ABSTRACT
This chapter begins with a discussion of the demand for health insurance, blending together traditional economic models of demand for insurance with the specific characteristics of the nature of health insurance and how it alters the demand for medical care. The chapter discusses the supply of health insurance and a brief excursion into the for-profit versus not-for-profit organizational form that also is prominent in the health insurance market. It includes the issues of market equilibrium in health insurance and the prospect of a "market failure." The chapter looks at the role of the US income tax system in subsidizing demand for health insurance and the resulting increase in the scale and scope of the health insurance coverage of US citizens and the concomitant increase in the size and scope of the US health care system. It analyzes the effects of the new PPACA law that requires all persons in the US to have health insurance.
