Market failure is a situation in a free market characterized by inefficient distribution of goods and services. In other words, it can be explained as a situation whereby the allocation of resources lacks Pareto efficiency. It is worth noting that the incentives for rational behavior in situations of market failure barely lead to rational outcomes, for the group, as people act in rational self-interest. The role of government in remedying market failure in the health sector include

• Lack of competition. Services in the health sector do not compete because they are not equal. In other words, each service is unique due to the difference in the degree of monopoly power. The situation has led to an increase in prices in the health sector. The government should subsidize the sector or use price ceilings in order to promote the affordability of health services.
• Information asymmetry. The difference in information between doctors and patients enables doctors to use the imbalance to manipulate services delivered to patients hence overcharging them. The government should initiate programs to educate the public on matters related to health in order to remedy the information asymmetry in the health sector.