is more dubious; response to financial incentives such as insurance is exacerbated; the social consequences and external …

This article describes the anatomy of health insurance. It begins by considering the optimal design of health insurance … moral hazard (the incentive of people to seek more care when they are insured) and supplier-induced demand (the incentive of … reduced provision of low valued care. Empirical evidence shows that both moral hazard and demand-inducement are quantitatively …

internalities justify government action. I then turn to markets for medical care and health insurance. Virtually all governments … provide health insurance for some part of the population. Governments face several fundamental choices in this provision. The … at the expense of quality. A second choice is in the degree of cost sharing. More generous insurance reduces the utility …

By 1993, over 70 of all Americans with health insurance were enrolled in some form of managed care plan. The term … traditional insurance plans, include the selection and organization of providers, the choice of payment methods (including … is somewhat lower cost than that enrolled in conventional insurance. This complicates analysis of the effect of managed …