LearnEconomicsOnline
 
   Home      article2

Why does the NHS continue to look after old people?

Posted by Rhys Williams on Tuesday 14th August 2012

There are currently more than 10 million over-65s in the UK at the moment with the figure looking to explode to 19 million by 2050[i]. The NHS spend £49 billion (around 40% of the overall NHS budget)[ii] on caring and treating the elderly every year and with the elderly population set to continue growing in the future can it continue to look after the elderly and why does it do so?

Putting aside the obvious moral, ethical and religious reasons there are also a few interesting economic factors that give support to dedicating half of the NHS budget to pensioners. The first is that without a free health service available for old people, the elderly would have to save money whilst they were working, with the expectation that they would need some kind of care in the future - which wouldn’t be paid for on the NHS. This would lead to an increase in the insurance industry which would benefit from the NHS stopping care for the elderly. However due to the problem of asymmetric information the insurance rate may out-price many people. This would also result in a fall in consumer spending, which straight away, would cause a fall in GDP and would hit many businesses. However the insurance industry would boom and there would be increased demand for administration as seen in countries like America, where due to not having universal care, a lot of admin is necessary. The multiplier effect may lead to even more detrimental effects on the economy plunging it into a worse state than it is already. However this would have a one off impact and wouldn’t last, it may even be offset by the increase in the insurance and administrative sectors.

The elderly play a large part in the economy. In 2010 over 65s made a net contribution of £40 billion[iii] to the UK economy through earnings, tax and spending. Without the NHS looking after the elderly, they would have to spend this money, currently supporting retail and the government budget, on healthcare. It is estimated to increase to £77 billion by 2030[iv] implying that the elderly are not as much of a burden on society as we may perceive.

Without NHS support the average life expectancy could also fall with the poor and less privileged having a considerable drop in life expectancy if they couldn’t afford elderly care and medication. Currently, the average life expectancy for someone in the UK is 80 years in the US (a country which doesn’t have universal health care) it is 78.2[v]. This could result in people retiring early in order to enjoy the last few years of their lives. Arguably this may not happen if people are unable to afford this. However if the elderly were still in work then it is likely to have a negative effect on the economy as there are fewer elderly people to volunteer, offer childcare, and spend their money on leisure.

On average health insurance currently costs £1000[vi] a year in the UK. Although this may fall if demand increased – if people were buying insurance for their old age – it would still out-price a lot of people. Would our society leave these impecunious people impotent? If not how would the system work to look after these people whilst not paying for all over-65s, perhaps charities would have to pick up the bill.

If a pensioner fell ill and couldn’t afford to pay for their medical costs then without the NHS it might be down to the younger generation paying for their parents and grandparents medical costs. This would reduce their consumption and may lead to an increase in debt especially amongst the poorer members of society. Some, especially females, may even leave the workforce in order to look after elderly members of the family. This is prevalent amongst Southern Asian countries like India where the elderly are dependent on the younger generations for survival. In this country it may not be a possibility without a massive culture change, as some people may not be willing to look after their sick parents, who would then have no-one else to turn to. Following on from this if the life expectancy rate were to fall then there may be fewer opportunities for grandparents to care for their grandchildren, forcing parents to either leave the workforce or pay expensive fees for childcare.

If the NHS were to ever stop treating pensioners, it would be down to government legislation. With pensioners paying around £45 billion per annum in taxes[vii] there is no need for over-65s to fret yet! Therefore along with the ethical reasons to care for the old the NHS’s continued service is also economically sound!

 ©LearnEconomicsOnline.com