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Foreword -- Abstract -- Acknowledgments -- Executive summary -- Pt. 1. Introduction: Why the public role in health care matters -- Choices for state intervention -- A road map -- Pt. 2. A conceptual basis for public and private roles: The three domains of health care -- Market failure and health care needs -- Dealing with poverty -- Summary: Justifications and risks of state intervention -- Pt. 3. Empirical patterns and explanations: Economic issues and health system objectives -- Overall health spending and public/private composition -- Explaining health outcomes -- Out-of-pocket spending versus private and public insurance -- State intervention in the insurance domain -- Pt. 4. Conclusions: The appropriate public role in health -- How to spend public money on health care -- References -- Statistical annex -- Figures

The appropriate role of the state in health is complex both in economic theory and in practice. Theory identifies three reasons for state action: (i) public goods or services with large externalities (involving efficiency); (ii) poverty (involving equity); and (iii) failings peculiar to insurance markets for health care (where both inefficiency and inequity arise). The insurance domain presents the most costly and difficult problems, and explains why - in contrast tom other sectors - governments tend to finance an increasing share of health care as incomes rise. Regulation, mandates and provision of information are also crucial public instruments; public provision of care is less important.