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10/7/2009
So, how much do YOU budget for health care?
Do you budget? I’m kind of anal I guess, so yup, we budget. Pretty closely. No miscellaneous expenditures allowed!
Ok, so whether or not you budget, how much do you spend every year for groceries? For eating out? For travel? For gasoline? For auto insurance?
How much do you pay in income taxes? Do you know without looking? Most likely not. More likely you know how much your refund was. True?
Sure – federal and state taxes (not to mention social security and Medicare taxes) are taken from your earnings before you see the check. You’re most likely used to your “take-home pay,” net of all taxes.
And net of any health care costs your employer pays for you or you pay via automatic payroll deduction. Am I right?
So how much does it cost you for health care every year? How much does it cost the average American?
Let’s figure that whatever cost your employer is undertaking on your behalf is in actuality a cost to you. That’s pretty reasonable isn’t it? So, regardless of who’s paying it, the average family health insurance policy in the U.S. in 2009 costs $13,375. (Depending - a lot - on the area of the state and country, figure Medicare at about $10,000 per person.)
Now, those policies contain varying levels of deductibles and co-pays. Let’s say that average family with an ‘average’ health care policy paid $2,000 out-of-pocket. In our case, we have a high-deductible policy and our out-of-pocket is closer to $5,000 for two of us, depending on the year.
Your Annual Budget for Health Care – add it up
$Cost of health insurance, paid by your employer or your government
$Cost of health insurance, paid by you
$Deductibles
$Co-pays
$Charges not covered by your insurance
$Your family’s total annual health care costs
So, let’s say the average family’s cost of health care is about $15,375 ($13,375 + $2,000). It’s a lot of money – much closer to your mortgage costs than to your family’s grocery budget, for example.
Yes, health care costs money. We Americans must get it through our heads that it isn’t free - and someone must pay for it. And those someones are you and I, especially if our earnings are above a certain multiple of the poverty level.
Ok. That’s the first hurdle - to recognize that health care isn’t paid for by fairies in the sky.
Then must come the discussion of “affordability.” A good AP article Sunday discussed subsidies for those who cannot “afford” health care and/or health insurance. What constitutes “affordable” health costs? One guideline, for example, says your mortgage is “affordable” if it’s not more than 31% of your total income. So what percentage of income should we be expected to bear for health care costs? More than we spend for our auto? For our home?
And if we don’t bear the costs, who will?
The article references a new online tool from the Kaiser Family Foundation – the Health Reform Subsidy Calculator.
The Health Reform Subsidy Calculator provides ballpark estimates of what households of varying incomes and ages would pay under the different Democratic health care bills. The legislation is still a work in progress and the calculator only a rough guide. Nonetheless, the results are revealing.
A family of four headed by a 45-year-old making $63,000 a year is in the middle of the middle class. But that family would pay $7,110 to buy its own health insurance under the plan from the committee chairman, Sen. Max Baucus, D-Mont.
The family would get a tax credit of $3,970 to help pay for a policy worth $11,080. But the balance due — $7,110 — is real money [11.3% of income]. Maybe it's less than the rent, but it's probably more than a car loan payment.
Kaiser's calculator doesn't take into account co-payments and deductibles that could add hundreds of dollars, even several thousand, to a family's total medical expenses. A Congressional Budget Office analysis estimates total expenses could average 20 percent of income for some families by 2016.
How much do you pay for health care in a year – and what percent is it of your total (including the value of employer-paid health insurance) salary? Is it affordable? How should we – America, Congress – define “affordable” vis a vis subsidies in a final health care bill?
And another whole subject – how are we going to bring down these costs?
Jo Egelhoff, FoxPolitics.net
COMMENTS
"And another whole subject – how are we going to bring down these costs?"
I'll take a whack at that one ... knowing full well that this is possibly THE most unpopular position one can take in republican circles.
CUT OUT THE MIDDLE MAN.
That's right - _eliminate_ the third party "payor".
Without an insurance company or the federal government in between a patient and their doctor, the cost of those magnificent buildings, employees (including THEIR benefit packages), taxes, profits, and operating expenses all get eliminated from the cost of the patient's health care.
In addition the doc's office won't have to hire an army of staff to do battle and push 'compliance' paper just to get what is rightly theirs.
Keep it simple - let patients hire doctors on retainer ... pay a monthly fee to the doc's office. The doctor pools the money, provides the services as needed, and a SUBSTANTIAL portion of the cost of health care has been eliminated.
I know this is not a popular stand among the elite who believe insurance is essential to "protect" everyone from risk, and in theory they are right. But take it from a guy who has worked in the belly of this beast - insurance companies don't always protect the insured ... they protect their shareholders first. Of course if you're one of those shareholders that's not such a bad deal but for the rest of us who are paying for insurance then paying again for all the times insurance has weaseled out on us, simple would be MUCH better.
Jeff R. (Wed Oct 07 07:42:35 2009)
Talking with a retired fellow the other day, he was bemoaning the fact he and his wife altogether pay $10,000 per year in health care. That figure includes his long term care insurance, his health deductibles, co-pays, insurance premiums and assumes a full deductible. He is well taken care of.
My question to him was, "If you're old and retired with your house paid for, what the heck else do you think you should be spending your money on? Since when did "retirement" mean "Somebody else takes care of my responsibilities.""
"Oh."
Brian Heyer (Wed Oct 07 07:58:41 2009)
Jeff, Jeff, I FINALLY found in you a political soul-mate!!! I've said all along, as an RN and someone who lived in a "national insurance" country, we MUST cut out middlemen. WE DO NOT HAVE A FREE MARKET SYSTEM, as so many deluded people believe.
I keep saying over and over, if you called a repairman to fix a leaking roof, and you had to pay him via a middleman, would he charge less or MORE? People like Jack L. just never seem to get it!
All we need is MAJOR MEDICAL (catastrophic care)--which would be easier for ins. co's to calculate anyway, based on risks--and pay out of pocket for everything else. Just the same as people pay their plumber, electrician, mechanic...otherwise, while we're at it, why not have gov't car insurance, house insurance.
Hey, why not promise everyone free food? After all, food is ESSENTIAL to health! Oh, wait, China already tried it and ended up with a phenomenally horrific famine back in the 1960s. (Why grow food if Big Bro will "give" it to you, and you can't get paid to grow it?)
Jo, a question--is that 13,375 arrived at by Kaiser? Hubbie's employer pays $2048 per year for our family of four (that are actually covered). Our deductible is $2000, and our out-of-pocket, covered by our flex account, is $1200-2500. so our total comes to $5248-6548. I believe we are pretty "average", but maybe not. All I know is we'd end up paying a lot more if Big Bro had its way.
PS. Our mortgage has been half our take-home pay for years. It's affordable because we do not waste as much money as many folks, such as ones who come to ER with piercings and/or tattoos, eating fast food and beer, talking on cell phones, with flashy jewelry on their persons. Who "can't afford" to pay their bills.
emily matthews (Wed Oct 07 09:51:20 2009)
Yes Emily, the $13,375 number is from Kaiser. Check out the site hyperlinked over the number, and again here.
Your $2,048 number seems very low. I'm thinking your husband works with the Sheboygan School District - ? The Appleton School District - last school year - paid $17,353 for a family policy and the employee paid $913. Total premium, $18,266. That's a Cadillac policy and I don't know the deductible off the top of my head, but it's not close to $2,000. Still, your premium wouldn't be 1/9 of Appleton's.
Jo (Wed Oct 07 10:29:14 2009)
Brian re: "If you're old and retired with your house paid for, what the heck else do you think you should be spending your money on?" My wife and I are recently retired. We live on modest pensions earned over decades of hard and occasionally low paying work. During these years we raised a family, voluntarily contributed to society, and through various sacrifices paid off our home. In all likelihood our incomes will not increase appreciably during the remainder of our lives. God willing the actuarial consensus is that we have 18-20 years ahead of us. So what do we spend all our cash on? We are frugal, some might suggest Spartan, in our lifestyle. In addition to normal living expenses (food, shelter, clothing, transportation, etc.) we pay for a smorgasbord of public services we are unlikely to ever use through our federal, state, and local taxes. With increasing age comes physical deterioration. Inspite of our efforts at wellness--diet and exercise and good living habits--we seem to require more medical attention with each passing year. Genetical predispostions are things we cannot control. The cost of medical care continues to escalate much faster than the rate of prudent investment returns. We made huge sacrifices to subsidize our children's educations. Consequently they live debt free, contributing positively to society in their jobs and community service lives. We continue to give back for the privilege of living in the most prosperous nation in history through charitable donations of time and money. We care for elderly parents--fulltime care for one parent and partial care for another. Neither parent has any real assets, although both lived lives of hard work and sacrifice. Having grown up in the "big depression" they never were able to get ahead of the game and consequently rely on us to support them financially (roughly 1/5 of our income). In addition we have a grandchild with special needs. We want our grandson to not only to have a decent life but also to be able to contribute to society as he grows older. Under current insurance restrictions, his medical costs requires nearly 1/3 of his parents combined income. We subsidize them with 1/5 of our income so they don't have to take public handouts. We retired based on years of planning. We included conservative social security and medicare coverage in our planning. Having seen the devastating impact of inflation on our parents meager savings, we built-in larger savings margins. Nevertheless, we are anxious about the future. Take away the social security and medicare planks of our plan and we are screwed. There is little time and opportunity to readjust to a vastly different future scenario. We believe we have and continue to be "responsible" citizens. We have never been extravagant, frivolous or dependent on social programs in the past. To revise the rules of the game at this late stage seems less than fair. P.S. It might be fun to compare incomes and spending habits to see who really is financially challenged by the health care situation in which we are embroiled today. Perhaps your question should be rephrased: "With such an abundance of opportunity, security and wealth in the U.S.A circa 2009, what the heck are young folks spending their money on?"
Dennis (Wed Oct 07 14:45:32 2009)
Thank you Emily - not only someone who "gets" my point, but someone who also works within the industry!
So how do we get the rest of the world to understand this simple economic principle?
Jeff R. (Wed Oct 07 16:06:41 2009)
Jo,
I am pleasantly surprised that there is a preponderance of opinion that cutting out the middleman is one big way to control health insurance costs. Your original question was how much do you (we) pay on health insurance. I will tell you that as a self employed business person I pay $538 per month but have a $7500 deductible per illness. The plan is complicated and we just changed. Our previous plan (a co-op) was $581 per month plus $5500 annual deductible. Our premiums there were going up 35% despite the fact we were platinum health risks. Why were premiums rising 35% ? Because I was a single employee employer. Nothing more. Anyone who thinks they have reasonable cost health care likely has no idea about the real cost or how their plan won't cover them if they get sick. After years of battling health insurers I see this as a war. Me against them. And like in a shooting war, I can do everything right and still be "killed" by a random event. In this case, it's not a bullet but a contract clause, a huge premium increase, an income drop, a company simply dropping out of the business etc. We pay 3x more of our national health care budget on administration, compared to the others. (healthcare facts october 2003) This is the single, easiest to control item but somehow we have a mantra of preserving the Insurance companies. Preserving companies that provide no net benefit and cost billions of dollars makes no sense to me. It is corporate welfare at its worst.
dave allen (Wed Oct 07 18:07:50 2009)
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