Nothing is certain but death and taxes

"Our Constitution is in actual operation. Everything appears to promise that it will last; but in this world nothing is certain but death and taxes," so said Benjamin Franklin (1706-90), American statesman, in a letter to Jean-Baptiste Leroy in 1789. He might have been writing about Kenya in 2012. We were all excited when the constitution was passed, but recognise now that it will take a long time and much effort to realise the true meaning of it. There are competent people who deal with taxes but less so when it comes to death. The problem with death is that you cannot delegate it. Since it only happens once, nobody really has first-hand experience of it. But that is no excuse for the pedestrian manner in which we approach death.

Almost all Kenyans by the time they approach adulthood will have witnessed a death at close hand. So common is death that it is rare to find an extended family, that is, grandfather, grandmother, parents and children all alive. In other parts of the world this is a common occurrence. If death were a painless, inexpensive affair, it would not merit much discussion. It is becoming rare for people to die at home and be buried without passing through a hospital. Proper hospital care even in a government facility is not cheap. Sadly then, apart from the emotional trauma, death is very expensive. People understand this fact in various ways. Some reason that since they will have gone, it really is not their problem to solve. Others believe that death is a clan affair and that clans exist as some kind of death co-operative. A few enlightened ones reason logically and conclude that they have to have some kind of financial plan to pay for what is certain to come.

A confusing term is used to describe this action of safeguarding oneself against the danger of illness and death – health insurance. The theory of insurance is that the insured pays a relatively small premium to an insurer in return for protection in case of a much larger financial loss, which must happen infrequently. In effect the insured takes a small guaranteed loss in return for the assurance that when a big loss comes along they will be reimbursed. For insurance to work properly the insurer must collect many small premiums from many who need insurance, pool the money together then wait for the relatively rare event to occur and pay out. Insuring your own health does not fit into this classic definition of health insurance.

Think about it. All drivers require car insurance. But not all drivers in their lifetime will have an accident. But every single person with or without health insurance will die, either of an accident or some disease. Who in their right mind what take a little money to pay big money for something that is bound to happen? The answer to this riddle is to look at the health problem a little bit more critically.

Yes, we do know that illness and death are certain, the problem is that we do not know when it will happen to us. That is what we can insure against - the timing. What we cannot insure against is the fact of it or the cost of it. So when we talk about 'health insurance' what we really must do is save enough money to pay for our own healthcare costs, keeping the money somewhere safe until it is needed. Ultimately the total cost of healthcare has to be paid for.

If each one of us did that as individuals then mattresses and banks would be bulging with money. And we would have a distribution problem where at the age of 100 years you might have saved enough to die, but unfortunately you needed the money 40 years earlier when you had a heart attack. So the first and most important task of health insurance is to pool money together into one large pot. The bigger the pot of money, the better because the scheme can take on more risk such as very expensive illnesses, people who haven’t paid for too long such as children and so on. There are also economies of scale associated with big schemes with millions of contributors. A small scheme is like your clan funeral committee. Every time something happens they fundraise.

Functional, but not very clever, they can bury you, but cannot get you out of hospital alive because the pool of money is not accessible when you most need it. One of the economies of scale that large schemes have is many people can access the care they need because the scheme is always receiving cash. So you can get healthcare when you need it and not when you have money. There is no cheap healthcare, but there is illness, accident and death. Health insurance is not really 'insurance' as classically defined. Just like implementing the constitution, having a proper way of paying for our health is going to be painful. But it certainly has to be done.