I think I’m good at things financial, but when it comes to healthcare I’m just as frustrated and angry as everyone else.
In an effort to reign in premiums, I use a high deductible Health Savings Account (HSA) for my family of five. Basically, any expense below $10,000 is mine to pay.
This is akin to the old catastrophic plans. My cost for such a plan? It was about $10,000 per year. But of course, I have to have the savings to make good on up to $10,000 of medical expenses in a given year.
Then came the renewal…
My cost was going up by 20%!
Keep in mind I had not had a claim in the prior year, nor in the six previous years that I had used an HSA approach.
When I called I was told, “It’s not your costs sir, it’s the cost of providing care in general.”
Somehow I don’t feel better. Then the latest report on insurance premiums made me feel even worse.
The Kaiser Foundation just reported that the average single-coverage health insurance premium for a family is $15,745 per year. Now, compare that with the average income for a family, which is roughly $60,000 (these are averages, not medians).
If that family has an effective tax rate of 15% – including payroll taxes, etc. – then they bring home $51,000 per year. That means the $15,745 insurance cost is a whopping 31% of their take home pay and leaves only $35,250 in the kitty for housing, clothes, food, transportation, education… and we haven’t even addressed savings.
We are effectively bankrupting the country in order to provide healthcare through the current model. The outcome is clear to every single person – the middle class, which is watching its earnings fall while tuition bills skyrocket, is being forced into the lower economic class just so it can insure itself against calamity.
What sense does this make?
So we get government commissions, studies, comparisons to other countries, etc. In the end it doesn’t matter because the special interest groups that are served by the current system, such as large insurance providers and specialty care providers, have unlimited access to politicians and contribute to them generously.
So after all of the gnashing of teeth and heart-wrenching testimony by those ruined by healthcare costs, we get the Affordable Care Act (ACA), which essentially says, “Things will be cheaper when everyone is forced to join and pays in.”
Huh? How does that work?
What we will get instead is a copy of the Massachusetts plan, where everyone joins and does indeed pay in, and costs continue to skyrocket. The reason? When everyone joins, then everyone demands care. And of course, everyone doesn’t pay in. There are tax breaks and thresholds so millions of the newly insured people pay limited amounts or nothing at all.
None of this lowers cost.
We Need a Total Rework of the System
If we determine that adequate healthcare is a right, which is something we have never determined before as a nation, then we need to address it as such.
Currently, we say that everyone should be guaranteed care but we allow certain groups to control the industry. Just consider one aspect – doctors. There is a widespread shortage of doctors in the U.S., and yet medical school is almost impossible to get into and is stunningly expensive if you happen to make it in.
Why is this?
Because we have not addressed the licensing and training process to match skills with needs. Most healthcare provision can be done by Physician’s Assistants (PA’s) or skilled nurses, and yet most people still get treated by the most expensive person in the room… the doctor.
Until we address how care is provided and by whom, we won’t do anything to lower cost. We will simply increase the number of people using the system. And therein lies the problem…
Mounting costs are crowding out the spending on everything else. When the family of four gives almost one-third of its paycheck over to taxes and healthcare, they can’t work on growing their own standard of living or even hope to save a little for the future.
This is a bad sign for our general economy because it doesn’t lead to sustainable economic growth.
Healthcare is probably the biggest economic challenge we face today and another reason for investors to be very cautious about the months and years ahead.
As ACA is implemented, consumers will be forced to handover their hard-earned dollars for the questionable peace of mind that health insurance brings. In so doing, they will lower their spending on everything else and economic growth will dwindle.
Hey, they might be poor, but at least they’ll be insured.
So why doesn’t that sound comforting…?