Friday 15 August 2014

Cost of Living in Australia- The Big Question

When all is said and done, what everyone wants to know is this- just how expensive is it to live in Australia?
Well, here's my take on this issue and that's an important point- this is my take on it and not a scholarly article
Nonetheless I'd like to lay some ground rules:
1) this is mainly comparing costs when moving from UK to Australia
2) I was a GP Principal in UK in a PMS practice and lived and worked in Coventry and in Australia I live in Wollongong and have only been here for 3 months or so
3) If you're looking for price comparisons for groceries etc read no further and more importantly reconsider your decision to emigrate!
4) Applies to people with 6 figure incomes in either denomination

Look at points 3&4. If you are on low incomes and emigrating, sure the price of your weekly shop is very important. In these situations I'm told a rough rule of thumb is to multiply your UK income by 2.5 rather than the exchange rate which is around 1.8 and then you should be fine. However, if you earn a million pounds in UK you clearly don't need 2.5million AUD to be able to afford groceries!

So, I've looked at what's really important. In my view gross earnings mean nothing- you want to know what you take home at the end of the day. This depends on several factors- income tax being the most obvious. 
But there are other factors- pension contributions, Health Funds, Debt servicing, property appreciation etc.
This is what I'm looking at right now in this blog.

Income tax- broadly speaking comparable in the 2 countries but on closer scrutiny not so. Australia is favourable because you don't loose the tax free personal allowance here unlike UK where you loose above 110K/year. Child care benefits are means tested in both countries but again I think for comparable incomes in both countries you might get benefits in Australia and not in UK (more later as to why)

Pensions contribution: This is responsible for a big chunk out of your gross earnings in UK. Of course as a partner you pay both Employer's and Employee's contribution in UK and combined this can be more than 20% (and rising). You do get a nice pension at the end of it and the NHS pension scheme is described as amongst the best in UK. but again there is a big caveat here. The govt can and has twice in recent past changed the regulations around NHS pensions. So, that nice pension I talked about is not a certainty. In fact everyone I spoke to before leaving was certain that in few years' time the tax free lump sum will become taxable and this will be huge dent in your pension. In Australia you pay into a superannuation; 9.5% minimum and upto 30K a year. But you pretty much invest where you like. Most people invest in property. Contributions are tax deductible and then you have the property to own (or shares or whatever) at the end. Policy may change but they can't take away your property! So, more to take home each month as less deducted at source and chance of having a better pension fund at the end (or of screwing it up as well!). But, once again, most GPs will invest wisely and be better off here in Australia I think.
For partners another factor comes into play and that is how payments are made in the NHS. QOF payments don't come till Sept or so the following year and several items have to be claimed for afterwards (imms and vacs etc). This means a sizeable portion of your income is tied up at any given time and you don't see it till you retire or leave partnership- the so called 'working capital'. My practice still owes me more than 40K. That means I earned 40K in the last 4-5 years, paid NI and tax on it but am yet to see it! 
In Australia I get 100% of what I earn every 2 weeks. Therefore, cash flow is much better and improved cash flow equates to better affordability for most things. I haven't got a credit card here and don't miss it!

Health Funds- In UK obviously there is universal coverage with NHS. But, you do pay a hefty price for it. Until recently, I thought it was good deal as literally everything was covered. But, with more and more cuts and stringent low priority procedures (varicose veins only if ulcerated, really??) I wonder if its a good deal anymore. For someone in good health like myself it means a lifetime of contributions with an uncertain benefit at the end or buy private cover on top. A double whammy! In Australia there is Medicare which is pretty basic compared to UK but so are the income contributions. The money saved there can be utilised to buy private health cover. This allows much greater flexibility. If you are young and single with no problems even no private health cover will do- ergo more to spend when you need it. But even a good level of cover for a family of 3 will cost about $4k/year here for me. This has some added benefits compared to NHS- I can get prescription lenses/glasses or remedial massages for example and I can see Consultants almost straight away, and for my situation this again works out better than it did in UK. There are tax benefits in having private health cover too so the final figure will be lower still.
If you have multiple long term conditions then the NHS may be better at least for now. Also note the difference between a health insurance (NHS) vs a Health Fund. Basically, in a health insurance scheme you make regular payments and only get something out if and when you need it and that is always decided by other people (NICE, EBM etc etc) In a health fund by contrast you get entitlements which you can use annually- prescriptions, visits to opticians, remedial massage etc. So you start seeing benefits of having a Health Fund from day 1

Debt Servicing- this is the next biggie and often overlooked I feel. By definition it just means the amount you pay (interest + principal) to pay off your debt. But, actual figures or even rates mean nothing by themselves. What I feel is more relevant is the difference between what the Banks pay you when you put your money in with them v/s what they charge you when you take a loan (mortgage, car, personal loan etc). Here, the UK loses out spectacularly. The base rate of the bank of England has been 0.5% for many years now and getting cheap loans should be easy. But based on the the BOE rates Banks have slashed the rates of interest they pay you- the Best buy ISAs only pay 0.5% or so after the initial headline grabbing introductory rate finishes. Some pay 0.1%. (see here and here to compare) Yet, the lending rates are still at the same levels as what they were when the BOE was was much higher (2.5% if memory serves me correctly). So, to get a mortgage at the best rates you need either 40% down payment or you pay around 4-5% interest and much higher if you buy to let. Car and other personal loans run around 5-6.5%. Clearly the difference in interest paid and earned is huge.
Neither is property appreciating in UK. I bought a house for 370K around 5 years ago. I'd struggle to sell for 400K now. Taking into account the land registry, interest paid and other charges if I were to sell now I'll have made a loss. It is equally hard to rent. I know of several GP friends who emigrated to Australia and had their houses lying empty for months. So, we pay high cost for servicing our debt and our assets are in a negative equity
In Australia, even high street banks are paying 2-5-3% interest on easy access savings accounts and a car loan I took out is 5.25%. The difference in interest paid and earned is much smaller. Similarly to buy a house you can do so with 10% equity (or even lower for GPs) and if you buy to let the rates are not higher! With ability to invest your superannuation in property it is quickly evident that debt servicing is going to be much cheaper in Australia and developing a property portfolio much easier. Less cost to service debt and assets appreciate

Lastly, I'd like to go back to income tax. I said the rates are broadly similar but in our situation not the effective tax rates. This is because unlike the NHS more or less all GPs here are independent contractors and work under an umbrella company and pay themselves a salary from this company. Apart from other benefits as far as I can see now this has 2 immediate effects- a) your own taxable income is lower (NB about child benefits above) and b) the taxable profit the company makes is taxed at corporate rates (30%) and not personal rates. So, in effect the effective overall tax rate works out to be less than in UK and you don't loose out on personal allowance either.

Time will tell how much (or how little) this works out to be in 1-2 years time but I feel confident that I'll be better off here and therefore when people talk about cost of bread or eating out in Australia I tune them out!







Tuesday 5 August 2014

Australia- Clarity of Vision

Arrived in Australia on 5th May after flying roughly 19,000 Kms.
So this is my experience literally so far and so faaaar!

As part of visa requirements for coming to work in Australia I had to obtain medical insurance for myself and family. As UK citizens we are entitled to reciprocal care with Medicare but its easier to do that after arrival.

So, amongst the first things I did on landing in Australia was to visit the local Medicare office to get my reciprocal card. I quickly realised how streamlined and unambiguous the system is as opposed to the UK where the same system of reciprocal care exists. In Australia I cannot access healthcare without my medicare card (can do via the BUPA cover I got for my 457 visa, have free emergency treatment or pay personally). Moreover, my entitlements are stored on my Medicare card which I need to access any service and they are not down to the whims of a GP. Also, I can access care without having to see a GP for everything.
I needed a new pair of glasses so I went to see an optician. Turned out an eye test and consultation were actually covered by medicare so I got this for free and then only paid for my prescription glasses- at no point was a referral to a GP or a referral from a GP requested.

Take a typical scenario: relatives from UK visit family in Australia and someone falls sick. They go to see a GP. The GP will charge them if they don't have a Medicare card and then they will have to claim it back under the reciprocal care agreements. At no point will the GP be pressurised to see or treat the patient for free. Moreover, not only is the GP paid, medicare will claim the money back from the NHS in UK (that is what reciprocal care is all about).
Now, reverse the scenario: Australian visits family in UK and falls sick. Family member will ring and demand an emergency appointment with their own GP. Said GP will have to see the patient as a Temporary Resident. The guidance is to only provide emergency treatment but family will demand everything including prescriptions for routine items. Either the GP refuses and only provides emergency treatment in which case his own patient (the UK family member) is upset and may complain or he does a FP10 script (a NHS subsidised script as opposed to a private one). If he does an FP10, the UK taxpayer foots the bill! (In Australia regardless of who wrote the script, the prescription benefits are stored on the Medicare card and you pay accordingly to the chemist).

In either case, no reciprocal care has occurred. There is no way the GP can record or the NHS claim from Medicare Australia for the visit to the GP (Note that  the reverse occurs). If the patient goes to A&E(even for non emergency scenario), gets a prescription or has an investigation, no reciprocal claim is being made as the GP has done the referral. In fact the BMA guidance states explicitly that it is not the GPs job to highlight on the referral or test form that the patient is under reciprocal care or even not entitled to NHS treatment (if they are from a country with no reciprocal arrangements) and that such checks must be done by the Hospital Trust. The BBC ran a programme on NHS fraud and highlighted that these checks don't  occur in almost any Trust in UK and as a result millions on pounds are lost every year. Details here on a similar report

It also highlighted that other EU countries are very good at claiming their costs back- Brits go to Europe and fall sick and NHS has to pay. EU citizens come to UK, get treatment and the  NHS can't be bothered to claim!
Add to this the huge number of patients from countries with no reciprocal arrangements. Now, as a taxpayer are you happy that your Govt is wasting your money on people who have no entitlement to care whilst simultaneously cutting down services available to you? (As if to highlight the issue recently this post from an American Dr visiting the UK was published. Have a look here)

Finally, another typical situation which I come across here daily and can't help thinking how wrong we've got it in UK. I work in Wollongong, which is a big University town with lots of overseas students and in UK I worked in Coventry which has a big and expanding University and lots of overseas students.
In Australia, overseas students have to have medical insurance and treatment is not covered by Medicare.
If the Uni expands and more students arrive there is no problem. Surgeries will hire more Drs and Medicare budgets are not squeezed. If the referrals are higher -say to psychologists or sexual health etc no one points fingers at the GPs or tries to performance manage them. The GP is free to practice in a safe and sound clinical environment as opposed to a monetary one.
Equally if practice numbers are low for Dementia, CVD, strokes etc as would be expected for a younger population that comes with a University Practice, Medicare doesn't come chasing the GP. In Coventry the University practices got a visit from NHS England for this very reason (low prevalence of certain diseases). And their funding was being threatened as 100s of patients were being removed from their lists (Payment to GPs is capitation based and Temporary Residents earn the practice a lot less than permanent patients. Are foreign students permanent or temporary?) This is the type of crazy admin work GPs in UK have to deal with on a daily basis.

In UK, foreign students pay a much higher fee and are  therefore  entitled to free NHS treatment. Fair enough, I think.
But only if part of that higher fee is transferred to the NHS. Otherwise the taxpayer is footing the bill for the Universities and the Universities love overseas students because they charge them higher fees. So in a city like Coventry, more overseas students means less NHS budget for the local taxpaying population. Fair you think?

Any health care system will have advantages and disadvantages. All systems are prone to misuse/abuse but in Australia I think there is a clear vision- your entitlements are clearly defined and carried by you on your medicare card. No one can sidestep that. Sure, there are losers and winners but the rules are clear. Medical professionals do not have to juggle financial, ethical, moral and clinical decisions. If the Govt wants to make cuts it simply changes the benefits available via your card. For example if you have diabetes you can get 5 visits to allied health professionals in a year (podiatrist, physio, dietitian etc). If the Govt decided to save and reduce costs they would simply reduce that number to say 4/year. Or if they thought diabetes is under diagnosed/treated etc it could increase the benefits. The GP doesn't bear the wrath of the patient nor is there any ambiguity as with all NICE guidelines for example (they recommend a treatment algorithmn and then say its up to the clinician's decision and patient choice should be respected). Look at the contradictory advice regarding glucose testing strips from NICE and DVLA for example. NHS would love you to stick to NICE guidance, but if a patient has a hypo at the wheel and you have not given enough testing strips as recommended by DVLA you get sued or struck off. A ridiculous situation to practice medicine in.

In UK, the Govt leaves everything, deliberately I feel a bit muddy. You are not entitled to free care if you're not from a country with reciprocal agreements but it's up to the GP to see them as a temporary resident and if the GP feels its appropriate they can register the patient. The NHS charter says tests, referrals etc must be paid for but the BMA advises against it to GPs. When things go wrong the Regulatory bodies- GMC etc will use the higher moral ground and stick to BMA guidance. But, in order to drive costs down the Govt uses all its might to make you go against BMA advice- the erstwhile PCT and now NHSE, CQC, NHS Choices, the complaints procedure for the NHS all make it impossible for frontline staff to follow the BMA guidance. In short, its clear as mud.

This kind of muddy thinking pervades all spheres of UK Govt and policy. When Coventry built a new Super Hospital the number of parking spaces were reduced as compared to the old Hospital because more parking spaces were against the Govt's 'Green Agenda'. Now, the hospital is notoriously congested and when the Air Ambulance lands or takes off even Ambulances are queuing just outside the hospital and the local residents are fed up. The Hospital has put up several bids to ease the parking problems and all have failed. 

Take this 'Green Agenda' a bit further. UK Govt says its committed to reducing ownership of cars and would like people to use public transport and greener cars. Yet, when the depression hit, one of the premier policies of the Govt to get us out of it was the car scrappage scheme which put thousands of new cars on the road. 
Equally if you follow this logic of less people buying cars and using public transport instead being good for the country, then all British car manufacturers will go bust. British car manufacturers are either at the Luxury end of the market(JLR, Rolls Royce etc) or bespoke sports cars- Morgan, TVR, Bristol etc. All these cars are distinctly eco-unfriendly. Is the govt prepared to see them go under? When JLR hired new people in Coventry this was greeted by Ministers as a step forward and a sign on investor confidence returning in UK. Surely, they should have been lamenting the fact that more gas guzzling, CO2 spewing cars were going to be manufactured?

I feel things in Australia are much clearer. They may not be to your liking but they are clearer. Australia has a big land mass and Australians drive long distances over roads that are often uneven. Ergo, they drive big cars and houses, garages, parking spaces etc are built to accommodate this. In Wollongong, in order to promote public transport we don't have congestion charging or prohibitive parking charges. Instead, in true Aussie style we have the The Gong Shuttle- a free bus service that connects all the major spots and the University. It runs a schedule that is better than any paid for variety in Coventry and also runs on Public Holidays and weekends (see schedule here).
Australians love the outdoors and the vast majority live by the coast. So, in Wollongong the council is spending money on running free swimming pools, public baths, free beaches with life guards (see here for details) and is also spending millions on a cycling/running path running some 20 odd kms. 

What exactly does UK stand for currently? I actually struggled to come up with an answer to that. I would have thought that education and the English language itself,  and the NHS would surely be in the top 10. Yet, Councils are busy closing down public libraries, toy libraries and Schools have had a freeze on funding and the NHS is facing massive cuts.

Time to ask- what exactly does being a Brit mean? What values, institutions etc would you like to preserve? And time to get voting my friends!