ABSTRACT
In this chapter, I examine sources of market failure in both health insurance markets and health care service markets so as to be clear as to where government intervention is necessary from the perspective of efficiency. I also explore the extent to which government intervention in health insurance and health care services markets is required on the grounds of a theory of distributive justice. Going back to first principles at this juncture will assist in analyzing reform proposals in subsequent chapters. It is impossible to evaluate the benefits and costs of health care reform without first identifying what the objectives of the health care system are or should be.
