TAXPAYER WILLINGNESS TO PAY FOR HEALTH INSURANCE REFORM: A CONTINGENT VALUATION ANALYSIS

A key criterion for evaluating policies to expand health insurance coverage is weighing the costs of such policies against the willingness of the public to pay for coverage expansions. We use new panel survey data from New York State to estimate residents' willingness to pay (WTP) to expand public insurance coverage. Using a nonparametric double-bounded contingent valuation (CV) approach, we specifically ask residents about their WTP to reduce the rate of uninsurance in the state. Our results imply an aggregate lower-bound WTP of over $2,800 per year to cover one person. We also analyze heterogeneity in WTP by sub-group and changes in individual WTP over time between 2008 and 2010. We find that a large majority of residents are willing to pay additional taxes to reduce the number of uninsured in the state, and that average WTP remained remarkably stable despite the economic downturn and the politically polarized discussions surrounding the Affordable Care Act. Decomposing the changes in individual WTP, we find that economic factors related to the recession, including changes in income and employment status, cannot explain changes in individual WTP, whereas individual changes in political opinions about health insurance reform between 2008 and 2010 are strongly correlated with changes in WTP. (JEL H20, H42, H51, H75,113) I. INTRODUCTION Public expansion of health insurance coverage has been a subject of intense debate in the United States at both national and state levels, especially in recent years (Epstein et al. 2009; Gruber 2008). The 2010 Affordable Care Act (ACA) puts into motion substantial further increases in public health insurance, most of which take effect in 2014. One reason for the controversy surrounding the issue is that the costs of reform are substantial and salient, (1) while the benefits are difficult to estimate, and may include direct components from improving access as well as indirect benefits associated with insurance against future risk and altruistic concerns about fairness and equity. The high costs of reform make it important to assess not only whether people support reforms in principal, through polling or election results, but also to estimate their willingness to pay (WTP) higher taxes to finance reforms. That is, as Kessler and Brady (2009) put it, it is important to examine the willingness of the public to "put their money where their mouth is." In addition, there has been recent interest among policymakers and academics in examining how economic recessions affect support for tax-funded social safety nets (Russell Sage Foundation 2011), which can be crucial for the long-run viability of such policies. Finally, we also test whether public policy debates prior to the passage of the ACA may have changed WTP directly by affecting opinions about public insurance expansions. Despite these concerns, there has been relatively little systematic analysis of WTP for health reform. A handful of opinion polls have asked whether respondents support increasing taxes to fund health insurance reform, although none have been longitudinal studies of the same individuals. Apart from one poll by Kessler and Brady (2009), these polls do not specify the size of tax increases and do not elicit WTP specifically. (2) In their analyses, Kessler and Brady (2009) use a contingent valuation (CV) approach and national survey data to measure support for selected reforms. Specifically, they examine expansions of coverage that would be financed through proportional increases in individual income tax payments. Using individual-specific estimates of required tax increases based on reported income, each respondent is asked whether they would support a coverage expansion. Each respondent is only asked a single "yes/no" question about their proposed tax increase. However, the survey is repeated for three selected reforms--a subsidy for private insurance, an expansion of Medicaid, or coverage of individuals with chronic illness. …