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Nosemonkey's EUtopia

In search of a European identity

Boredom + boredom = surprisingly interesting

In the world of Nosemonkey, there are a few givens:

1) I can’t do maths

2) The NHS is the single biggest problem facing the UK, and the cause of most of this country’s woes, but no one will ever be able to sort it out

3) Economics is boring (even though I know it’s not really)

4) Trains are even less interesting than blogs

The first two are largely irrelevant here. But, to my surprise, Tom at Blairwatch has managed to combine the last two in to (what strikes me as) a well-considered summary of the difficulties of working out quite why the British rail system is just so rubbish, and just what can be done to fix it.

Now that that all makes sense, all I need is for someone to explain to me why, when a £50 a month contribution to a private health insurance scheme will cover me for pretty much all necessary hospital trips and a £80 a month contribution to a private pension would (according to the government’s pension calculator) leave me with a weekly pension of c.£83 a week (£1 more than the standard state pension, assuming retirement at 65), the government effectively forces me to pay National Insurance when that money would be just as -if not more – profitably invested in private health insurance and pension schemes? Especially as the state pension’s unlikely to exist by the time I’m finally allowed to retire (probably 90 or so by then), so all the National Insurance I’m paying would, from a purely selfish point of view, be far better invested in a private pension fund.

Small words and short sentences only, please. (And if I see the term “monetarism” in there, your comment will be instantaneously deleted…)

7 Comments

  1. Because when you pay an insurance premium you are paying only for yourself.

    When you pay NI you are paying for yourself plus every feckless bastard that earns less than you do. Plus all the promises made by generations of politicians now thankfully dead.

  2. Hmmmm, this is similar to Social Security in the states, though we do not have a choice whether or not to pay into the system. Those who work for the government have a private pension fund, but not the middle class….lucky you….Social Security is already bankrupt and living on tomorrows dollars.

  3. Tim – yep. But considering that National Insurance is – technically – voluntary, and I have the option of not paying it (especially now I'm self-employed), is there actually any benefit to continuing to fork out however much it is per month for the limited return I, as an individual, can get from the thing?

    As I say, I don't understand economics and can't do maths, so I genuinely can't work this one out… Not paying National Insurance would, however, give me enough money to take out private health insurance and make a decent contribution to a private pension… What's the downside I'm missing?

  4. Good blog, but I'll try to explain why it's not like it looks.

    "when a £50 a month contribution to a private health insurance scheme will cover me for pretty much all necessary hospital trips"

    but the difficulty is the difference between individual actuarial risk and the overall social risk pool.

    Your 50 quid is limited in two ways. First its coverage is more limited than you think. If you had a chronic disease you would not be able to coverage for anything like that. If you were over 60 they'd laugh in your face. Second the removal of the low end of the risk pool from the overall actuarial pot means that all premiums rise. So if you get diabetes, or COPD or CHD or depression watch as your private health provider tells you to piss off inside three months.

    Your 50 quid is only there, effectively, because the NHS subsidises the private sector in two ways. Indirectly, all the really sick are denied access to private insurance through prohibitive premiums, which means that the private sector can keep their costs down by only treating relatively healthy people. Second there is a direct subsidy because all private sector staff have been trained in the NHS, are developing their skills and new techniques in the NHS, and the NHS takes in all the private sector's screw ups and saves their lives. (and the private sector F-up rate is much higher than you might imagine)

    For a sight of how private sector insurance actually work when it is not slicing out a niche market like it is in the UK you need to look at overall cost per capita in the rest of the world. As soon as you ask private insurance to do what the NHS currently does, it very quickly becomes very expensive.

    In the US health care costs per capita per year are $6,000, in the UK $2,500. Even in Europe where there is a theoretical market in provision of social health insurance (e.g. Germany and Holland) the costs are closer to $3,500. The only place in the Western world with cheaper health services is New Zealand, where they have strict rationing of care and Big Pharma over a barrel (rather than the other way round like it is in the US). The other thing that follows with large market of health care insurers seperated from the health care providrs is massive technical inefficiency in the administration of healthcare (with massive transaction costs). Administrating the US healthcare system e.g. is estimated at 15-20% of total health spending (cf 6-10% best estimate for the NHS).

    What this actually means can be shown by comparing US with UK. I live in Washington State which has no local income tax and about 15% federal income tax, so a very low tax economy. But adding the cost of private health insurance, which provides me with marginally less (and definitely less conveniently) than the NHS, and the relative monthly witholding from my salary is actually greater than what I paid in tax and NI in the UK (as a higher rate tax payer).

    What is happening to cover this enormous cost is more and more cost-shifting onto the patient – so if you visit a doctor that's $25, if you go to an ER that's $50. There are also an increasing number of schemes where your first $1000 or even $5000 of expenditure in a year is not covered.

    So – the answer to your question is that

    1/ read the small-print – you won't get decent health insurance for 50 quid a month, if you actually ever need to use health services.

    2/ dilution of the risk pool will mean that the NHS will not see cost savings commensurate to lost revenue, the NHS will then either collapse – in which case the cost of your private medical insurance will rise as the private medical insurers will have to provider comprehensive health coverage – or the government will have to increase your taxes to prop up the NHS, in which case you will be worse off, have access to less comprehensive care and the entire economy will suffer because still greater proportions of GDP will be going towards healthcare.

    Happy to provide links to all this if you want.

  5. it seems to me too that the answer is simply that you are not just payin for yourself… but then again i love trains, so you shouldn't believe a word i say:-)

  6. Hmmmm, and there was me thinking that the greatest problem facing the UK was the inevitable collapse of modern civilization as a result of climatic change and environmental pressures and the subsequant economic melt down and total chaos! Guess I was wrong!

  7. Tim – anyone who earns less than Nosey is not necessarily feckless. Why am I not surprised to read such a nonsensical and nasty statement from you.

    Nosey – the private pension *may* net you a quid a week more, but then again it may not. Depending on the type of pension, it may well depend on the value of the stock market on the day you retire how much you get, which is a wee bit risky, no? Someone who retired on September 10 2001 would be a lot better off than someone who retired on September 12 2001.

    Also, NI isn't really a savings scheme, despite the popular misconception of it as one. What you're actually paying for is government expenditure right now (the "promises made by generations of politicians" that Tim referred to). Essentially, you are paying part of your grandparents' pension in the hope that 40-odd years hence your children and grandchildren will pay yours