When visiting the British Isles back in late March during Spring Break of this year, we decided to take the train from Edinburgh, Scotland to London. We sat at a table with two lovely sisters that were natives of Edinburgh. Both ladies were senior citizens and one of the sisters had just had a hip replacement. With all the political talks about “Medicare for all” in the U.S. lately, my ears perked up when she mentioned her surgery. When I casually questioned her about the surgery, she said it was her second surgery for the same hip replacement, as the first one was not successful. I furthered queried her about the procedure. She said it happened in London. Further she did not know who the surgeon was, as they do not pick the surgeon, it is whatever surgeon happens to be on call at that time. The Scotsman lady, who was now a London resident, said she either paid very little if anything for the surgery. Nor did she have to pay for the second surgery to correct the first one. I asked her how she was feeling now after the second surgery—she said o.k. but was still recuperating. I also asked her if she was able to pick the hospital, since she could not pick her surgeon. She said no, the government, the National Health Service or NHS dictates everything.
When it comes to visiting the doctor, the last thing people want to think about is the cost of services. Often, patients are more worried about when they’re going to see the physician or undergo the procedure. Insurance plays a role in both situations. Many countries approach insurance slightly differently, but the United States and the United Kingdom find themselves on opposite sides of the health care system spectrum. While both face financial issues, the US and UK health care systems differ greatly, especially when it comes down to choice.
America: The Great Experiment
Across the political spectrum, most people would agree that the American health care system is broken. Private insurance companies run the industry with 67.2 percent of citizens receiving private voluntary health insurance (source). With the premium-deductible paradigm, most individuals and families face high out-of-pocket costs—averaging out to just above $1000 per capita per year (source). Furthermore, since a majority of health industry income is collected from insurance companies (some say over 80%, but my calculation has on average the insurance paying 57% of the bill), hospitals and doctors can see insurance companies as their clients rather than their patients. With this as the case, health professionals inflate their prices, knowing insurance companies will only pay for a fraction of the actual bill (source). In this way, we have seen health industry prices increase at exorbitant rates.
That being said, US citizens also have a great amount of freedom in deciding what level of insurance they wish to pay for. These vary from no insurance to insurance paying for 90% of medical expenses (companies compensate by charging higher premiums). Furthermore, individuals and families can choose which insurance company they use for service. With this choice, they can align their values and beliefs with a company that has similar standards. In this way, they more easily can receive the coverage they desire.
Great Britain: How long will it last?
Insurance in England only has one name: NHS – the National Health Service. Individuals pay into the system via tax whether or not they use medical services for that year; however, when they walk into a hospital, there is little to no out-of-pocket costs at the point of service (there is some logistics that must be worked out for the NHS to cover the cost). The Commonwealth Fund (a US-based think tank) ranked the UK as the top health care system among the top 11 affluent countries (source). The group found the NHS had the best care process and equity among clients and the third best access to care and administrative efficiency. The Guardian hinted at a warning in a recent article, noting that with a growing aged population, the government may have trouble in the future continuing to manage these costs and services (source).
Another weakness that researchers have found regards patient outcome. In the same Commonwealth Fund report, the group found the UK ranked 10th in terms of health outcome (the US placed 11th). What’s concerning about this is the disturbing logical implication of having a government-run insurance policy: the government gets to say who gets treated when. Now, there are many stories that illustrate the great work doctors can do under the NHS system (source), but there are other stories that point to the worrisome dangers of a monopolized insurance system. The Guardian reported in 2016 that an NHS watchdog found that NHS-run hospitals sent home elderly patients without informing relatives close to them (source). Furthermore, another think tank, the Nuffield Trust, found that the UK does not compare well to peers when it comes to people who die from situations that could benefit from medical treatment (source).
It comes down to choice
Ultimately, the difference between the two health care systems is who chooses which non-emergency services get conducted. In the US, the burden falls mostly on the insurance company who dictates (to a large degree) what the cost of the procedure is. In the UK, the burden falls on the NHS (aka, the government) since they manage the funds to services balance. Both systems are broken (with perhaps the US market more fractured than the UK market) and both have financial troubles. It seems that the individual has more of a choice in the United States with a say in who insures him but likely may have to pay more. Contrarily, an individual in the United Kingdom has lower at- time cost but has less freedom to receive care and also probably receives inferior care.
I for one am glad to be in the United States, where although I may have to pay more, I at least have more of a chance to choose.
No matter how large or how small your family is, you need to have a plan in place for when it comes to finances, your children, possessions, and healthcare. The most important thing is to put it in writing according to Stuart Ritter, T. Rowe Price financial planner. Take the stress off of your loved ones with a plan in place by asking yourself these important questions:
Source: T. Rowe Price Securing Your Family's Future
Spencer Fredericks ‘19
Financial Analyst Intern
As one of the two financial analyst interns at Traditions Wealth Advisors, Spencer specializes in investment research on behalf of Brien for all TWA clients. He conducts research on various asset classes and investment vehicles including traditional investments like stocks, bonds, mutual funds, ETFs, and CDs, as well as alternative investments such as master limited partnerships, hedge funds, private equity funds, real estate investment trusts, and opportunity zone funds.
Spencer graduated in May of 2019 with a Bachelor of Business Administration (BBA) in Finance from Texas A&M University. In addition to his degree, Spencer completed the Chartered Financial Analyst (CFA) Level 1 Exam in June. He hopes to pass all three levels to receive his charter.
Spencer hopes to work in the field of financial consulting or investment management, he is currently applying and interviewing for positions both in Texas and across the U.S. Having been born and raised in College Station, he hopes to find an opportunity to have a new experience in a bigger city upon graduation.
In addition to his work with Tradition Wealth Advisors, Spencer is a member of the Financial Management Association and volunteers his time with the Brazos Valley Senior Center and The Big Event. He enjoys spending time with friends and family as well as accumulating various hobbies such as mountain biking, playing pool, reading books, and cooking.