NATIONAL PROVIDENCE

Te Awamutu Courier, Volume 53, Issue 3813, 25 September 1936, Page 7

NATIONAL PROVIDENCE

FOR OLD AGE AND SICKNESS. HUGE INITIAL COST MUST BE INVOLVED. Actuarial experts express the view that the Government’s intended national superannuation scheme, now under consideration of a sub-commit-tee of the Cabinet, will absolutely dwarf already costly enterprises undertaken by the Government. No further public statement has yet been made in amplification of that of the Minister of Finance in his Budget speech that “ the Government has already taken the initial steps for the organisation of a complete health insurance, invalidity, and old age superannuation scheme, the object of which is to provide superannuation by right during sickness or old age without the means test.” HUGE INITIAL DEFICIT. There is nothing new about the proposed scheme. Health insurance has operated in England since 1911. It began, as any New Zealand plan must, with a huge initial deficit, but became self-supporting two years ago. A voluntary contributory pensions scheme was introduced in 1935. However, English benefits are low, and, correspondingly, the contributions. Australia has toyed with a general scheme for years, but it has always been shelved on the ground of expenSe. The proposed New Zealand scheme, in respect of superannuation, will will have to be based on much more attractive scale to receive the approval the Government hopes for it. An attractive scheme, on a contributory basis, will mean higher contributions and an initial higher deficit. Actuarial authorities are 'of the opinion that unless the Government proceeds with the utmost caution in launching a scheme, and adheres rigidly to actuarial principles, it will create a position beside which the £'30,000,000 deficit in the three superannuation schemes railways, teachers ,and general servants will be trifling. Sir Frederick Stewart, M.P., former Parliajpentary Secretary for Re-em-ployment, whom the Federal Government sent overseas last year to inquire into national insurance, reported on his return that in any plan for community insurance in Australia the Government must adhere strictly to actuarial principles and take such action as would make it impossible for this service to become a “ delectable titbit on the political auction-block.” It is known that some members of the Government had in mind a scheme the cost of which would be borne by the State, but the longer the formaion of definite proposals is delayed the more likely is it that the unbearable financial burden of such a proposition will become apparent and common sense suggest contributory schemes modelled on England and on that last placed before the Federal Government. Even a contributory scheme must carry for many years an initial deficit sufficient to strain severely the finances of a young country. It is impossible that the Government will deal with the insurance companies in any scheme it brings down. Indeed, some of its members feel that insurance should be a State monopoly, and that competition adds considerably to insurance costs. None the less, insurance interests will probably shortly submit a proposition for their participaion. It is claimed by one of the major offices that insurance organisations are the only existing concerns in a position to service national insurance at low cost, and pay out benefits promptly. The alternative, it is claimed, is the setting up of another State department, or extensive additions to existing iones, thus substantially increasing the present civil service army of 65,000 employees. EFFECT ON INSURANCE. Inquiries as to whether national insurance affected private insurance detrimentally showed that in England the experience has been to the contrary. Though the approved societies make no profit on their participation, their representatives, in their dual capacities, get into more homes than formerly, with beneficial results from persons made “ insurance-minded ” by compulsion. For this reason alone it would benefit the insurance companies if participation were allowed them. Under such participation an insured person would nominate his own society or company. On health insurance, already established. in varying forms in twenty European countries, and being considered in Canada, British Columbia, Australia, and the United States, the attitude of the British Medical Association, as a body, is known to be one of opposition to any interference with the established method of practice which, whatever its faults, has at least the virtue of antiquity. Health insurance, however, would be a distinct advantage to doctors practising in poorer districts where the percentage of non-payers is often up to 60 per cent. There is something to be said for a scheme which will obviate a professional man working for nothing and, on the other hand, the principle of making those who can or prefer to pay, pay for those who cannot or will not. Under a suitable scheme of health insurance the average medical practitioner would probably find himself in a better position than he is under the existing order. Gratuitous treatment, bad debts, and so on would be eliminated, and a welcome degree of financial certainty would be introduced. Against this the age-old traditions of independence, gratuitous treatment of the indigent, and honorary hospital service would be discarded. In spite of the disadvantages attaching to these free services, their loss would be a distinct wrench to the profession. UNIVERSAL MEMBERSHIP ? The health service is the simplest part of the problem before the Government, as it would become selfsupporting almost immediately. From an actuarial viewpoint a universal scheme for rich and poor alike would be the most convenient in this category. The sponsors of the English scheme of national insurance in 1911 favoured universal membership, but the British Medical Association ex-

pressed unwavering opposition, and finally an income limit of £l5O per annum was adopted. When this scheme was introduced in 1911 the initial deficit was estimated at approximately £70,000,000, without the pension benefit, which is by far the most costly and has a profound effect upon the amount of the initial liability. The English scheme calls for equal contributions of employers and employees, with State subsidy.

On a basis of all workers in receipt of less than £3O 0a year (assuring 422,000 males and 1500,000 females) being insured persons and entitled to medical service, sickness allowance of £2 per week (for first six months), with invalidity allowance of £1 10s weekly thereafter, death benefit of £25, pension of £1 10s a week at age of 65 years or £1 a week to widows of deceased members, the weekly contributions would run from 2s Bd, starting at 16, to £3 8s 3d at 60, or, at the extreme of 65, £2O 2s lOd. The range of weekly payments on the basis of all the benefits outlined has been estimated at the following for the varying age groups: 16 years, 2s 8d; 20, 3s 2d; 25, 3s lid; 30, 5s Id; 35, 6s 7d; 40, 8s lOd; 45, 12s sd; 50, 18s 6d; 55, 31s 3d; 60, 68s 3d; and 64, £2O 2s lOd. A lower retiring age, say 60 years, would increase the scale.

It is evident that, although youthful members would be able, with little inconvenience, to contribute their fair share toward the cost of the benefits they would ultimately draw, it w’ould be quite impossible to expect older members to contribute at a rate even remotely approaching the actual costs of their benefits. This difficulty was recognised at the inception of the British scheme, and a flat rate of contribution for all members, irrespective of age, and beginning at 16, adopted. £164,000,000 CAPITAL DEFICIT. If New Zealand was to adopt a similar procedure the initial deficit would be enormous, and obviously the more generous the scale of benefits the larger the deficits. It is estimated that if the flat-rate contribution selected was that based upon the age of 16 years the capital deficiency would amount to the amazing figure cf £164,000,000, or an annual cost of £6,560,000 in perpetuity. Alternatively, if members between 16 and 35 years paid the appropriate contribution according to their age and a flat rate (as for age 35) for ali higher ages, the capital deficiency would be £114,000,000 and the annual cost £4,560,000. A non-contributory scheme would mean an initial capital burden upon the State of approximately £213,000000, and the annual cost £8,520,000. From whatever angle the scheme is viewed stupendous capital deficiencies are certain if (1) the scheme is non-contributory, (2) the contributions are fixed at too low a figure, and (3) the benefits offered are on too generous a scale. Basing his figures on the amounts contributed to social insurance in Britain, Sir Frederick Stewart estimated that the adoption o fa plan on similar lines in Australia would mean a contribution of something under £7,000,000 a year each from tl,s employers, workers, and the State—about £20,000,000 in all—and he pointed out how the Australian Government was already spending more than £7,000,000 a year in directions which would be unneessary if the people were covered by insurance to the same extent as in Britain. FEDERAL SCHEME FEATURES. The main features of the last Nationel Insurance Bill introduced in the Commonwealth House of Representatives and which may serve as a guide to Mr Nash were: (1) The establishment of a national insurance fund contributed to by the employee, or voluntary contributor, and the employer contributor; (2) payment of a flat rate of contribution—males Is a week, females 6d, employers Is a week for each male employee and 6d for each female; (3) appointment of a board to administer the scheme and a representative commissioner in each State or territory; (4) co-operation with approved societies; (5) exemption of persons not engaged in manual labour whose total income exceeds £416 (6) restriction of voluntary contributions to those persons engaged in some regular employment and whose age does not exceed 45; (7) provision of nine cash benefits—-sick-ness allowance, disablement allowance, child allowance during sickness or disability participation, widows’ allowance, orphans’ allowance, superannuation allowance of 20s weekly to insured males over 65 and females over 60 (less than New Zealand oldage pension), wife’s superannuation allowance, widow’s superannuation allowance, marriage allowance; (8) no unemployment insurance benefits; (10) guarantee of additional costs of the scheme by the Government, which estimate dthat within 10 years the combination of benefits would exceed somewhat the liability which old age and invalid pensions would entail if continued alone.

The New Zealand Government is going ahead with a scheme embracing the benefits Mr Nash outlined in his Budget speech. How it intends to finance the scheme is of vital importance to the future of New Zealand.