Friday, January 01, 2010

The Costs of Health Care, It's Too High?

Well, folks, part four in this series.  If you haven't been keeping up then I'd suggest you read my previous three posts on this issue first.

People are always complaining about the costs of health care. Yet, as I have said previously the costs that they cite are always the costs of the insurance not the costs of the care itself. From the few articles that I have read maybe it is time to take a second look at how we address the issue of health care costs on a personal basis. Maybe it is time that we get out of this mindset of the need of health care insurance.

What do I mean by this? Well let’s take a gander at it from strictly a health care problem. Let’s take a look at the actual costs of health care for a typical family. Let’s create a scenario that I believe is considered an average for a family and do it with exaggerations.

1. We have a family of four and that each member of that family sees a doctor twice a year. Each doctor visit will cost $100.
2. Let’s continue to exaggerate by saying that each member will be tested for some reason. Those tests will cost $500 a piece.
3. Let’s add in medicine needed from each visit and say that it will cost $100 for each member.
4. Let’s also say that the family has insurance through their place of employment.

Now, what do we have? If we were to add all of these costs up it will come out to a total of $5600 a year which, without insurance, would have to come out of your own pocket each year. With insurance that requires a 20% co-pay, the amount that would come out of your pocket would be just $1150 and the insurance company carries the rest.

Now, since this is the beginning of a new year each of you can ascertain for yourself what were the actual costs of health care for your family last year. I think, though, that each of you will say and agree that I have probably exaggerated the actual average cost in my scenario. And for the very few I might have underestimated it.

But wait!!!! I am not finished yet. You need to remember that premiums were paid into that insurance company. That also has to be added into the total if we are to ascertain the real costs of health care we receive each year. Now we are getting to the bottom of the actual costs of health care and to the reason we consider health care costs so high.

According to the Memphis Business Journal health care premiums cost are $13, 375 a year per employee. It also states that employees are responsible for $3515 and your employer is paying the rest of it. In other words, the insurance company is paying out an average of $4450 for every $13,375 that they take in if my scenario could be taken as an average.

But, more important is the fact that we, the employee, are actually paying out $4665 a year for health care and not just the $1150 that we think we are paying. Now, I grant you that is still $935 less then if we had to pay that expense out of our pocket with no health insurance but there is more. Also remember that I exaggerated the cost of actual average cost of medical care in my scenario. And for you, the actual cost of health care last year would probably be greater with insurance than without insurance.

We need to take into consideration the amount of our own personal taxes that we pay into the county and state coffers as well as the federal coffers that is targeted for medical care costs that each of them spend, such as Medicaid and Medicare. That is another 4 or 5% of your annual income just for medical care. So, you look into the mirror and tell yourself just how much you actually pay so that someone else can pay your medical bills instead of accepting the rightful responsibility of your own bills.

I don’t care if you are a democrat, republican, liberal or conservative, your family needs take priority. They come first in my book before you consider any of my needs as you see them. But, if Congress writes a bill of mandate in regards to the medical care issue they are saying that my needs has a priority over the needs of your families and that is wrong in my book.

These are but the thoughts of a fool, as some would declare. It is your choice. You can support a mandate making my needs a priority over those of your family or you can stand at my side as we declare to the government that your family’s needs should take priority.


Rational Nation USA said...

And, as I agree with much of your premise let me ask this, a real life situation ;

A 60 year old man, duly employed by a national corporation, paying taxes into a system he supported for his entire working life, finds himself out of work for a surgery necessary to continue his line of work.

After a short period of time (less than doctors and rehabilitation experts recommend returning to his job) he finds himself with 30 dollars a week to support himself and his wife.

Correct rationale or flawed? I ask you and your readership the answer to this reasonable societal question. I ask because I have not the answer. What say you?

The Griper said...

we advocate individualism, my friend so the scenario you have depicted is a individualistical problem not societal.

and while you did not give enough information so as to analyze the problem fully i can see a lesson to be learned here.

that scenario exemplifies the need for independence and would be a good example case to teach others on the benefits of individualism vs the consequences of collectivism.

that lesson being is to depend upon yourself for everything rather than on others. and people need to learn that lesson early in life not late in life.

CJ said...

@Rational Nation
I didn't fully understand the scenario you laid out, but like so many problems it sounds like one that would be solved by saving a little bit of money.

If this 60y/o man had been putting away a decent amt for retirement and a decent amt for emergencies, this is really a tiny fraction of his income over 40 years of his working life so far, he should have plenty of money to pay for medical treatment and all other needs.

I know that when he started working the idea was a national corporation should take care of its employees as if it were a parent caring for a child. This is maybe a nice idea, but it doesn't exist anymore. People must save for their own expenses. I definitely feel for anyone struggling, but I am not convinced gov't taking over entire industries is the solution.

Rational Nation USA said...

Again I see your point. The problem is this:

I recently had relatively minor surgery. Cost - $12,000. I was left with a $600.00 cost to my family which I can afford to pay. Along with my $2500.00 annual insurance premiums. Fortunately I continued to receive my salary while out of work.

The man in my real life example had surgery much more extensive than mine and a much higher cost. His insurance covered the lions share of cost, but he is left with a larger final family cost.

He now faces a situation which puts him in potential financial hardship and potentially could result in his need to second mortgage his home to stay afloat. This after 42 years of paying his taxes and supporting a system that is arguably the best in the free world.

My question to you and your readership is this: is this situation right, should it be sustained, and is it ration? And lets add to this the possibility this could depict an individual that went to war for a nation he believed in.

Do I know the answer? No, that is why I ask you and your readership.

Even Thomas Paine, a revolutionary and the one most responsible for fomenting and galvanizing support for our revolution understood the complex question I ask today.

Anonymous said...

Amazing as always

The Griper said...

ok, the problem you created results in a conflict of emotions not one of logic, RN. it's an "undesirable" situation and one that we hope to avoid after years of work but it still is a common problem that occurs to a few of us. and we shouldn't allow age to create an emotional situation. the answer should be the same regardless of age.

statistics would call that situation an anomoly.

but, from what you have said it sounds as if he has enough equity in the house to deal with the problem. remember that house is a financial asset also.

and that, logically speaking is what the accumulation of assets is for, the paying of our financial responsibilities at those times as needed. if that wasn't the reason then accumulating assets would have no real purpose.

the only question would be whether taking out a second loan or selling the house would be the better option. he may even try to get one of those reverse mortgage deals that is being offered now days if he has an emotional attachment to the house itself.

and if i knew more about his particular situation in life i could probably suggest other options.

this scenario only indicates that absolute answers are not always available as Galt would advocate. each of life's answers is relative to the situation and the person in that situation. and that is one of the beauties of a free enterprise system of economics, its flexability.

Rational Nation USA said...

Not emotion Griper. I have no direct stake in this situation.

It is a situation that will, if the past decade is any indication, continue to plague us.

On a different not check out my post,up 15 minutes ago.

The Griper said...

you don't need to have a direct stake in something to see it as an emotional argument, RN there is the emotion of empathy.

and it will always be a situation some individuals will need to accept too. it has always plaguaded some individual throughout our history.

even a few of our founding fathers suffered this situation.

TRUTH 101 said...

I've submitted a plan for the world to see many times Griper. A 4% income tax along with appropriate copays to keep the mooches from taking advantage of the system as my plan for single payer health insurance. No more premiums to insurance companies. No more burden on employers for health insurance expense. Everybody contributes so nobody is getting "free" health care.

What' you're advocating is healthcare for the healthy. Your examples show the ripoff that insurance companies are getting away with.

RN made a real world scenario and you think someone of middle class means could actually save enough during his lifetime to not only retire, but pay a medical bill that unless he's in a fatal car accident or something, will surely befall him.

My Mom had at least 250 thousand dollars in medical bills before she passed away a few years ago. Fortunately my Dad had good INSURANCE. There are millions who don't and don't have access to good insurance like my Dad does.

Your views are troubling. Perhaps you should try some of the empathy you mentioned to RN and then rethink your position. Nobody dies because they were healthy. We all get sick. We're all Americans. We need to treat each other as such. It's good for business and labor.

The Griper said...

i haven't advocated for anything yet. i just presented the problems that i see in the present proposals.

"A 4% income tax along with appropriate copays... Everybody contributes so nobody is getting "free" health care."

do you have any idea of how many persons there are out there with incomes but do not pay any income taxes?

also, is it your contention that a person make health care costs (only a possibility) a priority over a person's food, shelter, and clothing costs(a certainty)?

does your plan cover every single type of illness that a person might face in life? not even medicare does that, even with medaid help.

as for control of costs, are you advocating the use of price controls in your plan or does your plan allow for the medical profession to get paid what they charge?

CJ said...

RN made a real world scenario and you think someone of middle class means could actually save enough during his lifetime to not only retire, but pay a medical bill that unless he's in a fatal car accident or something, will surely befall him.
If it's impossible for the middle class to save money to pay for things likely to befall them, where will the money come from? It won't come from the middle class b/c you say they don't have the money. It won't come from the rich b/c there are many more poor and middle class people than rich.

I disagree with your claim that the middle class cannot save enough money for their expenses. If they start right out of college saving a little in an HSA, money will accumulate rapidly. As they save more money, they can select higher deductibles which mean lower premiums. Eventually, when they have several million dollars, they can drop most of the their insurance and self-insure.

If the majority of people cannot handle this, the gov't can't handle it either.

CJ said...

My question to you and your readership is this: is this situation right, should it be sustained, and is it ration?
The situation is crazy. By age 60, the average person planning to have a basic retirement should have close to 1 million dollars saved. That money should be accumulated by saving a tiny fraction of his income over the years for retirement.

At age 60, he can withdraw from IRA-type accounts w/o penalty. The 1 million should be earning several thousand a month in returns from conservative investments. His medical copays should hardly take up a few month's investment earnings.

I definitely feel sorry for people who didn't save or have a hard life. I want to help. But a gov't program to tax our money and manage it is not the best way to help those people. The problems disappear if people save a tiny fraction of their income for the future.

The Griper said...

excellent comments CJ. and those are just one idea that would lower the cost of medical care by at least 50%
the poor, making minimum wage, could do the same thing. this would do more to lower the poverty rate in this country than all of the government programs together has tried to do.

TRUTH 101 said...

A 4% income tax that everybody pays menas everybody pays Griper.

An end to the handcuffing HMO's breeds competition among health care providers. I figured that would appeal to the right.

Sorry CJ. A million dollars won't cover retirement after a cancer or broken hip requiring 4 months in a nursing home. I've seen many loved ones end up destitute who thought they were fine. Medical costs are the leading cause of bankruptcy. And that is what far too many people view as their health insurance. Bankruptcy.

The Griper said...

"A 4% income tax that everybody pays menas everybody pays Griper"

fine, how does the government collect that 4% from those who have income and do not declare it?

how does the government collect that 4% from those who pays taxes on paper but not in reality?

the rest of your answer is nothing but misleading and exaggerations.


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