does not work well for the elderly, because their average health care costs can be very high. Thus, the U.S.

government started the Medicare program, which provides health insurance to all those over age 65. Other

government-funded health-care programs are aimed at military veterans, as an added benefit, and children in

families with relatively low incomes.

Another common government intervention in insurance markets is to require that everyone buy certain kinds

of insurance. For example, most states legally require car owners to buy auto insurance. Likewise, when a bank

loans someone money to buy a home, the person is typically required to have homeowner’s insurance, which

protects against fire and other physical damage (like hailstorms) to the home. A legal requirement that

everyone must buy insurance means that insurance companies do not need to worry that those with low risks
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