Health insurance in a democracy: A reply to Richter

Abstract

In his comment to my paper "Health insurance in a democracy: Why is it public and why are premiums income related?" (Kifmann, 2005), Wolfram Richter argues that my explanation for public health insurance with income-related premiums is not convincing. In particular, he remarks that my result would not necessarily hold if one bounds post-constitutional choice of coverage from below at the constitutional stage. Then a system with flat fees might be preferred. This is not surprising since the main drawback of the regime with flat fees is that it finds no public support ex post. Bounding coverage from below would clearly remove this problem. Richter's remark can be reduced to the question whether it is possible to specify the level g of public health insurance at the constitutional level. I discuss this problem on page 287 of the paper where I comment on Mark Pauly's proposal to establish "income-dependent social health insurance". This scheme also requires g to be specified ex ante. In my opinion, this is a difficult task since legal descriptions like "adequate", "medically necessary" or "cost effective" can be interpreted differently ex post and are therefore not useful in establishing either a specific or a minimum level of g which is sufficiently high to make a system with flat fees attractive at the constitutional level. In this respect, Richter and I disagree. As a consequence, I find it highly unlikely that a public health insurance system with flat fees will be politically stable in a democracy.