How to Have Affordable, Plentiful Healthcare


IMG_0123There are a lot of things wrong with the Affordable Healthcare Act, a.k.a Obamacare.  Requiring all insurance to cover everything rather than letting people buy plans to cover what they can afford to cover is a bad idea.  Having health insurance pay for routine costs like checkups and doctor’s visits is a bad idea.  Putting everyone’s health information online where it can be stolen and used for embarrassment and blackmail is a really bad idea.  It should be repealed and replaced with something far better.  It did get one thing right, however, that should be part of that something much better – the requirement that everyone contribute to their healthcare costs if they are at all able.

Now I do think that this provision of Obamacare – the requirement that everyone buy insurance or face a fine – is unconstitutional and Justice Roberts got it wrong.  You can’t force someone to buy something just because they breathe air.  There is nothing in the Constitution saying the government can force citizens to buy health insurance or anything else.  Still, the option if we did not would be to let people die in the streets if they did not do the right things – get a job and save up some of their money for healthcare costs – and therefore were not able to pay for healthcare.  This is not an acceptable option in our society.  There is therefore little choice but to require people to do what they should be doing – putting aside some of their money to buy healthcare before they buy new cars and a load of junk at Wal-Mart.

The issue with Obamacare on this front, however, is that they are having people put aside money in the wrong way.  It is a pay-as-you-go system, just like Medicare and Social Security.  Both of these programs rely on the right demographics – lots of young people and only a few old people – since the money paid in today is used today, with excesses used to fund other stuff that it shouldn’t rather than being saved up in case the demographics shift.   In ten years it won’t matter if you’ve put aside money every year for healthcare and never used any of it since the money you put it will have been spent on other people.  If there is extra put away, that will be squandered just as the excesses from Social Security were squandered.  Unless there are people there, paying in money for you when you need healthcare, you’re just out of luck.

Plus, they aren’t even really forcing people to put money away because they know all of those young voters who thought they will get free healthcare would turn mean and nasty if they were fined for not paying for expensive insurance.  Sure, this is what they signed up for when they elected Obama (twice), but many of them didn’t read the fine print and choose instead to believe the lies and the rhetoric.  So instead of fining them enough to force them to buy really overpriced insurance, they have been given all sorts of waivers for whatever reason they come up with and the Obama Administration has been delaying implementation of the fines.  This has meant that those who were paying, because they were sick or just foolish, have been paying more and more.  As prices rise because fewer people are paying, fewer people pay, driving up the cost for those who do pay.

But we could have affordable, plentiful healthcare.  It just requires we use the same  free-enterprise methods that have made housing, clothing, and food affordable and plentiful.  We just need to undo everything that was done to healthcare once insurance started and start over.  Here’s what is needed:

1.  Require most people to pay for their healthcare.  Currently, if you go to the hospital, you’ll pay tens of thousands of dollars a night for the room and $10 per pill for aspirin.  It is not that hospital rooms cost that much per night to man, or aspirin are really expensive to transport to the hospital.  The reason is that a lot of people are paying only part of their bill – or none of their bill.  The cost is therefore “whatever you can pay,” and those who are able to pay more – either because they have the money or because they have been buying insurance, or because they are taxpayers – do pay more.  Lots more.

Think of it this way;  If you were to go out and have a steak dinner with friends, it might cost you $30 each.  Maybe $40 each if you add a couple of bottles of wine.  Sure, that’s pricey, but it seems worth the price.  But now what if there are ten friends, but only two paid the bill.  Now each of the people paying would be paying five times as much for the same meal.  Suddenly that $30 steak dinner cost $150 – certainly an outrageous price.

Healthcare is the same way.  A hospital puts a list price of $10,000 a night for a room at the hospital, which maybe cost them $500 per night to staff and pay for the room in the building.  Some people plead poverty and the hospital charges them nothing.  They talk about how wonderful it was for the hospital to give them free care.  Many people have insurance and pay $5,000 per night, including $1500 they pay themselves and $3500 that the insurance picks up.  They gripe a bit, but end up talking about how glad they were to have insurance since it both cut their bill and covered part of it.  The last group is made up of people who have saved up rather than spending their money, or those who make decent wages and can pay the bill given a year or two.  They end up paying the full $10,000, covering for the people who get free healthcare and those who got a cut rate due to their insurance.

The first step to plentiful and affordable healthcare is to expect most people to pay their own bill.

2.  Make sure people save up to pay their bills.  Most people see millions of dollars go through their hands during their working lifetimes, yet can’t shell out $10,000 for a hospital stay.  (This is assuming hospitals only charged you what your stay really cost, plus a reasonable profit).  You need to make sure people have the money needed to pay the bills when they come due.  The solution here is to require people to put away a few hundred dollars from each paycheck into a health savings account.  This way, they’ll have the money to pay the bill.  Note this is the same idea that is in Obamacare where everyone would be forced to buy insurance.  The difference is that the money you need would be sitting there, waiting for you, rather than have already been spent to cover someone else’s healthcare.

People also need to have major medical insurance for the rare and very serious things that happen to a few people.  This is how people can pay for the heart transplant or chemotherapy, which truly is expensive.  If everyone throws a little money into the pot based on the chance they’ll need to use it, the cost will be very low and the money will be there to pay for these procedures when needed.  Again, everyone pays for their healthcare.

3.  Make pricing transparent,  Along with making people pay for their procedures is making the pricing transparent.  This means that the price the doctor charges is really what she charges, not a first, ridiculous offer that no one except those with no negotiating power – the uninsured who have money – pay.  It also means making prices published online so that people can comparison shop.  It is crazy that a procedure that costs $5,000 in one place may cost $750 across town.  If prices were published, these differences would go away.  Think of a website where you enter your procedure and it gives you choices of doctors and locations just like a hotel room site.  Price differentials would be a thing of the past.

So there you have it.  Three simple steps to make healthcare plentiful, high-quality, and affordable.  Now we just need to undo the mess that has already been made.

Please contact me via vtsioriginal@yahoo.com or leave a comment.

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Disclaimer: This blog is not meant to give financial planning or tax advice.  It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA.  All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.

2 thoughts on “How to Have Affordable, Plentiful Healthcare

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  1. You make a lot of claims about what you think the real cost of medical care is…please provide some actual data to show that the cost per night is 500 for example. It is easy to think that everyone else is charging too much. Heck, I think it should not cost as much as it does to to build a car. But that doesn’t mean it is true.
    Second, lets assume it is just 500 per night for the room & board. Now add all the additional costs for medicine, doctors, etc. And lets assume you are an 18 year old with no job yet, but have a medical condition that forces you to spend a week in the hospital. Who pays for that? Oh, wait … “force people to save for it”… yeah, with no job?

    It would be great if societies problems were so simple. But they aren’t. And proposing unrealistic simplistic solutions based on wild-a**ed guesses about what things should cost does not help solve the problem. Yes, the system needs fixing. But it needs careful thought, not just assumptions that what works for you is the answer for everyone

    1. Hmmm. Interesting question. Let’s see. If I assume the room costs are as much as an upscale hotel room, you get 1/2 hour of doctor time per day, you get 2 hours of nurse time, the hospital pays $5M per year for insurance and has an average of 500 patients at a time, plus they pay $100,000 per year for monitoring equipment for those 500 patients, I get the following nightly costs:

      Yearly Per Hour Per Day
      Room $80
      Doctor $250,000 $100.00 $50.00
      Nurse $60,000 $28.85 $57.69
      Insurance $5,000,000 $570.78 $27.40
      Monitoring Machines $100,000.00 $11 $0.55

      total daily rate $215.64

      Double this number for janitors and overhead and you still end up under my $500 per night number. Assume I’m wrong by half and you still end up with $1,000 per night, which is a lot less than the list rate for hospital rooms. The first issue is that for every one person who pays the full rate, there are a few who pay nothing and a bunch who pay a small fraction of the list rate. Ever see the ads from the drug companies that say “If you can’t pay for your prescription, we can help.”? The drug company doesn’t “help.” The other people buying the drug just pay more to cover the people who don’t pay. The second issue is that the list rates are way above what is really charged, but patients don’t know this because they can’t find out real prices. This would all go away if you had pricing transparency like you do on virtually everything else.

      Now let’s talk about the 18-year-old in the hospital for a week. First of all, if his cost was $5,000 for the week in the hospital instead of $100,000 like it is now, it would be a lot more manageable. He could easily pay that off over the next year or two. You could also offer insurance, which would be really cheap (like $100 per year) to cover for that type of occurrence since the chances are really low. Finally, if there were no other way, absorbing that small cost for that rare occurrence in taxes and other health costs wouldn’t be a big deal. The issue is when almost no one saves up for medical care because they’re too busy “living for today,” then predictably gets sick sometime in their life, then the hospitals pass the cost for their care onto others.

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