Journal of Economic Perspectives: Vol. 8 No. 3 (Summer 1994)


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Issues Every Plan to Reform Health Care Financing Must Confront

Article Citation

Aaron, Henry J. 1994. "Issues Every Plan to Reform Health Care Financing Must Confront." Journal of Economic Perspectives, 8(3): 31-44.

DOI: 10.1257/jep.8.3.31


This paper focuses on three main issues of fundamental health care reform. First, should experience rating--the linkage of premiums to actual loss experience--be retained? Despite widespread support for experience rating among economists, the paper argues that it should be abandoned for reasons of efficiency and equity. Second, would abandonment of experience rating cause much redistribution? The paper shows that redistribution among industries could require significant transitional adjustments. Third, should companies or individuals be subject to an insurance mandate? The paper calls for combining individual mandates, which have long-term advantages, with employer mandates, which have short-run pluses.

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Aaron, Henry J. (Brookings Institution)

JEL Classifications

I18: Health: Government Policy; Regulation; Public Health
I11: Analysis of Health Care Markets


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