Does Public Insurance Crowd Out Private Insurance?   You are a consultant to the government of Healthia, which is considering the establishment of a public health insurance program with the goal of benefiting low-income households that are not currently insured

Does Public Insurance Crowd Out Private Insurance?

You are a consultant to the government of Healthia, which is considering the establishment of a public health insurance program with the goal of benefiting low-income households that are not currently insured.

1. Draw a graph that depicts households’ choices of health insurance coverage, including distinct households with different preferences for health care.

b.  Now suppose the government of Healthia introduces a free health insurance program that is about as generous as a quarter of the existing health insurance policies.  Anyone who wants can take up the public package for free.  Who will join the public insurance program?  Which households have more insurance coverage than they did before the program? Which households have less insurance coverage than they did previous to the program? Explain intuitively and with graphs.

Those who illustrate crowding out can be classified into two groups:

1).

2)

Those who do not illustrate crowding out are:

3)

4)

c. Is there any evidence that public health insurance would crowd out private health insurance?