people can be required to purchase insurance raises the issue of government laws and regulations that

influence the insurance industry.

U.S. Health Care in an International Context

The United States is the only high-income country in the world where private firms pay and provide for most

health insurance. Greater government involvement in the provision of health insurance is one possible way of

addressing moral hazard and adverse selection problems.

The moral hazard problem with health insurance is that when people have insurance, they will demand higher

quantities of health care. In the United States, private healthcare insurance tends to encourage an ever-greater
demand for healthcare services, which healthcare providers are happy to fulfill. Table 16.2 shows that on a

per-person basis, U.S. healthcare spending towers above healthcare spending of other countries. Note that
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