Journal Of The Econometric Society

An International Society for the Advancement of Economic
Theory in its Relation to Statistics and Mathematics

Edited by: Guido W. Imbens • Print ISSN: 0012-9682 • Online ISSN: 1468-0262

Econometrica: Nov, 1992, Volume 60, Issue 6

Organizing the Health Insurance Market<1233:OTHIM>2.0.CO;2-5
p. 1233-1254

Peter Diamond

This paper presents a new approach to organizing universal health insurance. First the government divides the entire population into many large groups. Then, the government creates a Federal Health Insurance System (HealthFed), modeled on the Federal Reserve System, to fill the role now played by the benefits office of a large firm. The HealthFed would create a short menu of alternatives, solicit bids for insuring the entire group, and price alternatives. There would be redistribution between groups and pricing of alternatives to reflect optimal social insurance principles. There would be no connection between health insurance and employment.

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