THE Japanese approach to health insurance is quite different from that of the United States. These differences can be seen most clearly by contrasting two fundamental principles of insurance that amount to different ways of conceptualizing fairness. One can be called the “investment principle,” and the other the “equality principle.” Other dichotomies that convey this distinction include “equity” versus “uniformity,” “risk rating” versus “community rating,” and “casualty insurance” versus “social insurance.”

The investment principle means fairness in the sense that individuals should get out what they put in – get their “just desserts.” If they have a higher risk of whatever is being insured against – death, auto accidents, illness – they should pay a higher premium or receive a lower benefit. Equality means a different kind of fairness, as in the classic socialist formulation “to each according to his needs, from each according to his means.” In terms of values, these differences relate to an ethic of individualism versus an ethic of social solidarity.

The difference is easily seen in health insurance. Those who believe in investment would assert that people who exercise and don't smoke should not have to subsidize those who lead riskier lives, and they ask why people with money should not be able to buy superior medical care. Those who believe inequality would argue that poor sick people should not be deprived of the medical care they need and so must be subsidized by others.