Tan Kin Lian's Blog: Health insurance for an aging population

Monday, January 04, 2010

Health insurance for an aging population

There is a school of thinking that the state should not provide health care for the aging population, as this would be too costly and, due to limited resources, this is best left to the private market.

I disagree with this argument. With limited resources, it is important that the resources are used efficiently and not wasted. The private market allocate these resources to those who can afford to pay, but it is likely that the limited resources will be used wastefully, especially as the final allocation is also also determined by the profit earned by the medical profession.

If health care for the elderly is provided or paid by the state, there will be control over the unnecessary medical treatment, as they would be disallowed by the state. Private individuals are not able to know what is necessary or not, but the medical experts working for the state would be in a better position to make this type of decision on the optimal use of the state resources.

Even in America, the health care for the elderly is borne largely by the state. There is a need to prevent excessive consumption of health care by the elderly, but this is a challenge that has to be faced and overcomed. Pushing the problem to the private market does not solve it, as it will lead to worse outcomes.

Tan Kin Lian

5 comments:

Anonymous said...: REX comments as follows,

hi mr tan, i had been wanting to say some things relating to "With limited resources, it is important that the resources are used efficiently and not wasted." as lifted from your post, but couldn't find a sutiable thread to post. Now i have a chance. Feel free to move the below to other place in your blog or delete it if you find it useless (I wrote a post in Temasek Review and it is edited a bit for the purpose of your blog):

How to Optimise the use of Limited Resoruces in singapore.
I have a very strong view that the so called lack of entrepreneur spirit in Singapore is partly due to high rentals. To start any business, the biggest cost is rent. It is not even manpower costs. You could do with less people in the beginnng stage, even volunteers or family/friends. But you still have to pay rent, often times to the government if your shop is in govt controlled buildings. So young people are afraid to take risks, the rent is very very high. Entrepreneurs are desperately needed, they are the salvation to the unemployment problem not empty talk and forecasts as if employment is like the weather.

As it is, this Rent, together with taxes, GST, ERP etc., is part of the fuel which is used to support the national infrastructures and especially the ministers' salaries.

Today all these "fuel" needs to be very high all the time, because the ministers salary are very high. Is the resource really optimised?

For me i felt that the answer to the above is "no", and moving forward i have a proposal.

First peg the leaders' salary to just at most 20% of the salaries of USA politicians. In lieu of that, introduce an attractive lifelong pension for deserving ministers say $15,000 or more per month payable after they step down from office and provided they serve a minimum of 5 years and reach certain percent bench marks in election results. Make a back of envelope calculation taking into account their average age, and the State still saves money compared to paying them $200,000 per month with 13th month bonus. (If they die earlier the country also save because no need to pay out the pension any more)

Second, the savings derived above may be used to reduce future monthly operating expenses of the Government. Simply calculate the amount and reallocate it to:

a. health care services as per Kin Lian's post here
b. widespread rental reductions
c. any other services to help really really desperate citizens

Item a will be surely welcome relief to one and all;
Item b will stimulate new entreprenuers who would otherwise be afraid to venture out. This will have a multiplier effect on employment.

Benefits:
The citizens gain.
The politicians don't lose.

Finally if any minister doesn't like the scheme then he can opt out and keep his salary but NO THIRTEEN MONTH BONUS, NO PENSION NO MORE STATE PROVIDED AUTOMOBILE OR STATE PROVIDED BODYGUARDS NO MORE MEDICAL CLAIMS (unless it is private medisave) NO MORE CLAIMS OF AIRFARES HOTEL ALLOWANCES OF ANY KIND NOT EVEN COST OF STATE FUNERAL WHEN THEY DIE. With $200,000 a month they have enough to pay for all this. We have limited resources in Singapore, use it wisely.

REX; January 04, 2010 11:39 AM
Tan Kin Lian said...: Hi REX
If you wish to post a new topic in my blog, please send an e-mail to kinlian@gmail.com. It is easier for me to handle, compared to dealing with a comment in my blog.; January 04, 2010 11:55 AM
Garrett said...: Technically, US health care for old people (medicare) is an issue that is ballooning out of control and has yet to be solved. It is a ticking financial timebomb and none of the politicians are willing to address it simply because it is too large. I admit that I have no idea how it will be solved, but saying that private healthcare is not part of the solution might be a premature conclusion.

What constitutes the largest part of the US financial deficit? Is it the trade imbalance with China? No. Is it the Social Security system? No. It is Medicare. If US goes broke, it's not going to be due to Social Security or over consumption... it is Medicare.; January 04, 2010 1:25 PM
Anonymous said...: How to Optimise the use of Limited Resoruces in singapore?.

Ask the insurance agents.. They know best...
Buy wholelife plan ,lor.; January 04, 2010 1:50 PM
Tan Kin Lian said...: Hi Garett,
Medicare in USA is part of the wider problem of costly health care in USA. I believe that it can be solved, if there is sufficient attention to this matter. I hope that President Obama will succeed in the health care reform, at least by taking the first step in a long journey.

In other countries, such as UK, Europe and Japan, the health care system is managed more effectively, and they include socialised health care for the young and old people.; January 06, 2010 10:27 AM