Tuesday, August 24, 2004

The private health insurance sweetener

A bribe to the elderly? (who, contrary to the “mortgage belt”/young families demographic cliché, disproportionately live in marginal seats). Of course.

But unlike most bribes, this one is basically just all envelope – with no actual cash inside. At least for the elderly and sick, anyway (the private hospital/health insurance industry is another matter).

Insurance works like this. A large pool of the lucky pays for the misfortunes of the few. Change this formula too much – e.g. the pool becomes predominately the unlucky (= actual claimants) – and it is no longer a working case of insurance at all. Premiums will be priced at the same level as average claim cost, to reflect the near-certainty of the latter event, plus a margin for administration and overheads. This sounds like an irrational system – surely people would be better off, and things simpler, by just paying for their new hips et al as they go – but when a taxpayer subsidy is injected into it, everything changes, of course. Insurance “pools” that are otherwise unviable become de riguer.

As Australian Consumers Association spokeswoman Nicola Ballenden says:

[H]ealth funds will suffer a double-whammy of more older people, and fewer younger people, which will place even greater pressure on premiums.

To which chain reaction I’d then add: an even greater pressure for still more taxpayer subsidies for elderly private health insurance holders.

The issue here is not just fiscal erroneousness, nor the consequent public subsidy of a large-scale, and only loosely accountable private industry (private schools and Job Network are co-equal offenders in this respect, BTW). As the 30-something Rowen Atkinson writes in a letter to the editor in today’s SMH:

John Howard, we had an implied contract. I would sign up for private health insurance in my 20s and pay through the nose for a service I wouldn't use until my 60s. You were going to maintain that system and keep pressure off premiums by encouraging others to sign up while young and fit, and making the elderly pay more . . . Now that you have reneged on your end of the bargain, can I have the last four years of insurance payments back?

Today’s elderly often have a strong sense of their own entitlement:

You've paid your taxes the whole of your working lifetime, you've supported the other people with their handouts - the unemployed, the sick. We're the ones that with our taxes have provided the money for it.

But you’ve really got to wonder when Australian Medical Association vice-president Mukesh Haikerwal is also chiming in to the same tune:

They've been there since day one, through the hard times, and this is a bit of payback.

If the public health system is inadequate lifetime “payback”, then fix it, by all means.

Otherwise, be careful of what you wish for, oldsters. There’s plenty of younger folk living through hard times right now – sustained hard times such as you never, ever saw in your own lives (certainly not after 1945). And insurance pools are funny things – if enough people drop out of them, an alternative means of carrying the unlucky must necessarily be found.

Which will lead to a “free rider” problem and all that – as in problem for you, that is: you’re paying for a commodity that GenX is going to have to be eventually given for free, unless something changes drastically, and soon.

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