“Crowd-Out” Is Not The Same As Voluntarily Dropping Private Health Insurance For Public Program Coverage

Source: Leighton Ku, Center on Budget and Policy Priorities, September 27, 2007

As leading health policy experts have explained, under the fragmented U.S. health insurance system, virtually any effort to cover more of the uninsured — including efforts that rely on tax deductions or credits for the purchase of health insurance in the private market, as well as public program expansions — will result in some “crowd-out” (in the substitution of one type of health insurance for another) or in more heavily subsidizing people who are already insured, rather than in extending coverage to those who are uninsured. For example, an analysis of the Administration’s health tax proposals from last year by the noted health economist Jonathan Gruber estimated that 77 percent of the benefits would go to people who already are insured.

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