I'm struggling to sort out how our very expensive but very much middling heath care system fit into this framework.

Maybe there are some things that markets can't capture...

In the healthcare system, the intersection of private and government action create a flawed system.

What we want from a healthcare system is "health and wellness", i.e., lack of disease, long life, healthy kids. Our health insurance system provides short-term access to health care services.

Healthcare services are a component of health and wellbeing, but the market seems unable to provide health and wellness to the population as a whole. (We're around number 50 in the world in terms of life expectancy, on a par with Cuba and Bosnia).

An example: I currently smoke from time to time. I'm currently an Aetna customer. If I keep smoking, it could cost hundreds of thousands, even millions of dollars in health care costs when I get older. It's a pretty safe bet that Aetna won't be paying for my care. So what does Aetna care if I quit? Are they going to be agressive in spending money to help me quit? No.

Likewise, are they going to pay for my gym membership? Or create powerful incentives for me to workout? ( They might offer some discount on gym membership...) If they had to pay for me as a wheezing fat old man I'd think they might look at me differently.