Free Markets and Health Care: Lessons from Welfare Economics

Abstract The U.S. health care system is often criticized for being the most expensive in the world while delivering mediocre health outcomes. While policymakers on both the right and left agree about the need for reform, they disagree strongly about whether that reform should involve a smaller role for government or a larger role. At the same time, the U.S.’ high costs and mediocre health outcomes likely are at least partly attributable to lifestyle choices that occur outside of the health care system, creating another possible avenue for intervention. This introduction to the symposium on “Free Markets and Health Care” discusses how welfare economics provides a useful tool in evaluating the appropriateness of government involvement in markets related to health and health care. The papers in the symposium provide important new evidence to help inform debates about, for instance, regulations on health care providers and insurers, health insurance expansions, and policies designed to influence health behaviors.