This paper examines the public provision of health insurance for high
severity illness. Besley (Journal of Public Economics, 1989, 39, 141-1
56) argues that public coverage of high severity illness may interact
with private coverage for low severity illness so as to increase welfa
re. The possibility of interaction between public and private coverage
raises important questions for mixed systems, as in the United States
. Nevertheless, even within the more general framework presented in th
is paper there are no welfare gains of the sort Besley envisions.