Working Paper: NBER ID: w18105
Authors: Neale Mahoney
Abstract: This paper examines the implicit health insurance households receive from the ability to declare bankruptcy. Exploiting cross-state and within-state variation in asset exemption law, I show that uninsured households with greater seizable assets 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 similar on average to the penalties under the Affordable Care Act (ACA).
Keywords: Bankruptcy; Health Insurance; Implicit Insurance
JEL Codes: H51; I13; K35
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| seizable assets (D14) | out-of-pocket medical payments (I11) |
| seizable assets (D14) | health insurance coverage (I13) |