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Health Insurance Mandate

Can you give me some original ideas on the following:

A. What will be the effect of mandated health insurance benefits be on the labour if the workers do not place any value on the benefits? What if they do place value on the benefits?

B. What are five policies for Medicare and what goals does each address?

C. Explain the problem presented by selection bias for research on the effects of HMOs?

D. Explain Medicare and Medicaid in terms of services, financing, reimbursement, and those covered. What is the effect on taxpayers for these services?

Solution Preview

A. What will be the effect of mandated health insurance benefits be on the market for labor if the workers do not place any value on the benefits? What if they fully value the benefits?

We can start by saying that, in general, the mandated benefits, as some of it comes out of the pockets of employers, amounts to a wage increase of something like $5,000 or $6,000. According to the now famous study by Dr. June O'Neill and Dr. David O'Neill, the projected job loss is around 3.1 million nationwide, though concentrated in a few industries like restaurants and retail.

Now, if the insurance is valued by workers, then there should be no welfare loss. Those workers who value this insurance (that is, who have health problems or are very sensitive about developing them in the future) are quite willing to pay for certain services out of their paycheck. If they are already doing this, then the government mandate means nothing.

Those who do not want it, who think it useless, will see the fee as an additional tax. Therefore, the costs of any mandated plan are based on the distinction between the fee (whatever the mandate will cost per employee) and whether or not it is considered valuable. The more valuable it is considered, the less cost that will be borne by the specific employee.

What does this all add up to? In Summers' (1989) analysis, the equilibrium would, of course, shift in the labor market, but only to the extent that there is a distinction between workers who value and those who do not value the benefits. Wages will go down, but the utility of those who ...

Solution Summary

Health insurance mandates are examined. The effect of mandated health insurance benefits on labor are determined.

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