Bankruptcy as Implicit Health Insurance
American Economic Review
vol. 105,
no. 2, February 2015
(pp. 710-46)
(Complimentary)
Abstract
This paper examines the implicit health insurance that households receive from the ability to declare bankruptcy. Exploiting multiple sources of variation in asset exemption law, I show that uninsured households with a greater financial cost of bankruptcy make higher out-of-pocket medical payments, conditional on the amount of care received. In turn, I find that households with greater wealth at risk are more likely to hold health insurance. The implicit insurance from bankruptcy distorts the insurance coverage decision. Using a microsimulation model, I calculate that the optimal Pigovian penalties are three-quarters as large as the average penalties under the Affordable Care Act. (JEL D14, H51, I13, K35)Citation
Mahoney, Neale. 2015. "Bankruptcy as Implicit Health Insurance." American Economic Review, 105 (2): 710-46. DOI: 10.1257/aer.20131408Additional Materials
JEL Classification
- D14 Household Saving; Personal Finance
- H51 National Government Expenditures and Health
- I13 Health Insurance, Public and Private
- K35 Personal Bankruptcy Law