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Premium subsidies and social health insurance: substitutes or complements?
Mathias Kifmann1, Kerstin Roeder
1Universität Hamburg, Fachbereich Sozialökonomie, Von-Melle-Park 5, 20146 Hamburg, Germany. mathias.kifmann@wiso.uni-hamburg.de
Abstract:
Premium subsidies have been advocated as an alternative to social health insurance. These subsidies are paid if expenditure on health insurance exceeds a given share of income. In this paper, we examine whether this approach is superior to social health insurance from a welfare perspective. We show that the results crucially depend on the correlation of health and productivity. For a positive correlation, we find that combining premium subsidies with social health insurance is the optimal policy.
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