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1、Dynamic Ineffciencies in Employment-Based Health Insurance System：Theory and EvidenceDynamicIne cienciesinEmployment-BasedHealthInsuranceSystem:TheoryandEvidence HanmingFangxAlessandroGavazzaApril30,2007 Preliminaryandincomplete.Commentsarewelcome.WearegratefultoDaronAcemoglu,LuisCabral,AmyFinkelste
2、in,IgalHendel,StephenMorris,AloysiusSiowandseminarparticipantsatUniversityofConnecticut,Rice/HoustonandTexasA&Mforaskingmanyusefulquestionsandforhelpfulsuggestions.Weareresponsibleforallshortcomings.xDepartmentofEconomicsandCowlesFoundation,YaleUniversity,P.O.Box208264,NewHaven,CT06520-8264.Emai
3、l:hanming.fangyale.eduSchoolofManagementandCowlesFoundation,YaleUniversity,P.O.Box208200,NewHaven,CT06520-8200.Email:alessandro.gavazzayale.eduAbstractWeinvestigatehowU.S.employment-basedhealthinsurancesystema ectshealthcaredeci-sions.Westressthathealthisaformofhumancapitalthata ectsproductivityonth
4、ejobandwesuggestthatthecurrentU.S.systemmightleadtoanine cientlowlevelofindividualhealthduetoemployees'turnover.Turnoverinfrictionallabormarketscreatesanexternalitythatlim-itsemployer'andemployee'sabilitytoprivatelycapturethefullbene tsofhealthinvestments.Moreover,weshowthatunder-inve
5、stmentinhealthispositivelyrelatedtotheturnoverrateoftheworkers'industryandincreasesmedicalexpenditureinretirement.Weprovideempiricalevidenceforthepredictionsofthemodelusingtwodatasets,theMedicalExpenditurePanelSurvey(MEPS)andtheHealthandRetirementStudy(HRS).InMEPS,we ndthatemployersinindustries
6、withhighturnoverratesaremuchlesslikelytoo erhealthinsurancetotheirworkers.Whenemployerso erhealthinsurance,thecontractshavehigherdeductiblesandemployers'contributiontotheinsurancepremiumislowerinhighturnoverindustries.Moreover,workersinhighturnoverindustrieshavelowermedicalexpenditureandunderta
7、kelesspreventivecare.InHRS,insteadwe ndthatindividualswhowereemployedinhighturnoverindustrieshavehighermedicalexpenditurewhenretired.Wealsoevaluateandcastdoubtonalternativeexplanations.JELClassi cationNumbers:D84,D91,I121IntroductionTheUnitedStatesisuniqueamongindustrializednationsinthatitlacksanati
8、onalhealthinsurancesystem.1TheU.S.healthinsurancesystemisamixtureofprivateandpublicinsuranceswiththeprivateinsuranceplayingamuchmoredominantrolethantherestoftheindustrializedworld.Morespeci cally,intheU.S.mostoftheworkingagepopulationsobtainhealthinsurancecoveragethroughtheiremployers,whileelderlyin
9、dividualsaged65oroverarealmostuniformlyenrolledinMedicare.2;3Inthispaper,weinvestigatehowU.S.employment-basedhealthinsurancesystema ectshealthcaredecisions.Westressthathealthisaformofhumancapitalthata ectsproductivityonthejobandwesuggestthatthecurrentU.S.systemmightleadtoanine cientlowlevelofindivid
10、ualhealthduetoemployees'turnover.TheeconomicmechanismweexploreiscloselyrelatedtoAcemogluandPischke(1998,1999),anditisbestexplainedifweimaginethatworkersand rmsseparateatanexogenousrate.Frictionallabormarketsimplythatifaworker- rmpairseparatesinthefuturewithsomepositiveprobability,thepairwillnot
11、beabletoprivatelycapturetheentiresurplusgeneratedbyworker'scurrenthealthinvestment.Moreover,thehigheristheindustryturnover,themorelikelyisthesurplusloss.Asaresult,the rm/workerpairinindustrieswithhigherturnoverrateshaslowerincentivestoinvestinhealth.Thissimplecomparativestaticspredictioncanbeex
12、tendedtoallowforendogenousturnoverrates.Whenindustriesdi erintheskillsusedbytheirworkers,industrieswithmorespeci cskillshaveendogenouslylowerturnoverrates,andthusworkers'healthinvestmentishigher.Themodelalsoshowsthatemployerspayahighershareofemployees'healthinvestmentinlowerturnoverindustr
13、ies.Beforeanyhealthinvestmentismade, rmscompeteforworkerssubjecttoanintertemporalzeropro tconditions.Thelowerisemployee'sturnover,thehigherare rm's1Among30OECDcountries,Mexico,TurkeyandtheUnitedStatesaretheonlycountrieswithoutuniversalornearuniversalhealthinsurancecoverage.2Accordingtothee
14、stimatesofKaiserCommissionandtheUrbanInstitute,in2003,62%ofnon-elderlyAmericansreceivedprivateemployer-sponsoredinsurance,5%purchasedinsuranceontheprivatenon-group(individual)market;15%wereenrolledinpublicinsuranceprograms(mainlyMedicaid),and18%wereuninsured(seeHo manandHolahan,2005).3Theemployment-
15、basedhealthinsurancesystemoriginatedasa rmresponsetotheWorldWarIIerawagecontrolandlaborshortage,andwasmaintainedovertimeduetopowerfulpoliticalforcesrepresentingthemedicalprofession(seeCampion1986orRichmondandFein2005forhistoricalaccountsoftheemploymentbasedhealthinsurancesystem).1expectedpro tsdurin
16、gworker'slatercareer.Hence,theintertemporalzeropro tconditionimpliesthat rmsmustpayahighershareofworker'shealthinvestmentinhisearlycareer.Moreover,asimpleextensionofthemodelthatintroducesaretirement;periodafterthecareershowsaninterestingintertemporalreversalofmedicalexpenditure:individualsthatwereworkinginlowturnoverindustrieshavehighmedicalexpenditurewhenworking,butlowermedicalexpenditurewhenretired.Weprovideextensiveempiricalevidenceforthepredictionsofthemodelusi
