Equity in paying for health care services under a national insurance system.

The debate over the future of the health care delivery system evolves around the policy issue of what constitutes a fair distribution of the medical services which are considered essential to prolonging life, curing disease, and relieving pain. A case can be made that a socially equitable distribution implies that consumption of medical services is independent of the consumer's income and payment for them unrelated to utilization. The present paper examines to what extent the provisions for financing a national health insurance system are likely to advance or hinder the fair distribution of health care services. Almost all bills specify a mix of direct (cost-shared) and indirect (prepaid) financing. When cost-sharing is based on the quantity of services or on the level of medical expenditure, it helps divert medical care and health insurance benefits to high-income persons at the expense of their low-or moderate-income counterparts. When indirect payments or premium levels are determined by insurance risks rather than by income, they may be too high for persons with moderate means, and are likely to exclude such persons from the national insurance program. When health insurance is tied to salaried employment, it discriminates against the unemployed and the self-employed. To rectify such inequities, some NHI proposals specify separate insurance plans for the disadvantaged. Such programs, which require income-testing to determine eligibility, are likely to be plagued by administrative complications currently engulfing other means-tested social welfare programs. The present paper makes some recommendations for the purpose of avoiding these difficulties and fostering equity in health care.