OK, I’m a skeptic.  I watch with dismay as the government endeavors to “fix the health care problem.”  This is the same government that has created the problem.  Much as the Congressmen who most contributed to the current financial crisis now are in charge of a fix for that, I anticipate that the same politicians who add more and more to our health care costs will develop the plan to make it cheaper.

I have more than an academic interest in this subject.  We are among the few who pay directly for our health care.  This is not quite true because we must utilize “an administrator” or we would be overcharged.  Health care is perhaps the only service for which paying cash results in a surcharge.  It is better to refer the supplier to our “administrator” (agent) and then after a couple of weeks we are told how much to pay the supplier.  Then the supplier sends us an invoice and we pay the reduced charge.  Tell me how this benefits either the consumer or the supplier?  I pay the administrator to negotiate the reduced charge, and the supplier waits weeks for payment.  Simply dumb.

I believe that the United States population is about 304 million.  Of these some 50 million are uninsured.  There are various reasons for this, but it is largely because the cost is too high for the benefits desired.  The health care cost for our population is estimated at some $2.5 trillion.  This includes the cost of caring for the uninsured, of course, because in our generous society medical care is provided even to those who can’t or won’t pay for it.  The total cost amounts to some $8,200 per person (pp).  This is the health care problem in America. 

How many of us would conclude that the improvement in our health provided by health care is worth this much?  For a family of four this comes to some $32,000.  Clearly many families of four would want much more economical health care if it were available.  I suspect that a family earning say $40,000 would consider $4,000 to be a reasonable cost for hospitalization insurance and maybe $1-2,000 for out-patient doctor, dentist, optometric care and drugs. 

Why would an average family not want to spend some $32,000 each year for health care?  Even if the family could afford it, whoever is in charge of finances would consider the cost way out of line for the benefits.  Certainly the family wants to protect its health, but it also want to eat, drink, go out, and travel from time to time.  Spending this much on health care to extend life under as many circumstances as possible is simply excessive.  Most would rather take the money for a better life during periods of health and die a bit sooner if chance would so have it.  Unfortunately families are not given that choice.  No one in government is talking about that.

Instead, the proposal is to increase spending by another about $150 billion each year.  This is such a huge number that we cannot really grasp it, but dividing it by the some 50 million uninsured gives a value of  $3,000 pp.  At first glance, this might not seem a bad cost compared to the $8,200 pp of medical care now.  Except, we must ask, what is it for?  It would seem that this cost is to increase the benefits for the currently uninsured.  As, I said already, these folks are already receiving medical care.  The care may not be as good as that received by the insured, but it is there.  Thus, the additional cost must be to equalize their care with that of the insured.  In effect, the program is to increase medical care and with it the total medical cost for everyone.  The program will increase the cost for the entire population to $8,700 pp.  This does not seem to address the basic problem that medical care is already too expensive.

More, since it is doubtful that most of the newly insured will be paying for their benefits, it is likely that the rest of us will have to pay more for medical care. I am not sure how this is possible, but am fascinated to find out.  More importantly, I want to know how it will affect me.  So far, the news is not good, but as convoluted as our health cost payment system is, it is not easy to determine exactly how the new regime change will affect me personally.  This is in large part because the payment of health costs and of taxes are already so closely intertwined, even for us who in theory pay directly for our health care.

Last year Anne and I paid some $17,000 for health care including $7,000 for hospitalization insurance, $8,000 for long-term care insurance, and $2,000 for out-patient care, etc.  But, our cost is not as simple as that.  Because we carefully limit our income, health care greatly exceeds 10% of it.  That means we can deduct health care costs (in excess of 10%) from our income tax.  On top of that we receive a deduction for putting money into a health savings account.  Without recalculating my income taxes (horror) I can’t put an exact value on the tax credit for health costs, but I estimate it at about $5,000.  So our health care cost is about $12,000.  At $6,000 pp we clearly are getting a great bargain (based on the calculations above) even though the cost seems obscene to us. 

The new administration does not believe in high-deductible health insurance policies.  The indication is that it will demand we purchase a low-deductible policy and also wipe out any deduction for a health savings account (H.S.A).  This will likely increase our insurance cost by much more than the $2,000 we paid for costs other than insurance and probably not reduce our non-insurance costs by very much.    On top of this, we will loose whatever part of our tax deduction was for the H.S.A.  These changes will significantly increase our cost.

The short of it is that the new program will increase medical costs, a huge negative when medical costs are already much too high.  We are being sucker-punched here; most of us never see how much it is costing us, and now it will cost us more.  Some like to imagine that if it is a government program, someone else will pay.  For some that may be true, but if we believe that someone else is going to pay more than a fraction of that new $150 billion a year health cost, we are stupid.  I wonder how we will manage to pay for it.  I simply don’t see how we can. 

Probably the whole system will collapse, and that could be a good thing.  It would make much more sense though, if we let folks pay directly for their own health care.  The costs would quickly come under control and we would get what we want at a reasonable price.  It seems almost criminal that the current system makes it so that many of us have completely lost the need (and ability) to save and pay for things such as doctor’s visits or the delivery of a child.  This “having it taken care of” attitude makes us dependent and irresponsible.  Some of us seem miffed when a medical provider demands even a ten or twenty dollar “co-pay.”  Our failure to pay directly for basic medical services does not insulate us from these costs; it hides them from us.  That is dangerous. 

Instead of showing us the costs in meaningful terms, our Congress appears to believe we are willing to imagine we live in a fairy world where unlimited medical services that let us live nearly forever, can be had by all with someone else paying for it.  That is deceitful to no end.  Forgive me if I have a problem with that.  Being a minority voice, I expect the magic of propaganda to succeed, but I could wait forever to spend more on health care.