Wednesday, December 12, 2012

Insurance - A Pyramid Scam?

So, Coyote begins to understand that Obama's individual mandate is having the same problem as almost every European Insurance Plan. They all start to fall apart, when the general population is not growing anymore. It is a scheme where the young pay for the old and this works as long as there are more young than old. But even than it is not entirely fair, because the young often have LESS disposable income than the old.

This is mostly the definition of an unsustainable pyramid scheme. It only works if population growth is unlimited, which would mean that our planet can support an unlimited amoun of people without any drawbacks. We cannot and modern societies tend to mean less children. From the European countries only France has a sustainable population growth, most others are bound to run into spending problems on health care rather sooner than later.

So what will happen when health care costs rise due to an aging population? Taxes on the young will increase, retirement age will be post-poned and health care cost-overruns will be limited (or at least we will try to).

In my opinion the US has the time to learn from those countries which will face this problem first: Germany and Japan. Both have very old populations with a bottom-up age-pyramid. Both have huge health care obligations as well as elderly care packages. They will be prime examples for countries like the UK, Canada, now the US or Spain and Italy.

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