Abstract

Professor Havighurst examines the claim that the United States is overspending on health care. Finding much of the evidence inconclusive, he nevertheless finds one clear cause of allocative inefficiency to be unwise tax subsidies for the purchase of private health insurance. He avers, however, that a more serious problem is the market's failure to offer consumers a full range of health care choices, specifically low-cost options. Here, he makes the novel claim that overspending on health care is attributable to the failure of private contracts to specify the precise character and scope of the health services to be provided and the particular rights and obligations of the various parties to the transaction. This contract failure, he forcefully contends, is in large part the fault of a legal system that has effectively displaced private contract as the ultimate source of entitlements and rights. He argues for making an expanded role for contracts a cornerstone of health care reform.