Hari on Public Services


Let\’s start with the health service. The NHS is, in effect, a very wide health insurance scheme.

No it isn\’t. It\’s a combination of a health insurance scheme and a health assurance scheme. As your basic analysis is wrong at the very start of your argument the rest is also incorrect.

To explain. Insurance is where you pay to protect yourself against the effects of something that might or might not happen. Fire insurance for your house, car insurance for the risk of your maiming someone else while driving. You don\’t think these things will happen but the effects if they do (replacing your house, paying for the 50 year care for a quadriplegic) are so impossible for you to bear without some risk pooling that you are willing to pay a monthly premium to protect you against said low risk but possible effects.

Assurance is something different, it\’s paying into a savings plan (or if you prefer, a pre-payment) for something you think probably will happen. It might not, for sure, but the probability of it happening is somewhere between odds on and nearly dead certain. A savings plan to pay for your funeral is assurance: you\’re almost 100% certain that you\’ll need a coffin or a crematorium at some point (there are always those few who are lost at sea etc). A pension plan is a form of assurance: you\’re pretty sure you\’ll live to draw it, you certainly hope you will, but there\’s always a chance that you\’ll pop your clogs the day before you retire. This difference between pensions as assurance and insurance is why the State pension age should rise to the average life span: the state pension being insurance that you\’ll outlive the assurance that you have rationally bought (no, not a right wing idea, comes from Brad Delong, a Clinton Admin official).

Turning to health care, the NHS is a mixture of both of these things. Yes, it\’s an insurance scheme for if you get cancer, if you need to be scraped up off the road with multiple injuries. And in this case, yes, the total population probably is a very good risk sharing pool. That doesn\’t mean it needs to be organised as it is, a Stalinist centrally operated both insurer and provider, but there\’s certainly a decent argument to be made for tax funded such insurance over the whole population (one I agree with BTW).

But there\’s a whole another level of health care which is much closer to the assurance model. Routine health checks, seeing a GP, needing a new knee perhaps, vaccinations if you want to travel, vaccinations of children say. These are predictable costs (to an extent) and they\’re also not high costs. The assurance model is thus a better fit. The risk pooling part is much less important. An individual could rationally purchase private insurance or prefer to pay out of pocket for whatever they consume. But there is no argument that this part of health care has to be pooled, for insurance risk purposes, over the entire population.

Making this difference is one of the things that people identify as making the French system work so well (routinely called the best value system in the industrialised world). Cancer care (and a few others) is 100% paid for from the insurance you pay as a deduction from your wages (very like NI, although the system that spends the money is very different from the NHS). Routine medical care is paid 70% or so from said insurance, the balance being paid by the patient: and the vast majority of the French take out private insurance to cover that as well. Note though that even when the State will pay, it\’s not free at the point of consumption. You pay first then get it back.

So, to wrap up, Hari\’s argument does (arguably) hold for catastrophic care, but not for all health care. Which means that it doesn\’t hold for the NHS, which is both.

Technology is similarly making the case for the BBC all over again. Soon, a majority of TV viewers will have automatic recording technologies such as TiVO and Sky Plus, so your favourite programmes are sitting there waiting for you when you switch on the box. One of the many advantages is that you can simply fast-forward through the adverts: I don\’t think I\’ve watched a single one since I got mine six months ago. TV advertisers are waking up to this drying up of their audience, and demanding lower rates. Commercial television is going to have drastically smaller budgets as this trend deepens – and the quality will inevitably deteriorate.

So how will good TV shows be paid for in future? One alternative revenue-stream was going to be phone-lines on shows like The X-Factor – but the British TV industry just tossed that option into the shredder by famously ripping off their callers. Then there\’s the option of subscription channels you have to pay for monthly. But if we\’re going to do that, doesn\’t it make more sense to retain the ultimate high-quality subscription channels for just 36p a day, through the BBC licence fee?

Sure, as long as I\’ve got the opportunity to opt out, as I do with Sky, Setanta and any of the others. No opt out allowed and it isn\’t the same at all, is it?

8 thoughts on “Hari on Public Services”

  1. What struck me was that he was happy to claim that the NHS was a health insurer, and that private insurers are bad because they can refuse to insure people, but totally ignores the fact that the NHS is also a healthcare provider, which has nothing to do with the insurance aspect of what it does.

  2. It’s all part of the same “but it really is good value, and a needed service” etc etc. Fine. If that’s all true, there’s no reason to make it compulsory, people will pay for it anyway. And if they won’t, your argument is false. So drop the gun, and stand by your convictions.

  3. I largely agree with you. His argument regarding the NHS has some merit, and I plan on writing a full blog post on that side of things. His argument regarding the BBC is total balls.

  4. “…private insurers are bad because they can refuse to insure people…”

    The NHS is worse – it can take your money in NI contributions for years (rrgardless of whether you want to pay for them or not), then turn around and refuse you lifesaving drugs or surgery because it is ‘not cost effective’.

  5. Did he seriously just argue that TVOD will ensure the survival of the license fee? Words fail me….

  6. “…the State pension age should rise to the average life span”

    No it shouldn’t. Because more people live into old age doesn’t mean they are any more able to work at that age than ever it did.

  7. One is not a logical consequence of the other, but (given the massive decline in the proportion of jobs that involve hard manual labour, and the substantially improved quality-of-life of people aged 65-75) both are actually true.

  8. A further thought – at least with private insurance there is a contract which should specify what cover the customer is actually getting. With the NHS and the de facto rationing that takes place, there is no link between the premium (tax) paid and cover received. An explicit statement of what cover you do get from your general taxation insurance/assurance would allow individuals to decided whether to take out seperate insurance to cover any gaps – e.g. speed of treatment, availability of latest drugs etc.. Of course that opens up all sorts of political questions – much better to pretend the NHS covers everything than to admit it doesn’t and watch the consequent growth of private provision.

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