Refundable Tax Credits for Health Insurance:
The Sensitivity of Simulated Impacts to Assumed Behavior
Upjohn Institute Working Paper 05-119
David W. Emmons
American Medical Association
Eva Madly
W.E. Upjohn Institute
Stephen A. Woodbury
W.E. Upjohn Institute and Michigan State University
woodbury@upjohninstitute.org
July 2005
JEL Classification Codes: I18, H23
Abstract
We replicate and extend a simulation model developed by Jonathan Gruber with the goals
of illuminating Gruber’s modeling of health insurance coverage under a tax credit and examining
the sensitivity of the results to changes in the model’s key parameters. The replications suggest
that a refundable tax credit of $1,000 for a single individual or $2,000 for a family for private
health insurance would reduce the number of uninsured individuals by between 17.5 and 28
percent and require new government expenditures of between $16.6 and $44 billion, of which
about $7.4$9.7 billion would be for coverage of previously uninsured individuals. These wide
simulated ranges highlight the uncertainty inherent in modeling the effects of health insurance tax
credits and suggest that progress on the issue of tax credits for health insurance will require
improved evidence on the likely take-up rate of a credit.
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