Wednesday, February 19, 2003
Baby Boomer Lies and Statistics 101 (first of a continuing series)
News item: about 200,000 Australians aged from their late 20s to their late 30s have given up their private hospital cover in the past two years. According to a spokesman for federal Health Minister Kay Patterson, up to 5 per cent of the drop in cover among the under-40s was because people were moving into higher age brackets:
http://www.theaustralian.news.com.au/common/story_page/0,5744,6006976%255E2702,00.html
Huh? Since when did grasping at statistical straws/insignificances (“up to 5 per cent”) become an excuse for reasoned comment? Not coincidentally, the same spokesman goes on to crow that baby boomers’ children are heading in the opposite fiscal direction: "We are still getting growth among the 15- to 24-year-olds so young people are taking out private health cover, and that's important for the future of the system”.
To understand that these statistics contain some alarming fiscal implications (above and beyond whatever they mean for the future of the public health system), one needs to grasp the health gamble/spin’o’the dice faced by late 20s to mid 30s Australians in June 2001.
With little forenotice, they (and no other Australians) had to make the decision between (i) taking up private hospital cover immediately, or (ii) face paying up on an escalating, 2% annual financial penalty should they later decide to take out private cover.
Younger Australians were exempt from this gamble because the penalty only kicks in at age 30. Those older were effectively exempt, because the decision to go with (i) was a no-brainer – not only could they (usually) easily afford immediate private cover, but being near, on, or beyond the threshold of 50, they were medically “ripe” for such cover, anyway. [Indeed, the unexpected recent large rise in private hospital claims can be attributed precisely to a perverse side-effect of this ripeness – thousands of hitherto-healthy, self-insuring baby boomers rushed into a “don’t delay/never-to-be-repeated” offer, and so, quite naturally, then proceeded to let the wheels fall off their health. But this is another story.]
This gamble vs no-brainer inter-generational divide is compounded by the Medicare levy surcharge, on individuals earning more than $50,000 (or families earning more than $100,000). With the 1% penalty surcharge roughly equalling the cost of private hospital cover, high earners (this time of any age) are given a no-brainer, even on a stand-alone basis. For low-earning Gen X’ers however, whose future income volatility is much higher than for older baby boomers, the stakes are raised – should they go from income famine (without private cover) to feast, they will incur a punitive double jeopardy, hitting them whether they self-insure or not.
The fiscal health roadmap for those 200,000 Gen X Australians is stark – if the “carrot” private cover is just not affordable in one’s 30s, then the “stick” of future punitive pricing just doesn’t matter. Not affordable now equals not affordable ever, from whichever way you look at it. Going from income famine to feast thus becomes more of an unlikely hazard than an aspirational net gain. What started as a real gamble has now become a no-brainer for many of Gen X. And another festering inter-generational borderzone spectre for our social planners – that of the skint retirees of 2025-2040 needing the sort of public health system that last existed only decades earlier.
News item: about 200,000 Australians aged from their late 20s to their late 30s have given up their private hospital cover in the past two years. According to a spokesman for federal Health Minister Kay Patterson, up to 5 per cent of the drop in cover among the under-40s was because people were moving into higher age brackets:
http://www.theaustralian.news.com.au/common/story_page/0,5744,6006976%255E2702,00.html
Huh? Since when did grasping at statistical straws/insignificances (“up to 5 per cent”) become an excuse for reasoned comment? Not coincidentally, the same spokesman goes on to crow that baby boomers’ children are heading in the opposite fiscal direction: "We are still getting growth among the 15- to 24-year-olds so young people are taking out private health cover, and that's important for the future of the system”.
To understand that these statistics contain some alarming fiscal implications (above and beyond whatever they mean for the future of the public health system), one needs to grasp the health gamble/spin’o’the dice faced by late 20s to mid 30s Australians in June 2001.
With little forenotice, they (and no other Australians) had to make the decision between (i) taking up private hospital cover immediately, or (ii) face paying up on an escalating, 2% annual financial penalty should they later decide to take out private cover.
Younger Australians were exempt from this gamble because the penalty only kicks in at age 30. Those older were effectively exempt, because the decision to go with (i) was a no-brainer – not only could they (usually) easily afford immediate private cover, but being near, on, or beyond the threshold of 50, they were medically “ripe” for such cover, anyway. [Indeed, the unexpected recent large rise in private hospital claims can be attributed precisely to a perverse side-effect of this ripeness – thousands of hitherto-healthy, self-insuring baby boomers rushed into a “don’t delay/never-to-be-repeated” offer, and so, quite naturally, then proceeded to let the wheels fall off their health. But this is another story.]
This gamble vs no-brainer inter-generational divide is compounded by the Medicare levy surcharge, on individuals earning more than $50,000 (or families earning more than $100,000). With the 1% penalty surcharge roughly equalling the cost of private hospital cover, high earners (this time of any age) are given a no-brainer, even on a stand-alone basis. For low-earning Gen X’ers however, whose future income volatility is much higher than for older baby boomers, the stakes are raised – should they go from income famine (without private cover) to feast, they will incur a punitive double jeopardy, hitting them whether they self-insure or not.
The fiscal health roadmap for those 200,000 Gen X Australians is stark – if the “carrot” private cover is just not affordable in one’s 30s, then the “stick” of future punitive pricing just doesn’t matter. Not affordable now equals not affordable ever, from whichever way you look at it. Going from income famine to feast thus becomes more of an unlikely hazard than an aspirational net gain. What started as a real gamble has now become a no-brainer for many of Gen X. And another festering inter-generational borderzone spectre for our social planners – that of the skint retirees of 2025-2040 needing the sort of public health system that last existed only decades earlier.
