How does government address adverse selection problem?: How does government address adverse selection problem?
It could: Impose a mandate that everyone buy private insurance ($825 per policy) Offer insurance directly Both options have low risks subsidizing high risks Other reasons for government intervention: Other reasons for government intervention Externalities Negative health externalities Administraive costs Economies of scale in administration Redistribution With full information (genetic testing), insurers can identify high risks Fairness of this discrimination? Paternalism Individuals won’t insure unless govt. forces Government failure is refraining from helping Slide25: Calendar for October 2006 (United States) Sun Mon Tue Wed Thu Fri Sat 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 Phases of the moon: 6: 13: 22: 29: Holidays and observances: 9: Columbus Day, 31: Halloween Other ways to smooth consumption: Other ways to smooth consumption Self-insurance (Unemployment ex.) Own savings Labor supply of family Borrowing from friends charity Government
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