We examine the welfare effects of the interaction of three types of technological progress in medicine and health insurance; some paradoxes emerge. The model specifies three types of people: W (well); H (sick with high cure rate if treated); and L (sick with low cure rate if treated). There are...

When the value of a medical treatment differs across individuals, it may be socially beneficial to treat some, but not all, patients. If individuals are ignorant of their health status ex ante, they should be willing to purchase insurance fully covering treatments for high-benefit patients (Hs)...

We model a health insurance market where rising cure rates for a disease may paradoxically diminish welfare and even negate the desirability of health insurance altogether. In the model, rising cure rates can affect welfare in two ways: (1) directly, by improving some individuals' health, and...