Public Policy for Health Care

David Cutler

No 5591, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper reviews the public sector role in the provision of health care. A first role of the government is to use tax policy to correct externalities associated with individual behaviors. Estimates suggest that the external effects of many `sins' such as alcohol consumption are greater than current taxes on these goods. A second role of the government is to correct distortions in markets for medical care and health insurance. Markets for health insurance have traditionally not offered a choice between cost and the generosity of benefits. As a result, there have been incentives for excessive technological development, particularly technologies that increase spending. Once technologies have diffused widely, they are overutilized. Policies to increase choice in insurance markets could increase welfare, provided they limit segmentation on the basis of risk.

JEL-codes: I11 I18 (search for similar items in EconPapers)
Date: 1996-05
Note: AG EH PE
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (15)

Published as A.Auerbach, ed., Fiscal Policy: Lessons From Economic Research, Cambridge, MA: MIT Press, 1997.

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