This paper investigates the effects of market-wide changes in health insurance by examining the single largest change in health insurance coverage in American history: the introduction of Medicare in 1965. I estimate that the impact of Medicare on hospital spending is substantially larger than...

Moral hazard--the tendency to change behavior when the cost of that behavior will be borne by others--is a particularly tricky question when considering health care. Kenneth J. Arrow's seminal 1963 paper on this topic (included in this volume) was one of the first to explore the implication of...