Welfare Effects of Health Insurance
Today, we move on from why people buy health insurance to the effects of health insurance, with particular attention to financial well-being, health, and broader welfare implications. One strand of this literature focuses on the financial effects of health insurance. By reducing exposure to medical expenditures, insurance can relax household budget constraints and lower the likelihood of financial distress. Empirical evidence exploiting Medicaid expansions shows that gaining public insurance reduces adverse financial outcomes such as medical debt and bankruptcy, highlighting an important channel through which insurance affects economic well-being beyond healthcare consumption (Gross and Notowidigdo (2011); Hu et al. (2018)).
A second strand examines the health effects of insurance coverage. While it is not theoretically obvious that insurance must improve health, recent work using large administrative datasets and quasi-experimental designs provides compelling evidence that expanded coverage improves health outcomes and reduces mortality. These studies reflect a shift in the literature toward settings and data that are sufficiently powered to detect health effects over longer horizons (Miller, Johnson, and Wherry (2021); Goldin, Lurie, and McCubbin (2021)).
Finally, a broader literature considers the overall welfare effects of health insurance, emphasizing that insurance policies generate indirect effects that extend beyond the insured population. The introduction and expansion of public insurance programs can affect provider behavior, healthcare spending, and the allocation of resources across the economy. Classic and recent work shows that large-scale insurance expansions such as Medicare and Medicaid have substantial general equilibrium and fiscal implications, underscoring the importance of evaluating insurance policies from a system-wide perspective rather than focusing solely on individual beneficiaries (Finkelstein (2007); Finkelstein, Hendren, and Luttmer (2019)).
Potential papers for presentation today include
- Hu et al. (2018) — financial protection and household debt under Medicaid
- Miller, Johnson, and Wherry (2021) — health and mortality effects of insurance coverage
- Finkelstein, Hendren, and Luttmer (2019) — welfare valuation of Medicaid incorporating transfers and external effects