Politics of social health insurance

This paper studies the political support for social health insurance when a private alternative exists. Individuals differ only by their risk. For the more realistic distributions of risk, a majority of agents do not want public insurance. However, in a representative democracy, or in a direct democracy with altruistic agents, we show that social insurance can be adopted, particularly for treatments which have the best cost-utility output. But if the low risk agents are more politically powerful than the high risk, the low cost treatments will not be refunded by social insurance, even if their utility is high. (C) 2008 Elsevier B.V. All rights reserved.