Obamacare 5 years later. Crow, anyone?

[Aber]

You're correct, I have occasionally been snippy with EG.

Which is understandable as Elf Grinder 3000 could be seen as giving actuaries a bad name.

 

[Stimpson J. Cat]

Taxes, they are not similiar.

Taxes as a percentage of GDP by country
https://en.wikipedia.org/wiki/List_o...centage_of_GDP

In addition to what Emily's Cat said, you were specifically referring to how horrible it is that "they are forced to pay astronomical taxes to fund it", where the "it" in question was clearly their universal health care system. Regardless of how much higher total tax revenue (as a percentage of GDP) may be in the UK compared to the US, it is clear that you personally would not be paying "astronomically higher" taxes to fund healthcare if you were in the UK, because as we already saw, your total income tax rate in the UK would only be marginally higher than it is in the US. And the same goes for almost everybody else. The fraction of people who make more than $200,000 a year in either country is extremely small. And a lot of the people who do make more than that get a lot of their income via capital gains tax, which is not subject to the National Insurance tax in the UK. So they would typically be paying an even lower percentage of their income to pay for the health care system.

If taxes are higher in the UK, it clearly is not due to having tax-funded universal health care, because the tax revenue that is raised to pay for health care in the UK just doesn't amount to that much. In fact, I would guess that the majority of the difference in those figures you cited comparing tax revenue for the US and the UK come down to VAT taxes.

The bottom line is that health care costs in the UK are much lower than the US. So the notion that people in the UK are paying astronomically high taxes to pay for it is absurd, and demonstrably false.

 

[Architect]

In addition to what Emily's Cat said, you were specifically referring to how horrible it is that "they are forced to pay astronomical taxes to fund it", where the "it" in question was clearly their universal health care system. Regardless of how much higher total tax revenue (as a percentage of GDP) may be in the UK compared to the US, it is clear that you personally would not be paying "astronomically higher" taxes to fund healthcare if you were in the UK, because as we already saw, your total income tax rate in the UK would only be marginally higher than it is in the US. And the same goes for almost everybody else. The fraction of people who make more than $200,000 a year in either country is extremely small. And a lot of the people who do make more than that get a lot of their income via capital gains tax, which is not subject to the National Insurance tax in the UK. So they would typically be paying an even lower percentage of their income to pay for the health care system.

If taxes are higher in the UK, it clearly is not due to having tax-funded universal health care, because the tax revenue that is raised to pay for health care in the UK just doesn't amount to that much. In fact, I would guess that the majority of the difference in those figures you cited comparing tax revenue for the US and the UK come down to VAT taxes.

The bottom line is that health care costs in the UK are much lower than the US. So the notion that people in the UK are paying astronomically high taxes to pay for it is absurd, and demonstrably false.

There is an extremely long thread (which I have been rereading over the last few days) in which Rolfe went into healthcare costs and tax in some depth; in summary, those in the US will generally pay more when total healthcare costs (i.e. including employer's contributions) and taxes are combined than the UK.

The extent to which she included employers' NI contributions was not clarified but, speaking as an employer, I would be surprised if these made a significance difference inasmuch as they will be much lower than US employer's PHI contributions and excesses/co-pays.

Now of course there will always be winners and losers in both systems. Someone with a series of ailments in the UK system will be well ahead of (say) my wife who (childbirth aside) hasn't been in hospital at all in her adult life and is lucky is she sees our GP once a year.

Interestingly it is my wife's employer who provides her with a BUPA-style top-up family PHI policy. Going by her tax liability, it seems to cost her employer around £400 PA. Even covers pre-existing medical conditions.

As others will be aware from my previous postings elsewhere, it's so cheap because anything serious gets covered by NHS as a matter of course - in short, when my knee got replaced, it knocked a couple of weeks off the waiting list and I got a swanky room with better food.

Damned if I would pay even £400/year if it was coming out my own pocket. I got the same surgeon, physio, etc. as I'd been seeing under the NHS anyway. Plus the new Southern General has NHS single rooms now anyway.

 

[Architect]

Going back to the point at hand, I wonder about the extent to which our higher taxes would be funding a significantly greater welfare safety net than in the US: my general understanding, but unsubstantiated by any research I hasten to add, is that we spend a surprisingly large sum on this.

 

[Francesca R]

If taxes are higher in the UK, it clearly is not due to having tax-funded universal health care, because the tax revenue that is raised to pay for health care in the UK just doesn't amount to that much.

Health spending from government in the UK is about 18% of the total I think and just under 7% of total economic output.

 

[Francesca R]

Interestingly it is my wife's employer who provides her with a BUPA-style top-up family PHI policy. Going by her tax liability, it seems to cost her employer around £400 PA. Even covers pre-existing medical conditions.

That sounds very low. It could be the amount of the tax paid on the benefit, which would mean the policy cost would be over double that? If not it is a remarkably low price.

Damned if I would pay even £400/year if it was coming out my own pocket.

Employer provided private cover does really--it's just that employers don't usually give the option to take the premium as pay instead. (It would still be worthwhile to opt out if one didn't even think the cover was worth the tax on itself)

 

[Francesca R]

GDP is a good barometer of the tax burden

its 39% for the UK and 26% for USA

33% for the USA. (includes non-tax receipts such as social insurance and any revenue from state owned things.)

Source is Annex table 26

 

[Francesca R]

By the way, I was hoping to get some feedback on the evidence I posted which shows that Canadians and Europeans are actually benefiting enormously from the drug development that Americans pay for. It is certainly ironic that these ungrateful freeloaders should turn around and castigate us for having high prices for medical care when those high prices are subsidizing their low prices.

You would accept that this situation is a collective voluntary choice by the US, I trust?

Sort of similar to, if I always get the two-versions-ago iphone (I hate iphones) when I upgrade, I "freeload" on a very fancy device that is "subsidised" by all the early adopters who always pay up big-time for the latest release.

 

[Francesca R]

A private market where everyone pays their own money towards their own health care is much more efficient [ . . . ]

No it isn't, there is no risk pooling. Diversification of idiosyncratic risks by pooling them mathematically lowers total, and therefore average risk. Always. (Unless everybody has the same risk which you have already conceded is not the case)

 

[Francesca R]

I live in the UK, and while the Tories have been attacking the NHS in the last 5 years, it's still an excellent model. I look at the US and I can't understand how people put up with a more expensive system that doesn't cover all of the population.

Our politicians scare people with the American model.

I have never seen any politician or even voter in the UK or Europe advocate the American model.

It is kind of the reverse of the "if you want to get to X, don't start from where you are" scenario. As in "Shall we move to where they are?"

 

[sunmaster14]

You would accept that this situation is a collective voluntary choice by the US, I trust?

My point wasn't really that Europeans are ungrateful for the subsidization that the US provides them (there is defense subsidization too, including maintaining the safety of shipping across the oceans that the whole world benefits from), or that we shouldn't keep providing those implicit subsidies. My point is that the European health care model looks better than it is because of that subsidization. If we (i.e. USians) go to that model too, we won't get the same benefit that Europeans are getting.

Sort of similar to, if I always get the two-versions-ago iphone (I hate iphones) when I upgrade, I "freeload" on a very fancy device that is "subsidised" by all the early adopters who always pay up big-time for the latest release.

Right, but not everybody can adopt your strategy.

 

[sunmaster14]

No it isn't, there is no risk pooling. Diversification of idiosyncratic risks by pooling them mathematically lowers total, and therefore average risk. Always. (Unless everybody has the same risk which you have already conceded is not the case)

I think EG3000 is talking about having everybody pay prices for insurance according to their risk. That is not the case anymore under Obamacare. The only risk factors now are age (which is diluted in terms of pricing) and smoking (which also is probably).

 

[Francesca R]

My point is that the European health care model looks better than it is because of that subsidization [externality]. If we (i.e. USians) go to that model too, we won't get the same benefit that Europeans are getting.

May be true. Alternatively, some nation other than the US could pay up even more for medical R&D and get even better innovations which the US and everyone else could piggy-back on. If you are arguing that it is inconsistent for anyone to criticise the US health-financing system while at the same time benefiting from a positive externality it throws off to the rest of the world, well, that doesn't usually stop folks. Nor does the US creating positive externalities levitate its system above criticism. Nor does this observation mean that the internalties (to the US) are "worth it".

Right, but not everybody can adopt your strategy.

They can't all be early adopters either. It's kind of collectively voluntary . . .

 

[Francesca R]

I think EG3000 is talking about having everybody pay prices for insurance according to their risk.

That's what I inferred. And if these risks are not pooled (everybody has an individual equity insurance portfolio) then the total size of that portfolio will be a lot higher than a general one. Or if it isn't, there will be more defaults (untreated sick folks)

 

[sunmaster14]

That's what I inferred. And if these risks are not pooled (everybody has an individual equity insurance portfolio) then the total size of that portfolio will be a lot higher than a general one. Or if it isn't, there will be more defaults (untreated sick folks)

I'm not sure I understand your point. Why wouldn't the risks be pooled? Everybody would still be buying catastrophic insurance. They would just be paying different prices according to their risk factors. Those who have high but predictable health care costs might be subsidized in some way, but the subsidies would be explicit rather than implicit the way they are now.

 

[Francesca R]

Well I assumed ElfGrinder3000 advocated an individual equity arrangement in line with their previous posts on health insurance, in which case there's no cross-subsidy between policy holders, only between the policy holder and the insurer.

 

[sunmaster14]

Well I assumed ElfGrinder3000 advocated an individual equity arrangement in line with their previous posts on health insurance, in which case there's no cross-subsidy between policy holders, only between the policy holder and the insurer.

I'm still confused. Risk pooling has nothing to do with subsidization, cross or otherwise.

 

[Francesca R]

In a pooled insurance fund, the lucky (who don't claim) compensate the unlucky (who do). And with health insurance it is also pretty unavoidable that the sick (sick not just from bad luck) are compensated by the healthy (healthy not just from good luck).

In a fund that is fully individual equity, there is no such cross-compensation.

I switched "subsidise" for "compensate"

 

[sunmaster14]

In a pooled insurance fund, the lucky (who don't claim) compensate the unlucky (who do).

No, they don't. The insurance company does. "Lucky" people lose on their individual bets with the insurance company, and "unlucky" people win. "Lucky" people don't actually pay more if there were more "unlucky" people than expected. The insurance company just loses money.

And with health insurance it is also pretty unavoidable that the sick (sick not just from bad luck) are compensated by the healthy (healthy not just from good luck).

Why? That's what underwriting is meant to prevent. Just because Obamacare does away with underwriting, it doesn't mean that it didn't actually work.

 

[Francesca R]

"Lucky" people lose on their individual bets with the insurance company, and "unlucky" people win.

That is what I mean.

"Lucky" people don't actually pay more if there were more "unlucky" people than expected. The insurance company just loses money.

They pay more than if the unlucky were not insured, and would pay less if they didn't insure themselves. But of course folks don't know what their luck will be.

Why? That's what underwriting is meant to prevent. Just because Obamacare does away with underwriting, it doesn't mean that it didn't actually work.

Critics don't think it works so well, or worked so well. Even with quite intrusive underwriting, information asymmetry can produce high-utilisation pools of insured, for which the remedy (for insurers) is/was to deny cover to a significant fraction of insurees (outright denial of insurance or rescinding payouts)