Missing Markets
J Mick Tilford
March 29, 2013
Standard analysis
• Tilford is an outstanding health economist
… and an alumnus of this department.
Has been in Arkansas all his professional
• Arkansas is a pretty conservative place.
• How does he frame his analysis?
Beer and Pizza
• Notes that we do most of our analyses
with “widgets”, or in a pinch, beer and
• We get markets – people use their
• Firms enter or exit as profits dictate.
Can you
think of
• 1963 article noted that all would
health insurance for the elderly was
beneficial, but …
• Insurers would have trouble marketing
insurance to people with (generally) high
expenditures and (generally) low incomes.
• Missing markets are inefficient.
• Creation of Medicare filled the missing
Medicare  old; Medicaid  poor
• Tilford argues:
• When someone says the cost of
expanding Medicaid to cover the healthcare needs of poor citizens is something
we can’t afford,
• … they’ve “placed a value on poor
people’s lives, and it is low.”
HIV/AIDS in Africa
• George W. Bush was persuaded, largely
by Evangelical leaders that “all of God’s
children deserved help”.
• Increased US financing from $500 Million
to $3 billion per year.
• Emergency Plan for AIDS has been very
successful, although the economic costs
of HIV/AIDS in Africa are still enormous.
Arkansas Legislature
• Tilford notes that the poor cannot buy health
insurance because they lack the income to do so
… competition won’t do the trick.
• Health quality in Arkansas is low, and costs are
• “Health security for all Arkansans will come by
helping public and private payers achieve the
most efficient outcome.”
• “Students of health-care economics know that
truly is best for Arkansas”.

Missing Markets - Department of Economics