| The large and growing uninsured population poses an alarming threat to the U.S. health care system. This paper explores one of the less cited causes of the lack of health insurance -- the health care safety net. The safety net is a component of the U.S. health care delivery system that aims to provide medical services to the vulnerable patients (e.g. people without health insurance) regardless of their ability to pay. Available through both private and public health care providers who operate under the legal mandate or an explicit open-door policy, such medical care is usually provided free of charge or at a substantial discount. The implicit assumption of the safety net programs is that the demand for such services is largely the result of uncontrollable economic and health conditions, making the health insurance unaffordable. However, this assumption misses a fundamental maxim in the economic approach to human behavior, which implies that the decision not to purchase health insurance is ultimately a matter of choice, and that such a choice is influenced by the availability of various insurance alternatives, including the health care safety net.;I developed an analytical model which incorporates the utilization of safety net into the demand for health insurance paradigm. The economics literature dealing with the uninsured issues has been treating the lack of health insurance as a "corner solution" to the market insurance problem with its value assumed to be exogenous to the insurance decision. My model tries to analyze the null-insurance choice as an "interior solution" implicating the individual preference to the alternatives to market insurance, such as the safety net and self-insurance, which are often neglected in the literature. I showed that the safety net healthcare resources can act as a substitute to market insurance, similar to the classical form of self-insurance. However, contrary to what prior literature modeled as self-insurance, this free-cost alternative can lead to a "safety net moral hazard". Accordingly, an otherwise insured individual may choose to drop or eschew the insurance coverage and free-ride on the safety net program.;Equally important is the empirical part of my study, which offers a quantitative assessment of the magnitude of the "safety net moral hazard" problem in U.S. The calibrated simulation bearing on the above theoretical model indicates that about 15.75% of the current uninsured population, or 7.2 million people in U.S., can attribute their lack of health insurance to the existing safety net system. My empirical model based on a unique dataset that links multiple national surveys (Community Tracking Study Household Survey, Area Resource File, AHRQ Safety Net Monitoring Data Book) has verified the crowding-out effect with significant and robust evidence. The model employed a comprehensive set of measures of the county level safety net accessibility, all of which showed significant negative impact on the tendency of insurance purchase by the county residents. On average, the presence of local safety net resources can reduce the probability of individual insurance coverage by as much as 2.57%. |
