This paper examines the structure of the American medical care system, especially the system of care for the elderly. We focus on three sets of interactions: coverage rules (how people get health insurance and who pays for it); the reimbursement system (how providers are paid); and access rules (what are the financial and nonfinancial barriers to receipt of care). Coverage in the United States is variable – guaranteed and complete for the elderly, but neither guaranteed nor complete for the nonelderly. Historically, reimbursement of providers was very generous, and access to providers was open. Increasingly, though, the reimbursement and access routes are being restricted, as insurers respond to the perception of significant moral hazard in the receipt of care.
We seek to explain the creation of national Old-Age Insurance (OAI) and Health Insurance schemes, and their subsequent growth. We estimate a hazard model of the ‘risk’ of a country’s creating social insurance. Many theories about the adoption of social insurance exist, but none fits the data well. We find weak evidence that the risk of adopting a system declines in a country’s wealth and in the ethnic heterogeneity of its population. Catholic countries are more likely to create earnings-related OAI systems. We conclude that social insurance can be politically expedient for many different reasons. The growth of OAI spending since 1960, controlling for population ageing, has varied considerably across countries. We find it has been faster in countries emerging from dictatorship, and slower in English-speaking countries. Thus the pension spending is following rather different trajectories across countries.