Almost 20 years ago, I gained 13 pounds in one night. Turns out, that is not good. After months of medical tests, I was diagnosed with a kidney infection which I continued to deal with. A few years later, my wife was diagnosed with breast cancer. After surgery, chemo radiation and ten-years of follow up, she was considered to be cancer free a few years ago. But once a person has been diagnosed with cancer, or kidney problem for that matter, the person always knows it can happen again. We have both had medical events since then, but the one thing I have never had to worry about is health insurance coverage and paying medical bills, until now.
I have dealt with health care in the US as obviously as a consumer, as the owner of a small business which provided health care to full time employees, and as a financial planner working with clients. Based on the above, I would assert the following.
Our current system of health care in the US has serious flaws and I believe it will get worse, not better.
Our long term economic growth and the financial security of our citizens is dependent on developing a comprehensive health care system.
As voters, we need to focus on Congressional candidates who are educated about all of heath care and committed basic health care for all citizens.
As a financial planner, I needed to focus on what health care costs my client and the options to finance health care. As a citizen, I focus on the total cost of health care in the US. Given this, I would state the following:
The estimated total cost of health care in the US is $3.35 Trillion Dollars. Yes, that is correct, Trillion. The per capita cost of health care in the US is over $10,000.
The median household income in the US is about $57,000. According to a recent survey, almost 60% of households have less than a $1,000 in savings. These are working households, but considering the per capita cost of health care and the income and savings of the majority of households, it is clear the majority of households cannot pay for current health care, not to mention pay for a higher percentage of health care. These working individuals who are contributing to the economy, but without help, cannot afford basic health care. Equally if not more important, the current system will make it difficult for many households to build and sustain financial independence.
At one time, it may have made sense to tie health care to employment at one time, but it no longer does. Many individuals work for companies who do not provide health care to their employees, or employers have shifted increased costs of health care to employees. Other individuals have one or more part-time jobs, are currently unemployed, or have retired before being eligible for Medicare. Equally, if not more important, in a global economy, can the US compete with companies in other developed countries where health care is part of being a citizen and government administrated? Can capitalism thrive and grow in the US when entrepreneurs are discouraged from starting businesses due to losing their own health insurance or having to compete for employees with more mature companies who can offer health care to their employees? Also, does it make sense for an employee to have to choose between ABC company and XYZ company based on health insurance benefits or continue to work in a specific job with no job satisfaction only for the health benefits? In short, tying health care to employment now causes more problems than provides solutions.
Health care is still the largest cause of bankruptcy in the US. Can a society grow economically if a significant percentage of the population have the risk and often do go bankrupt from health care related costs? The majority of those going bankrupt had some type of health care coverage. In addition to simply not having insurance, bankruptcy may due to high deductibles and/or co-insurance along with medical expenses not covered by insurance.
Health care is a US risk management issue, not an individual one. Most individual or household risk management issues are specific. For example, a renter needs renter insurance, not homeowner’s insurance. An owner of a 15-year old car with over 150,000 miles on it, would buy a different type of type of auto insurance than a person who has just bought a brand new luxury vehicle for over $50,000. A person who has no financial dependents has minimal if any need for life insurance. All of these are risk management issues where an individual or family can decide if they wish to insure a risk that is applicable to them. By comparison, very few, if anyone in the US will not need health insurance at some time in their life. Basic health care is a comprehensive need for all of our citizens, because most everyone if not everyone in our society will be a consumer of health care at some point in their lives.
Individuals and families are often calling insurance providers to determine if a specific treatment, medication or health care provider is covered by their insurance. Coverage can vary by company and even state. Basic health care coverage should be consistent for all households throughout the US. Households who wish to insure risks not covered by basic health care will be able to purchase supplements similar to current Medicare Supplements
Health care is currently taxed differently. An employee whose employer provides health insurance would not pay taxes on the cost. If the employee pays part of the premium, it can be pretax. A self-employed person may be able to deduct health insurance costs. An individual who buys a plan if they have itemized deductions, may be able to deduct part of the premiums. The taxability or non-taxability of health insurance should be the same for everyone.
Medicare is government sponsored and administrated health care. I suspect any politician who votes to end Medicare will be out of office the next election.
If the current system of health care is flawed and not sustainable, then the question becomes “what is the best means of providing basic health care for US citizens in the most cost efficient manner which still enables the economy to grow and individuals and families to build long term financial security. In a future article, I will discuss my thoughts on the best option in my estimation for solving the problem.
*This content is developed from sources believed to be providing accurate information. The information provided is not written or intended as tax or legal advice and may not be relied on for purposes of avoiding any Federal tax penalties. Individuals are encouraged to seek advice from their own tax or legal counsel. Individuals involved in the estate planning process should work with an estate planning team, including their own personal legal or tax counsel. Neither the information presented nor any opinion expressed constitutes a representation by us of a specific investment or the purchase or sale of any securities. Asset allocation and diversification do not ensure a profit or protect against loss in declining markets.