Household Wealth and Health Insurance as Protection against Medical Risks

摘要

This paper develops a theory of household behavior that describes the choice between health insurance and wealth as protection against the uncertainty of medical expenses, and it shows that the tax subsidy associated with the current exclusion of employer-paid insurance benefits from an employee's taxable income alters the choice in favor of insurance. To investigate the empirical significance of the factors outlined in this theory of savings and insurance, the authors draw upon data from the 1977 National Medical Care Expenditure Survey (NMCES). NMCES provides extensive information on the benefit provisions, premiums, and financing of the health insurance held by approximately 10,000 households who are representative of the noninstitutionalized civilian population in the United States.