The Cost Dilemma
“Can you believe how much our health insurance premium is going up this year?” my wife said to me. “No surprise to me,” I said to her. Health insurance has been heading this way for a long time now. Not only are premiums increasing at an incredible rate of 17% per year, the delivery of health costs by doctors and hospitals seem to be spiraling out of control. It is a well know fact that much of our health insurance premium today is well padded to take care of the indigent, the un-insured as well as the illegal immigrant. However, we continue to hear claims that 47 million people are uninsured. How did we come up with that number? “How did we let this happen?” a colleague asked me the other day. As in everything else in life, if we do not pay attention to the details in our lives the bad is liable to bite us when we least expect it. We have swept escalating costs under the carpet for too long. However, in this economy and for our future we now need to take control of managing our own health care and its related costs. Regardless of whether Government achieves its perceived “nirvana” with Universal health care, consumers will ultimately be paying the price.
The rise of Health Savings Accounts (H S A)
For those of you who have not heard of H.S.A. accounts, it is time to take heed of this incredible option for families. In the simplest example that I can make, if you were able to reduce your premium by half and put the other half into a savings account for your family that would grow tax deferred like an IRA would you do it? If you got to pay for medical services before tax from this account would you do it? Most people would say, “Where’s the catch?” The only catch for this type of plan is you must have a high deductible plan and not want the Cadillac plan that pays for everything. Now, you can control and manage your costs by picking and choosing for the services that are most important to you. If you and your family are healthy, you will visit doctors less and save more in the health savings account. It seems like a win-win. You can always get more information on these plans and the benefits by visiting HSAbank.com.
The Long Term Care problem
As most of you are aware, people are living longer which will has ultimately created a breakdown in services and a rise in costs. When one looks at the expense of home health care, assisted living or a nursing care facility it is truly mind boggling. If you think paying $6,000 to $8,000 a month in home health care is a lot today, look no further than tomorrow for the coming crash. These costs are literally unsustainable into the future and most people will run out of money for this care, move into their children’s homes or surrender to the state.
How many of you have visited a nursing home facility? How many of you think that Medicare or Medical will take care of you? Think again because that party is ending as we run out of money.
While most baby boomers are thinking about how to help fund college expenses, they should also be thinking about their Long Term Health Care needs. Only 9% of people older than 65 have long term care insurance and 60% of those will require some form of long term care. It seems that the public has failed to recognize the future risk. The quality of the care will ultimately go down while the costs continue to spiral. Medicaid will probably become a real welfare program that covers everyone. State budgets are in trouble as well. Due to this coming crash it is important that you re-position your wealth management assets with this in mind whether you are affluent or not.
The Case for Means testing
We have all heard the news about Social security and Medicare running out of money due to the fact that there will be fewer workers to support those on these government assisted programs. So what is the possible solution? Pundits have been talking about increasing the age that you can receive benefits, reducing the benefits or just not letting anyone with decent income have any of what they have put into the system. The best case I have heard centers around means testing. This type of benefit planning involves the current income levels of those who are about to retire or are retired. Into the future it is possible that the individual benefits for Medicare and Social Security will either become reduced or possibly eliminated for people who make a certain amount of income. This has partially been done by limiting the benefits you receive at age 62 as well as taxing those benefits if you make too much income from other sources. Those who have put a lot of dollars into the system will not be happy since they will feel cheated. However, this unfunded liability of trillions of dollars will have to be dealt with sooner rather than later.
Yes we are living in uncertain and chaotic times! Yes we know that we will have to take our head out of the sand and face the future of health care and costs. Don’t expect for health care costs to go down in the near future. Don’t expect that some magic plan is going to appear to solve this coming cost and benefit dilemma in heath care. Do expect that you need to take control of your health care costs and manage them as you would any thing else in life. We will all pay the price into the future but we must come together to force those in charge to be creative, use the dollars they get judiciously and take this very seriously. We are on a collision course with Health care and we need to deal with it. Do some research and take control. It’s your life!
Jaime A. Hinojosa is a Certified Financial Planner ™ in the San Francisco Bay