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Expanding Health Insurance Coverage: Who Will Pay?

Recent discussions on extending health insurance to the more than thirty million uninsured Americans have focused on two strategies: expanding the Medicaid program and mandating that employers sponsor coverage for their employees. This analysis, using a microsimulation model of the U.S. health care financing system, suggests that these two options would result in very different distributions of financial burden. Employer-sponsored coverage is financed in a highly regressive fashion, in contrast to the Medicaid program, which is proportional to income. Furthermore, the burden of paying for health care under Medicaid varies little among generations, whereas the cost of employer-sponsored care is lowest in households headed by persons over sixty-five years old. Low health status populations do not pay disproportionately higher taxes or premiums to finance either the Medicaid program or employer-sponsored coverage. Their incomes, however, are more effectively protected by Medicaid, because it offers more comprehensive benefits.

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