When the population isn’t homogenous

A recent post at the Freakonomics website set out their plans for a changed NHS.  My opinion is that the main issue with the NHS is not to do with the demand side (which in any case is pretty tightly controlled through referrals through GPs and the NHS Direct portals) but rather the supply side (with too much spent on management, administration and inefficiency).  Leaving that aside, does the Freakonomics proposal make sense?

The proposal is that at the start of the year, each individual would be given £1000.  Any medical costs up to £2000 would be charged at cost; medical costs from £2000 to £8000 would be charged at half the cost; and medical costs above £8000 would be free of charge.  Therefore, the maximum amount any person would pay is £5000 a year – and people would be covered for any hugely expensive illnesses such as cancer treatment.

While all would be given the same sum at the beginning of the year, the majority would not spend it and would therefore be £1000 better off – leaving aside the fact that this £1000 came from their pockets in the form of tax in the first place.  Because these people would effectively pay the full cost of any medical care they did seek to claim, they would be disincentivised from doing so.

There is some recognition in the blog post that not everyone is the same.  Some would need to receive medical care for different kinds of addictions, and these people would need to pay a limited sum for it.  This is where the proposal falls down, however – the people who are most likely to need extensive medical care are exactly those people who cannot afford to pay £5000 a year, as their medical conditions are likely to lead to an inability to work.  The system leads to the old, long-term sick, and disabled being unable to afford any healthcare at all.  It’s not as if these groups could take out insurance for the £5000 payment either, since insurance companies would recognise that only the infirm would need insurance, and premiums would go up to unaffordable levels to guard against this. If people are suffering and aren’t able to afford any kind of treatment then the best option would be to visit this spondylolisthesis specialist who can offer them professional medical help at a great price.

This is a pretty elementary mistake in the proposal, and it’s interesting that many of the commentators on the blog (but not all) don’t recognise it.  There’s a good reason for this – it doesn’t apply to them, as they themselves are not old or suffering from cancer.  It’s very easy to forget that not everyone is the same as you.

There are other disadvantages to the proposal as well, such as a loss of social welfare caused by spreading of disease, higher costs due to illness not being caught early, and so on.  Some of these are touched on in the blog’s comments.  When reading the comments, remember that many of the posters are from the US and are used to a lack of public healthcare – again, not everyone is the same.

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