Skip to main content

A Political Economy Model of Health Insurance Policy

Abstract

This paper aims to explain the divergent path of U.S. health policy from other high-income countries. The paper develops a general framework of interest group politics to study how the organization of industry can shape health insurance coverage and greater public involvement in health insurance. Large firms face a higher degree of unionization and provide more health coverage for employees than small firms. Consequently, large firms favor the adoption of a policy of universal health care coverage as a means of divesting health care costs to the public sector. Public aversion to higher taxation counterbalances this effect.

This is a preview of subscription content, access via your institution.

Fig. 1
Fig. 2
Fig. 3
Fig. 4

Notes

  1. Most OECD countries achieved universal or near-universal health care coverage prior to 1990. The U.S., Mexico and Turkey are the only remaining exceptions (Docteur and Oxley 2003).

  2. This view is consistent with the historical concept of health insurance in the form of mutual aid societies of the late 19th century. Individual members of a mutual aid society would contribute small sums of money to a common fund that would then cover large expenses of some its members in need (see Bronstein (1996) and Stone (1993)).

  3. Breyer (2001) analyzes how redistributive components affect the extent of coverage in a compulsory insurance system in a model of direct democracy. The study compares the collectively financed health insurance systems in Germany and Switzerland.

  4. Allowing for corporate taxation would reinforce the positive relationship between greater public involvement in health coverage and increased costs to small firms since smaller firms tend to be less internationally mobile and hence more likely to bear the burden of taxation.

  5. This is despite efforts by most states between 1990 and 1995 to introduce regulations aimed at making health insurance more available to small firms (see Stream (1999) for details of state regulatory reforms).

  6. See for example U.S. Department of Labor (1998), Freeman (1981), Freeman and Medoff (1984).

References

  • Angel, R. J., Lein, L., & Henrici, J. (2006). Poor families in America’s health care crisis. Cambridge: Cambridge University Press.

    Book  Google Scholar 

  • Bernheim, D., & Whinston, M. (1986). Menu auctions, resource allocation, and economic influence. Quarterly Journal of Economics, 101, 1–31.

    Article  Google Scholar 

  • Breyer, F. (2001). Income redistribution and the political economy of social health insurance: Comparing Germany and Switzerland. DIW Discussion Paper No. 253, Berlin.

  • Bronstein, J. M. (1996). The politics of U.S. health care reform. Medical Anthropology Quarterly, New Series, 10, 20–24.

    Article  Google Scholar 

  • Buchmueller, T. C., Dinardo, J., & Valletta, R. G. (2002). Union effects on health insurance provision and coverage in the United States. Industrial and Labor Relations Review, 55, 610–627.

    Article  Google Scholar 

  • Docteur, E., & Oxley, H. (2003). Health-care systems: Lessons from the reform experience. OECD Economics Department Working Paper No. 374. Paris: OECD Publishing.

  • Freeman, R. B. (1981). The effects of unionism on fringe benefits. Industrial and Labor Relations Review, 34, 489–509.

    Article  Google Scholar 

  • Freeman, R. B., & Medoff, J. L. (1984). What do unions do? New York: Basic Books.

    Google Scholar 

  • Grossman, G. M., & Helpman, E. (1994). Protection for sale. The American Economic Review, 84, 833–850.

    Google Scholar 

  • Grossman, G. M., & Helpman, E. (1996). Rent dissipation, free riding and trade policy. European Economic Review, 40, 795–803.

    Article  Google Scholar 

  • Hacker, J. S. (2004). Review article: dismantling the health care state? Political institutions, public policies and the comparative politics of health reform. British Journal of Political Science, 34, 1–32.

    Article  Google Scholar 

  • National Center for Health Statistics (2006). Hyattsville, MD, USA. Website: http://www.cdc.gov/nchs/nhis.htm.

  • OECD. (2002). Economic surveys: United States, III. Health system reform. Paris: OECD.

    Google Scholar 

  • OECD Health Data (2003). Organization for Economic Cooperation and Development. Paris. Website: http://www.oecd.org.

  • Olson, M. (1965). The logic of collective action: Public goods and the theory of groups. Cambridge: Harvard University Press.

    Google Scholar 

  • Persson, T. (1998). Economic policy and special interest politics. Economic Journal, 108, 310–327.

    Article  Google Scholar 

  • Stone, D. A. (1993). The struggle for the soul of health insurance. Journal of Health Politics, Policy and Law, 18, 287–318.

    Article  Google Scholar 

  • Stream, C. (1999). Health reform in the states: a model of state small group health insurance market reforms. Political Research Quarterly, 52, 499–525.

    Google Scholar 

  • U.S. Department of Labor, Bureau of Labor Statistics (1998). Employer costs for employee compensation, 1986–98. Bulletin 2508.

  • van Ark, B., & Monnikhof, E. (1996). Size distribution of output and employment: A dataset for manufacturing industries in five OECD Countries, 1960s–1990. OECD Economics Department Working Paper No. 166. Paris: OECD.

Download references

Author information

Authors and Affiliations

Authors

Corresponding author

Correspondence to Alena Kimakova.

Rights and permissions

Reprints and Permissions

About this article

Cite this article

Kimakova, A. A Political Economy Model of Health Insurance Policy. Atl Econ J 38, 23–36 (2010). https://doi.org/10.1007/s11293-009-9200-z

Download citation

  • Received:

  • Accepted:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s11293-009-9200-z

Keywords

  • Health insurance policy
  • Health care coverage
  • Political economy

JEL

  • P16
  • I18
  • H51