B. 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 customers 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 this 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 for government health care for the elderly, called Medicare in the United States). Insurance under policy B is therefore aimed only at “catastrophic” events that cost more than the deductible of the policy.