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Consider two alternative proposals for health care reform

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Consider two alternative proposals for health care reform. Under proposal A, the government mandates that everyone must buy health insurance, restricts insurance companies to provide a single type of policy with generous benefits, and then lets the companies compete for consumers to sell that policy. Under proposal B, the government sets up “health care savings accounts” for everyone and allows insurance companies to offer only policies with high deductibles. Under the latter policy, consumers would then pay for most health-related expenditures using funds in their health care savings accounts and could convert any balance to retirement accounts when they reach the age of 65 (and thus become eligible to government health care for the elderly). Insurance under policy B is therefore aimed only at “catastrophic” events that cost more than the deductible of the policy

1. If you thought the primary problem arose from the moral hazard, which policy would you favor?