured through legislative action. Given the failure of the most recent attempt at massive insurance expansions (David Cutler and Gruber, 2002), the likely approach is through incremental reforms. At the same time, there remains a fundamental conflict between the right and the left over the appropriate form that such incremental reforms should take. The left advocates additional expansions of the public-insurance safety net, for example, to parents of children already publicly insured. The right advocates subsidizing the purchase of private insurance through the tax code. In recent years, a number of analyses, both inside and outside of government, have studied the impact of these types of reforms (e.g., John Holahan et al., 1999; Gruber and Larry Levitt, 2000; Mark McClellan, 2000). These analyses have largely talked past each other, however, as there is little agreement on the "right" criteria on which to evaluate incremental reforms. Should we be concerned solely with the number of persons newly insured? What about the extent of displacement of other forms of insurance coverage, or "crowdout"? And what about the types of uninsured covered; should we count equally a low-cost child who is newly insured and a high-cost older person? In this paper, I lay out the issues surrounding the criteria along which alternative approaches to reform can be evaluated. I then present microsimulation estimates of the impacts of three types of reforms: tax credits for individual purchase of nongroup insurance, expansions of public insurance to children and parents, and expansion of public insurance to all adults. I use the results from these simulations to contrast these reforms using the various criteria developed here.

Gruber, Jonathan