A measure of the welfare cost of health insurance.

A measure of the economic welfare cost due to excess usage of insured services is presented, illustrated by empirical estimations of the welfare cost of existing insurance in selected years and of the effect on marginal welfare cost if all 1963 physician care had been fully insured. It is argued that no case can be made for either increasing or restricting insurance coverage as a means of reducing excess usage cost, but that empirical investigation, with refined estimates of critical parameters, will allow prediction of the effect of any health insurance package on economic welfare.