This article describes the anatomy of health insurance. It begins by considering the optimal design of health insurance policies. Such policies must make tradeoffs appropriately between risk sharing on the one hand and agency problems such as moral hazard (the incentive of people to seek more...

This chapter summarizes the many aspects of public policy for health care. I first consider government policy affecting individual behaviors. Government intervention to change individual actions such as smoking and drinking is frequently justified on externality grounds. External costs of...