Responsible Citizens Need Not Apply

My older daughter graduated high school last month. The ceremony itself was mercifully short, but we did have to arrive early to get a seat.

As I thumbed through the program, I noticed the school had printed, beside each student’s name, the list of colleges where they’d been accepted, the school where they intended to matriculate, and the aggregate sum of the scholarships they’d received.

I noticed something else. The dollar amounts of those scholarships are massive… and that’s the problem.

There is no doubt that many of the young women at my daughter’s school are bright, and that universities around the country are using financial incentives to woo them. This is understandable.

What is not comprehensible is the fact that a partial scholarship from a state university is worth $80,000 or more.

Granted, these were for out of state schools, but seriously? $80k for a state school?

Unfortunately, we all know why these numbers are so big. We also know the college’s response when you ask about it…

“Most of our students don’t pay the listed price.”

Really?

Then why is that your listed price?

Oh, that’s right, because some people DO pay it. Some people actually have to step up and write a check if they want their son or daughter to attend. These are the people who don’t qualify for different types of aid. In short, they’re penalized because their parents were, and are, responsible.

Unfortunately this is not the only area of life where this is going on…

My graduating daughter is the same one who hurt her ankle earlier in the year. Remember? We had the big debacle over the charges incurred at the medical facility, where we were told – after the fact – that there was no way to know the cost of treatment before it was administered.

The joy of that situation was refreshed this month when the New York Times posted a study concerning the wide variance in how much hospitals charge for the most common 100 procedures, such as a gallbladder removal.

One hospital in St. Augustine, FL charged $40,000 to remove a gallbladder, while another in Orange Park, FL charged $91,000.

What’s the difference between the procedure in St. Augustine and Orange Park? Who knows? Maybe in Orange Park they valeted your car, or had cloth napkins with dinner.

This same relationship, where one facility charges multiple times that of another facility, shows up repeatedly. The response of the hospitals? “Most of our patients are covered by Medicare or private insurance, so they don’t pay those prices.” Which of course means that someone does!

And who is that someone? That’s right, the same responsible citizens who don’t qualify for aid or a discount of some sort… who are simply trying to make their way through life and pay their own bills.

The fact that this sort of adverse selection is allowed to take place is shameful, particularly because institutions of both types – education and healthcare – greatly benefit from government dollars.

Schools get funding through student loans. Medical facilities get funded through both Medicare/Medicaid and private insurance, which is tax-advantaged. So the same person that has to pay list price for tuition and healthcare is also paying (through taxes) for those institutions that are gouging him.

Perfect.

The lesson to be learned is sad but obvious. Do your best to avoid being that responsible person.

When sending a young one to college, play the scholarship and in-state tuition game. It limits choices, but it’s also easier on the pocketbook.

If it’s healthcare you need and your budget allows it, investigate going outside the U.S., where medical tourism is making procedures like knee replacements part of an extended trip to the spa.

Whatever you do, try not to approach either of these fields – education and healthcare – unarmed. Chances are they’ll take a lot of your money… particularly if you are a responsible citizen.

Rodney

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About Author

Rodney Johnson works closely with Harry Dent to study how people spend their money as they go through predictable stages of life, how that spending drives our economy and how you can use this information to invest successfully in any market. Rodney began his career in financial services on Wall Street in the 1980s with Thomson McKinnon and then Prudential Securities. He started working on projects with Harry in the mid-1990s. He’s a regular guest on several radio programs such as America’s Wealth Management, Savvy Investor Radio, and has been featured on CNBC, Fox News and Fox Business’s “America’s Nightly Scorecard, where he discusses economic trends ranging from the price of oil to the direction of the U.S. economy. He holds degrees from Georgetown University and Southern Methodist University.