Decentralizing tragic choices: pooling health risks with health unions

American Journal of Economics and Sociology, The,  Jan, 1998  by K.K. Fung

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Third, medicare is abolished and the medicare tax is channeled into the health-dollar funds. People over 65 years get their lifetime contribution to medicare repaid with interest, and if not employed, they will contribute up to 14 percent of their above-poverty income. This contribution is tax-exempt and matching funds from the government make up any shortfall.

In summary, the need for additional taxes to fund the global health budget is very minimal. The leakage of health funding through higher cash income to those with above average health coverage will be more or less offset by the extra tax on these extra incomes, additional contributions from the non-elderly whose incomes are above the poverty level, and additional contributions from the well-to-do elderly who are now enjoying medicare benefits at very low insurance premiums. In fact, if the global budget is tied to a lower constant percentage of the GDP, the need for extra taxes can be done away with.

The general idea of health unions is not to increase health access by increasing the funding but by redistributing the health dollars of the current national health budget.

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A Recap: Why Are Health Unions Better Than Health Insurance?

To summarize, health unions have many unique advantages that health insurance does not have. They are as follows:

* Decentralized tragic choices: Life-and-death decisions arouse a sense of tragedy because there are conflicts in ethical principles. This sense of tragedy, however, can vary depending on how the tragic choices are made. In centralized decision making such as under health insurance, the conflicts between ethical principles are highly visible and often explicit. Denial of funding for life-and-death cases is viewed as more tragic. In impersonal interactions of independent decisions such as under health unions, these conflicts are hidden and anonymous. As a result, people are resigned to seemingly random results of uncoordinated innocent choices.

* Interpersonal comparison of utility: A centralized funding agency also has insurmountable difficulty in comparing interpersonal health utility. An explicit uniform tradeoff for all the insured among the many relevant factors, even if possible, is even harder to defend. On the other hand, individual consumers can freely take into account a broad range of utilitarian factors to arrive at a unique tradeoff.

* Flexibility: Individual consumers making the tradeoff also do not have to worry about setting a precedent. They can change their mind about the tradeoff depending on changing circumstances. An insurer, on the other hand, does not enjoy the protection of impersonality and anonymity. Instead, it must be stuck with a bad precedent and apply it uniformly.

* Diversity: Letting health consumers decide what treatments to fund for themselves and fellow members in their health unions reduces unnecessary disagreement on treatment limits. Not only might the overall treatment philosophy differ among health unions, members within a health union might differ on whether or how much to fund in any particular fund-raising appeal (cf., with Emanuel's commonality requirement in community health programs, 1991: 179-183). On the other hand, a uniform benefits package under health insurance requires the insured to subsidize all treatments in the package whether they agree with them or not.