What’s Wrong with the Healthcare Market?


I was thinking the other day about the American healthcare system and why it doesn’t seem to function like the other markets.  I mean, there is really no issue with getting food – it is cheap and plentiful.  Sure, people who make a lot of money are able to buy better quality food, or at least food that costs a lot of money in fancy restaurants, but anyone who is willing to work a little can get enough to feed their families, even if it is very little steak and a lot of ground beef and chicken.  Clothing is also not an issue – you can pay $5,000 for a dress, but anyone who works can get can cloth themselves and their family.

The healthcare markets, however, are different.  The cost of things can be very high, such that even someone who makes a good, middle class income can be bankrupted by a hospital stay.  There are some ways to save money, but in general the premium price is almost always charged, particularly when things are urgent.  Why is it the free enterprise works great for food and clothing – necessities of life – but not healthcare?

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Then I started thinking about it a bit and realized that healthcare is not operating under the free enterprise system like food, clothing, shelter, and virtually everything else.  Healthcare is different for these reasons:

  1.  Most people pay for buffet plans, then use as much as they want without concern for costs.
  2. Most services are provided without the consumer or the provider knowing what the price will be.
  3. The final price is decided after the product is consumed, and often the consumer and the person/entity that pays is different.
  4. Many people receive services and pay nothing.

Think about what it would be like if you went into a restaurant that had the same policies.  You can already see what happens when you pay a fixed amount for unlimited food since there are buffet restaurants.  People eat a lot more than they would if they were paying per item, and also tend to concentrate on the more expensive items.  Very quickly the buffet restaurants learn how much they need to charge and earn a profit, and that tends to be a reasonable amount since there is only so much people can eat.  But in the medical system prescriptions, devices, and services can be really pricey, so if people just keep consuming a little bit more it drives up costs, which is why premiums seem to rise every year.

 

                 

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Think now what the effects of the second and third items – having services provided without knowing the cost and not even deciding on the final price until the product was consumed  – would be in the restaurant industry.  What if you walked into a restaurant and sat down and there were no prices on the menu.  You ask the waiter about the price of a steak and he says that he’s not sure since it would depend on your insurance.  You tell him you don’t have restaurant insurance and ask him what you would pay.  He says he’s not sure since everyone pays with insurance.  He might be able to tell you the list price was $500, but says you’d probably pay a lot less.  You then go ahead and order meals for you and your family, sweating the whole time because you’re not sure what the meal was going to cost you.

At the end of the meal, the waiter comes out with the check – $3,455.  You look through the bill and see that rolls were $30 each!  You know you could have bought a whole pack of rolls across the street for $5.  You say that there must be some sort of mistake.  The waiter refers you to a manager who says that they could work out a payment plan.  He also says that he’d be willing to cut $1,500  off of the bill.  You’ve already consumed the food, so you can’t just say “No thanks!” and walk out the door.

Would you go to a restaurant like this?  Maybe you would if you had a meal plan where you paid a fixed amount for food at the restaurant, but what if the price of that meal plan just went up every year until you were paying $5,000 per year for the plan?  Would you be tempted to go to the restaurant more often?  Would you get more food than you really needed, and insist on only the best food while you were there?


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And what if while you were at the restaurant, you saw the family next to you just walk out without paying a bill?  They got the same food and the same service, but paid nothing.   You ask the manager why they didn’t pay and he explains that they didn’t have any money to pay, so they just eat for free as part of the restaurant’s benevolence.  Of course, you realize that the restaurant doesn’t have any source of money except for people like you who eat there and pay their bills, so you’re really paying for the bill of the family that eats free.  Going to the lot you notice that they are stepping into a brand new Cadillac.  You are getting into an old Honda because you want to save up some of your money to pay for things like food and can’t do that with a big car payment.

Obviously this is not the way that restaurants work.  The prices are clearly printed on the menu in almost every restaurant and there is no negotiation.  While you do not pay until after you’ve eaten, you have a good idea of what your bill will be and you choose restaurants based on what is in your wallet since you know that you’ll need to pay the bill after the meal or they’ll call the police.  No one eats without paying, so the price fo your food is only based on what you eat.  You’re not paying for other people.  As a result, prices are reasonable and there is a wide variety in choices of restaurants.  If eating at fancy places is your thing, you can put your money towards that and cut in other areas.  If it is not, you don’t need to pay the same price as others who like fancy places when you do go out since you can pick a cheaper place.  With medical care, especially when it is an emergency, there is little choice.  Plus if you’re on insurance because you’re worried about a big bill, you end up paying premium prices whether you use your medical care often or not.

 


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So how do we fix the healthcare system in the US?  Well, we start having people save up money for medical costs so people can pay for their own care for one.  We make prices transparent for another and have consumers pay the bill and get reimbursed by insurance rather than having fifty different deals cut with insurance companies and having the consumer have no idea what things costs.  We also get medical costs out there where people can see them rather than have everything so hidden.  Maybe there is a tech entrepreneur out there who can take that last idea and run with it.  Think about an app that tells you what the price of procedures are across your city and what that would do to medical care prices.

So what do you think?   Please join the conversation and leave a comment.  Contact me at VTSIoriginal@yahoo.com.

Disclaimer: This blog is not meant to give financial planning advice, it gives information on a specific investment strategy and picking stocks. 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. All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.

Why Are Republicans Afraid of Free Market Healthcare?


The United States has fantastic healthcare.  We have all of the latest machines and gadgets.  You can get in and see a doctor often the same day, but certainly within a couple of days if needed.  There are also starting to be walk-in clinics at drug stores and other places where you can go without an appointment for simple things like ear infections and poison ivy rashes.  There are readily available hospitals and emergency rooms for more serious events.  Finally, there are all sorts of new drugs coming out all of the time that treat virtually everything that makes ailments that were once considered just part of growing older a thing of the past.  Certainly the care available is among the best in the world.

The issue is not healthcare, but the way in which payment has been made for healthcare for the last 40 years or so that has made the sticker price very high and the amount that people are paying increase faster than inflation.  The issue is that prepaid healthcare, in the form of cover-all health insurance plans, has become a standard benefit at work. It has also become a common benefit provided by the government for those who don’t work or who have jobs that don’t provide health insurance.

Insurance is a good thing to buy and part of a free-enterprise market.  Most people don’t have an extra $50,000 in the bank to pay for their and someone else’s car and injuries should they get into a car accident, so they buy car insurance that covers the costs should it happen.  People also don’t have an extra $200,000 to replace their home should a tornado wipe it out, so they have home insurance.  In both cases people don’t pay the full price of a car accident or a home each year when they buy the insurance – they pay a small fraction of the price based on the amount that the insurance would pay should an event occur and the likelihood that it would occur in any given year.  Insurance works well for events that are unlikely to happen, but that would be financially devastating should they occur.  This keeps the cost affordable but makes sure the money is available for the few people who use it each year.

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What is called health insurance in the US includes an element of insurance that covers things like liver transplants and hospital stays that are unusual, but it also covers doctor’s visits, prescriptions, and labs that will happen for most people each year.  This means you are paying the full cost of these procedures, plus a bit extra to cover administrative fees and profit for the insurance company.  Plus, since people are paying for everything regardless, and it will cost the same whether you go to the doctor fifty times or three times, and whether you get the name brand drugs that see for $500 per month or the generics that sell for $15 per month, people tend to use healthcare more and not take cost into consideration in their choices.  This then causes the cost of insurance to rise.

Another factor is that health insurance makes pricing very opaque.  The sticker price for a doctor’s visit might be $150, but the doctor might have an arrangement with the insurance company that they’ll take $40.  An x-ray might have a sticker price of $500, but the insurance pays $75.  If you ask the doctor, you might get similar prices, or pay just a little more or a little less, if you’re paying cash.   If you’re dealing with a hospital it is more difficult to negotiate since they’re trying to get as much as they can to of each patient, so their willingness to cut a deal will be based in part on their expectations of whether you’d be able to pay the full amount.     Because a lot of people pay nothing at the hospital, or the hospital gets less than the cost of care from the government Medicaid or Medicare programs, they charge others more to make up the difference.  They then claim that the ones who don’t pay are getting “charity care” from the hospital, when really the patients who pay out-of-pocket or use insurance are paying the their bills, and they don’t even get to deduct the gifts from their taxes.

                 

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Free-markets, where there are many consumers and many providers trading with each other, would work with health care just as it works with everything else.  If everyone just paid out-of-pocket and didn’t use insurance except for major events, the costs would immediately drop to be in line with what the insurance companies pay or even less since the doctor’s would no longer need to spend time and money sending in insurance claims.  If everyone were paying for themselves, costs would decline since you wouldn’t be paying the costs that others didn’t pay, just as it would be a lot more expensive to go out to eat if you were paying for the tables around you rather than just the cost of your food.  Prices would also start to be more transparent,  as medical centers started to advertise their prices and specials to attract customers.  Those that didn’t provide their real pricing would lose customers since people wouldn’t put up with not knowing the price before they bought things and being surprised at the end just as they wouldn’t shop in stores that had no prices until they got to the register.  Prices would drop as providers looked for ways to be more efficient and cut their costs to avoid being undercut by other providers.  Manufacturers of medical devices and drugs would also look for ways to cut costs if they were competing for consumer dollars rather being able to bill insurance companies since they would not be able to sell drugs that cost $100 per pill.


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Despite the vast evidence that free-enterprise makes markets more efficient, lowers prices, and improves customer satisfaction, Republicans are scared to go to a free-market system.  Rather than simply repealing Obamacare and shifting to a market system over a reasonable transition period as they’ve said they wanted to do for the last six years, they want to go to some sort of Obamacare 2.0 that still has all of the collective payment for care but without the things that sort of make Obamacare work like the requirement that everyone get insurance.  We could be on the road to a great system where anyone who works a regular job would worry about getting healthcare no more than they worry about getting food.  Why the fear?

The answer is simple:

  1. Eliminate the tax break for providing insurance through work to encourage employers to simply pay their employees money and separate healthcare from work.
  2. Require everyone to put away money into a health savings account so that they have the money needed for healthcare so that others don’t get stuck with their bill.
  3. Make the health insurance market free, allowing insurers to sell anywhere they wish rather than being confined to certain states.

Do these things and watch healthcare costs drop as the free-enterprise system does its magic.  There is no reason to fear.

So what do you think?   Please join the conversation and leave a comment.  Contact me at VTSIoriginal@yahoo.com.

Disclaimer: This blog is not meant to give financial planning advice, it gives information on a specific investment strategy and picking stocks. 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. All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.

The ACA was Terrible; the AHCP Even Worse


Those who are regular readers to this blog will know that I am not a fan of the Affordable Care Act (ACA), a.k.a.Obamacare.  Amazingly, the Republicans have created a replacement plan that is even worse called the American Health Care Act (AHCA).  In what appears to be an effort to avoid making anyone mad, they have basically taken out the parts of Obamacare that sort of made it work, but that people didn’t like because it cost them money, and left the things in that made it financially unstable, but which everyone loved because they were “free.”  Having a lot of people getting free stuff, with no way to pay for that free stuff, is a sure-fired way to bankrupt an industry.  The ACA nearly destroyed the heath insurance industry – the AHCA will surely finish it off if it passes as it is.

The things people loved in Obamacare:

Subsidies (paid for by taxpayers and people paying full freight on the unaffordable, Affordable Care Act insurance)

Keeping young adults on parents’ health insurance until 26 (really, this provision has no effect since young adults rarely get sick, so their health insurance would be really cheap if they ever left their childhood bedroom)

Coverage of preexisting conditions (the most unaffordable provision, since this allows people to buy insurance on the way to the hospital)

No lifetime or yearly maximums (should be included, but raises rates)

Things people didn’t like:

Penalties for not buying health insurance (the only way to make premiums affordable)

Collection of healthcare data by the Feds (creepy)

Forcing religious businesses and entities to buy insurance that included abortant drugs (so much for the 1st Amendment)

So the AHCA tries to keep the things people liked, but get rid of the biggest thing that people didn’t like:  being forced to buy insurance, particularly really expensive insurance for those who are young because they are covering all of the high costs of those who are old.  With the ACA, many young people wisely decided that they were better off paying the penalty, so they didn’t buy the insurance, which pushed the price higher for everyone else, until the ACA entered the death spiral.  The AHCA does nothing to fix this issue, and even makes things worse, since now those who don’t buy insurance until they are sick don’t even pay a penalty.

         

The secret to reducing the price of healthcare, and making getting it a non-issue for virtually everyone just as buying food is a non-issue for anyone with a job, is to get most people to actually pay for their healthcare.  This can only be accomplished if you make sure that they put enough money aside so that they have the money when needed, rather than spending every dime and then not being able to pay their medical bills.  Not even requiring people to buy health insurance is a sure recipe for having lots of people with no money to pay the bills when they have an emergency.  This means the costs for those who actually do pay will get even higher.

A good health care plan has people saving up money when they are well to pay the inevitable times where they will need healthcare.  It also means having them mainly pay for the services they receive, as opposed to having insurance that covers everything regardless of cost, to give them an incentive to use less health care or choose lower cost options when it really isn’t important.  Basic, routine care like physicals and ear infections should be paid for by individuals with money they have saved for medical expenses.  The large, unexpected expenses that rarely happen to an individual like the long hospital stay due to needing to replace a kidney should be covered by major medical insurance.  Insurance only works if most people never use it, since then it is cheap for everyone and since you want to make sure that the few people who incur the big expenses are covered.  The solution is therefore the following:

                            

1.  Require that everyone sets up a Health Savings Account (HSA) and contributes a required portion of their income to the account, up to a certain dollar value of income.  The contribution percentage would decline after a certain amount is saved in the HSA, meaning that those who used little healthcare would have a higher take-home pay, providing an incentive to maintain high account balances and not spend money unless needed.  Those who cannot contribute enough to cover reasonable costs would have their contributions subsidized.  Any money left at death would be passed to heirs.

2.  Require that everyone also buy major medical insurance – insurance that pays for costs above a certain, large threshold, like $20,000.  Ensure that there are enough insurance companies competing that the price of this coverage is as low as possible and the service is as good as possible.   These policies must be clear on what is covered and government should fine any company that does not immediately pay for a covered service (no denying payments for sick people, hoping they won’t dispute the mistake and just pay the cost themselves).  The threshold could also be raised as an individual increased the amount in his HSA, thereby lowering the premiums.  For example, an individual with $40,000 in an HSA could have a major medical plan with a $40,000 deductible, which would cost less than one with a $20,000 deductible.

3.  Develop a high risk pool, subsidized by taxes, that covers those with really bad medical luck (like a major disease at 18 years old before starting a job and getting major medical insurance).  These individuals are rare so most people would be able to cover themselves with everyone saving up a portion of their income in an HSA, so spreading the risk out over the whole population won’t cost much.

4.  Require that all medical providers post costs and stick to those costs (no preference for one patient over another).  This would allow individuals to shop around for the best deal and eliminate price disparities as currently exist.

What would things be like after this plan is implemented?   Most people would just pay for their medical treatments out of their HSA when needed because they would have the cash saved up.  There would be no need for the doctor’s office to file insurance, reducing costs.  In addition, because most people were paying their bills and you wouldn’t need to pay for other people, costs would drop dramatically.  Imagine $20 office visits, $15 X-Rays, etc….  Hospital stays would be maybe $150 a day instead of the thousands they now cost per day.

There would also be incentive to save money, and therefore people would pick the cheaper option when it really didn’t matter and not use healthcare when not really needed.  This would cause less demand, and therefore lower prices.  Doctors could also provide a discount for procedures that really reduce costs like certain exams.  Prices would decline to the point where getting healthcare is no big deal for most people.  With most everyone paying for their own healthcare, the cost to cover those who could not would be easily obtained through charity or taxes.  Now that’s health insurance reform.

Contact me at vtsioriginal@yahoo.com, or leave a comment.

Disclaimer: This blog is not meant to give financial planning advice, it gives information on a specific investment strategy and picking stocks. 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. All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.

Are You Ready for the Storm?


jellyfish

We had a tornado go through our town this week.  Luckily no one was killed or even seriously injured, but there were a lot of trees knocked down and some damage to houses and cars, particularly where trees fell into houses.  In some cases people will need to move out and rent for a while until their homes are repaired or even rebuilt.  Seeing the damage and helping out with the clean-up is really sobering.  It really makes you think about what it would be like if a tree fell into your home, or even if just a few of the big trees in your yard came down, leaving you with a big mess to clean up.  Let alone if a more powerful tornado had come and destroyed homes entirely.

Even if it is just a big tree felled in a windstorm, you now suddenly have a big expense and a disruption to your normal life.  Maybe you wouldn’t be able to go to work for a few days while you cleaned up the damage.  In the case where the work was beyond your ability, as it is when a huge tree comes down, or comes only part way down, leaving a dangerous situation, paying for a tree service to come and take care of the situation can be extremely expensive.  Maybe insurance would pay for most of the cost, but you still might need to find a thousand dollars or more to pay for the deductible.  Does your insurance even cover a tree fall that doesn’t hit the house?  Ever check?

It’s really made me wonder about how ready we are for something like this happening.   I think we’re better off than many families because we don’t live right up to the line with our income with nothing left over for unexpected expenses or brief interruptions in our income.  Still, something that takes you suddenly out of your normal life and perhaps makes it difficult to get to the paperwork and information you rely upon can create a challenge even if you do have resources to help take care of the issues.

I won’t go into emergency kits and what to do in an emergency – there are plenty of places to read about that – but what does it take to be ready, financially, for a crisis?  Also, what would it take the have the information you need, ready at-hand?  I think I have the number for the insurance agent in my wallet, but maybe I should also keep a copy at work, just in case I need to leave quickly and can’t get to my wallet.  Also, what about people who help with the immediate clean-up and protection of your home should it be damaged?  People who help get the roof tarped and maybe pump out water?

Here are some things I’m thinking about.  I’d love to hear some ideas that you use to be ready in the event of a disaster in your life.

  1.  Cash for a hotel might be an issue, and maybe I won’t be able to get to the room with my wallet, so maybe I should keep a credit card or debit card that I can also use at an ATM to withdraw cash with me at work.  Maybe I should have some cash in the car, just in case.
  2. Having the number for my banks, broker, and other financial institutions handy would also be a good idea.  If I needed to transfer money between accounts or sell some stocks to pay for things, it would be good to have these numbers ready.
  3. Having the number for tree services, flood clean-up businesses, and other emergency services handy.  Sometimes you don’t have time to wait and need to get things going right away.
  4. Having an emergency fund ready.  I do this already to take care of things like unexpected car repairs, but seeing a storm and thinking about all of the money you might need to pay out immediately, long before the insurance comes in to pay you back, really drives the point home.  I normally have enough to pay for expenses for about three months in cash and CDs at the bank.  I make sure I have enough in cash to take care of things that are likely to happen, but have some extra in CDs that I can draw upon if needed, just losing a little interest, for the unlikely but possible things.
  5. Building up your house and car fund.  I buy used cars (typically 4-5 years-old) for cash, and make all home upgrades with cash, which means I don’t have payments to make or any interest to pay.  Still, I don’t just spend the money I would have been using for payments on other stuff.  Instead, I am constantly putting away the money I save into investments since I’ll eventually need money for the next car or home repair/upgrade.  Usually I would have a little while before purchasing the next new car or home repair or upgrade to plan and think about it, but having an investment account I can draw on quickly should a tree fall on the car and we need a replacement now is definitely a good idea.

So what ideas do you have?  Are you ready, financially, for an emergency?

Got an investing question? Please send it to vtsioriginal@yahoo.com or leave in a comment.

Follow on Twitter to get news about new articles. @SmallIvy_SI

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.

How to Replace Obamacare with a System that Works


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Having been elected, President-Elect Trump is now faced with finding ways to live up to his promises.  One that he has made, which has been made by many in Congress, is to repeal and replace Obamacare.  He is discovering, however, that doing so is not that easy since there are a lot of people relying on the current system, bad as it is, making it difficult to transition to something else.

One of the mistakes he’s making is trying to keep the requirement that insurance companies cover people with preexisting conditions, which is like forcing insurance companies to sell homeowner policies to homeowners when their house is already on fire.  As political pundit Lawrence O’Donnell correctly pointed out on his show, that quickly leads us back to Obamacare since you can’t cover those already sick unless everyone is forced to buy insurance so you have enough healthy people to cover the cost.  Otherwise, you only have people signing up for Obamacare when they’re really sick, then dropping the insurance when they’re better.  The cost then skyrockets until you end up paying the same amount whether you have the insurance or not since the cost of the insurance is the cost of the procedure.

The three things that will make a good health care payment plan are: 1)Have people saving up so that most people pay for their own regular care and a good portion of the big emergencies. 2) Make pricing transparent so that people can compare costs and choose the lower cost option just as with any other service.  3) Require everyone to buy major medical insurance to cover the unusual, high-cost items.

Here is the outline of a plan that will work, including a path to transition from the mess we have.

1.  Saving.   People should be required to fund an HSA and then pay for regular health expenses out of this account or out-of-pocket.  If most people were paying for most of their medical expenses with cash, which they could if everyone were saving for medical bills, it would mean people who were paying their bills would no longer be paying for several others who do not.  This would make medical prices lower.  Also, it would reduce the cost of providing the services since doctors would not need to maintain a staff to file insurance paperwork.  Right now my family is paying about $4,000 per year for a plan with a $3,000 deductible.  My employer is paying another $10,000, meaning I’m paying about $14,000 per year for health care before we even start paying off the deductible.  On a bad year, we may have had $10,000 in medical expenses, and most years we’ve had maybe $2,000 since we just have office visits.  If I were able to save up most of the money I’m paying for health insurance, in a couple of years I’d have $20,000 to $30,000 to pay for some fairly big expenses.  Given ten years, I’d be able to cover most procedures.  Workers with very low wages could have their HSA contributions subsidized so that they would have the money when needed (see point 4 below for a way to do this through charity).

2.  Pricing.   Probably the biggest issue is pricing.  Doctors and hospitals do not readily provide pricing information.  When they do, it is normally the list price, which is two to four times what they actually charge insurance companies and Medicare.  If medical providers were required to provide pricing, and if everyone (except maybe for some coupons or special sales) basically paid the same thing, the list price would be far less and within the budget of many more people.  Consumers could also shop around for the best deal, which would force providers to lower their costs and get things as efficient as possible.  This works for every other product and would work for health care.

3.  Major medical insurance.  Everyone should be required to buy major medical insurance.  There are things that happen to a few people that are very expensive.   If everyone were to buy insurance, however, the relatively few people who see things like organ transplants would be covered.  Because few people would use the insurance, the cost would be very reasonable, comparable to auto insurance and homeowner’s insurance.  Insurance payments could be subsidized for extremely low-paid workers (either from taxes or from charities).  Note that if everyone was required to buy major medical insurance, insurance companies could cover those with preexisting conditions currently since that would be factored into the risk pool used to price the policies.  People who developed a need later would already be covered.

4.  Tax credits for medical donations.  Individuals could be given a tax credit (meaning your taxes are reduced dollar-for-dollar) for donations to charities that provide medical care for those who are unable to pay themselves.  Donations could also be made to fund the HSAs and major medical insurance of those in low-wage jobs and the disabled who are not working.  Because the charities would directly offset tax dollars, this plan would reduce the need for taxes.  Also, because individuals could donate to groups in their area where they could make sure the money was being used well, the amount of waste would decline.  These dollars would go far further than tax dollars would.

How to transition.

For transition, I would just let the government (meaning the taxpayers) absorb the regular medical costs for individuals unable to work currently due to medical conditions.  Over a two to five years this requirement would decline since people would be saving up for regular expenses and buying insurance for exceptional ones.    Also, the charitable donations would start to replace the need for government dollars.

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

Follow me on Twitter to get news about new articles and find out what I’m investing in. @SmallIvy_SI

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.

How to Have Affordable, Plentiful Healthcare- Part 2


Fountain

In part 1 of this post, reader Carl challenged me in a comment to provide solid numbers for the cost of a room in a hospital.  Well, I dug into the 2013 HCA   year-end report (HCA is a large company that manages several hospitals across the US) and here’s what I found:

In 2013, they had 42,896 hospital beds in their hospitals.  Those beds were full 54% of the time.   =.

That year they had 1,744,100 admissions and 2,844,700 equivalent admissions.  Admissions are people actually admitted to the hospital, while equivalent admissions is a representation of how many admissions they would have had if outpatients were counted as admissions for the amount of time they spent.  From a ratio of admissions to equivalent admissions, you find that the ratio of inpatients to everything is about  61% of the admissions are inpatient.

From a ratio of admissions to equivalent admissions, you find that the ratio of inpatients to everything is about  61% of the admissions.  Let’s therefore assume that about 61% of the hospital costs are inpatient costs.

For 2013, their total costs were $29.62 B.  Taking that number, multiplying by 61%, and then dividing by the number of beds times the number of days in a year, times the occupancy rate, you get:

$2210 per bed per day

Now this includes not only the cost of the room and staff to check on you while you’re in a room, but the cost of surgeries, supplies, and so on.  Given that these other activities like surgeries are a lot more costly for the hospital than a room where you lie around, I think my guestimate of $500 or so per day was probably fairly close.  Even at $1000 a night, it is a bargain compared to the list prices.

Other things in the report:

Managed care and insured are 30% of the business, but pay 46% of the costs.

This shows that you are subsidizing others, including those on Medicare and Medicaid, as well as those who don’t pay (charity care), when you have insurance or pay out-of-pocket.  Medicare was 45% of the business, but paid only 39% of the costs.  Medicaid was 17% of the business, but paid only 10% of the costs.  Charity care was 16% of the business, but paid 0% of the costs.

If people were forced to save up money for healthcare, such that most people had money to pay the bills when the need arose, we would see costs for those who are responsible (those who currently have insurance or pay themselves) drop by at least 50%.

Probably the most telling number was the gross charges, which were $181.1 B.  Compare this with the costs (already stated) of $29.62 B,  and you have charges of more than 600% of costs.  This is the list price you see on the bill and the charges that you get if you walk in without insurance.  The hospital only has revenues of $34.18 B, meaning that most people (those with insurance or the government programs) don’t pay anywhere near the list prices.  The average ratio of money  paid to costs was 115%.

This means that the people who don’t have insurance are hit with a bill of six times what things actually cost, whiole the insurance company only pays 1.15 times costs.

If you have the money but no insurance, you probably end up paying this hugely inflated cost.  If you have the money but are willing to fight a bit, you still probably pay 2-3 times costs while on average people are only paying 1.15 times costs.  This means that the people paying out-of-pocket are subsidizing the low payments made by the insurance companies and the government.  This forces people to get insurance or risk facing astronomical hospital bills.

This issue would be solved by making pricing transparent.  There is no way that you could charge someone six times costs while others were paying 1.15 times costs.  If prices were posted – true prices, not what they list but then cut by huge amounts if you have insurance – web aps would quickly pop up to show people the lowest prices and hospitals would be forced to drop their list prices to compete.  Suddenly you would be paying $1000 per night for a hospital bed instead of $12,000, making it easy to cover the costs with the money you had in your HSA for medical care.

Forcing people to save up money and pricing transparency relally are the path to affordable, plentiful, high-quality healthcare.

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

Follow me on Twitter to get news about new articles and find out what I’m investing in. @SmallIvy_SI

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.

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.

Follow me on Twitter to get news about new articles and find out what I’m investing in. @SmallIvy_SI

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.

Obamacare is failing. Here’s a better way.


IMG_0123

For years the Affordable Care Act was being rolled out in drips and drabs, and having portions delayed to avoid angering voters right before critical elections.  Now it is fully implemented and health insurers are falling out of the Obamacare marketplace left and right.  It is becoming clear that the predictions made by pundits as the law was being passed are coming true.  Healthcare premiums are rising way up due to the requirement that insurance have no limits and cover preexisting conditions (the money to pay for these things needs to come from premiums).  People are losing jobs as employers are cutting workers – both to stay below the 50 person threshold where health insurance is mandatory and to offset costs from increases in healthcare premiums.  Other employers are cutting fulltime employees and shifting them to part-time shifts (less than 30 hours per week) to reduce the number of full-time employees below the threshold.  Not only are people not getting insured – they are losing wages as well!

Predictions on the supply side are also coming to pass.  Doctors are quitting the practice to avoid having their payments dictated and face a mountain of paperwork.  Others are shifting to concierge practices and not seeing patients with insurance at all.   Networks are being shrunk to reduce costs, resulting in long drives to see specialists or even primary care doctors.  Copays are also going up as insurers try to cover costs.

Costs are also not decreasing  – they are increasing.  This is partly because individual who originally bought minimal plans, because this was what they could afford, lost those plans and had to pay for plans with a lot more services they may or may not use.  (This is like wanting to buy regular gas but being forced to buy premium.  Sure, it is better gas, but not worth the cost to many people.)  In addition, younger individuals are needing to subsidize the healthcare costs of older, sicker individuals.  Even with these increases in premiums, insurance companies are not covering costs.  Healthy individuals are deciding to go uninsured because the price is not worth the perceived value (if you are healthy), some individuals simply cannot afford the higher premiums, and the penalties for not signing up were delayed another year.  As a result, only the sicker individuals who are using far more healthcare than they are paying for are enrolling.  Because of this, premiums are not covering costs and it is expected that the government will need to bail out these insurers.

The Affordable Care Act actually exacerbates the issues that existed with traditional health insurance.  These are:

1) Everyone pays essentially the same cost whether they use healthcare or not, so there is an inclination to go to the doctor for every little thing and there is no reason to choose lower-cost treatment options.  Increased demand results in higher costs, and higher payouts result in higher premiums.

2) Pricing is greatly distorted by insurance.  Just try asking the front desk in your doctor’s office what a procedure will cost with your insurance (your portion and what the insurance will pay) and it is unlikely anyone in the office will know.

3) A lot of people aren’t paying, or paying very little, so those that do pay are paying for ten or twelve other people besides themselves.  (Imagine what eating out would cost if you had to pay for the meals of five tables sitting next to you.)  This makes fewer people willing to save up and pay because the costs are so much higher than the value received (for example, $10 aspirin in hospitals), so people would rather not save and then rely on charity when they need healthcare.

Realize that there is no magic that allows people to pay less than the cost of their care, on average.  If someone gets care for free, someone else must pay twice.  This is true of anything – someone needs to create the value that is used.  Everyone cannot have free cupcakes.  Someone needs to put in the effort to make the cupcakes and must buy the ingredients, and few people will make free cupcakes indefinitely if they are not compensated for their efforts.

The secret to reducing the price of healthcare, and making getting it a non-issue for virtually everyone just as buying food is a non-issue for anyone with a job, is to get most people to actually pay for it.  This means that they need to save up money for the inevitable times where they will need healthcare.  It also means having them pay for the services they receive to give them an incentive to use less or choose lower cost options when it really isn’t important.  The solution is therefore the following:

1.  Require that everyone sets up a Health Savings Account (HSA) and contributes a required portion of their income to the account, up to a certain dollar value of income.  The contribution percentage would decline after a certain amount is saved in the HSA, meaning that those who used little healthcare would have a higher take-home pay, providing an incentive to maintain high account balances and not spend money unless needed.  Those who cannot contribute enough to cover reasonable costs would have their contributions subsidized.  Any money left at death would be passed to heirs.

2.  Require that everyone also buy major medical insurance – insurance that pays for costs above a certain, large threshold, like $20,000.  Ensure that there are enough insurance companies competing that the price of this coverage is as low as possible and the service is as good as possible.   These policies must be clear on what is covered and government should fine any company that does not immediately pay for a covered service (no denying payments for sick people, hoping they won’t dispute the mistake and just pay the cost themselves).  The threshold could also be raised as an individual increased the amount in his HSA, thereby lowering the premiums.  For example, an individual with $40,000 in an HSA could have a major medical plan with a $40,000 deductible, which would cost less than one with a $20,000 deductible.

3.  Develop a high risk pool, subsidized by taxes, that covers those with really bad medical luck (like a major disease at 18 years old before starting a job and getting major medical insurance).  These individuals are rare so most people would be able to cover themselves with everyone saving up a portion of their income in an HSA, so spreading the risk out over the whole population won’t cost much.

4.  Require that all medical providers post costs and stick to those costs (no preference for one patient over another).  This would allow individuals to shop around for the best deal and eliminate price disparities as currently exist.

What would things be like after this plan is implemented?   Most people would just pay for their medical treatments out of their HSA when needed because they would have the cash saved up.  There would be no need for the doctor’s office to file insurance, reducing costs.  In addition, because most people were paying their bills and you wouldn’t need to pay for other people, costs would drop dramatically.  Imagine $20 office visits, $15 X-Rays, etc….  Hospital stays would be maybe $150 a day instead of the thousands they now cost per day.

There would also be incentive to save money, and therefore people would pick the cheaper option when it really didn’t matter and not use healthcare when not really needed.  This would cause less demand, and therefore lower prices.  Doctors could also provide a discount for procedures that really reduce costs like certain exams.  Prices would decline to the point where getting healthcare is no big deal for most people.  With most everyone paying for their own healthcare, the cost to cover those who could not would be easily obtained through charity or taxes.  Now that’s health insurance reform.

Contact me at vtsioriginal@yahoo.com, or leave a comment.

Disclaimer: This blog is not meant to give financial planning advice, it gives information on a specific investment strategy and picking stocks. 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. All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.

Why Are Health Insurance Rates Going Up? Simple Economics.


Rates for healthcare plans under the Affordable Act (ACA) are projected to go up by double-digit rates in many areas.  You can find information for your specific area by going here:  https://ratereview.healthcare.gov/.  While there will be likely be many explanations for these increases such as greedy healthcare executives or a vast right-wing conspiracy to scuttle the healthcare law, the reason really comes down to simple economics.

Let’s say that five people have health insurance.  Two of the people use $10,000 in healthcare each year.  Two of the people use $5,000 per year.  The last person doesn’t use any care each year.  The insurance company would pay out $30,000 in coverage each year (two times $10,000 plus two times $5000).   If everyone paid the same premiums regardless of how much  care they used, the insurance company would need to charge at least $6,000 per person ($30,000 divided by five people) or they would be losing money.  They might charge $6500 each  person so that they would make a $3,000 beyond costs to pay for costs and to provide a small profit at the end of the year for their trouble.

 The trouble with this scenario is that the fifth person is paying $6,500 for the coverage, but he never gets sick and therefore never gets anything for his money.  If he is allowed to drop the coverage, he might decide to drop out.  The cost to the others would then go up to $8,250 per year since they would need to pay for the costs of the healthcare provided.  The two people only receiving $5,000 in coverage might then decide to drop out as well since they are paying more than they’re receiving.  This would make the cost to the two individuals remaining go up to $11,500 per year.  Note that they are only receiving $10,000 in coverage but are paying $11,500.  They still need to pay for the policy infrastructure and give a profit to the insurance company, so they end up paying more than they would if they were just to pay for their healthcare on their own.  Remember that with insurance you need to pay the costs plus administrative fees and profits.

 What if you forced the individuals who would otherwise drop out to remain in the program and pay their premiums?  Well, since they were being forced to buy coverage, they would justifiably increase the amount of healthcare they were using.  They might go in for a physical and some blood work each year, or maybe a couple of times a year, since they were paying for it anyway.  They might go in when they had a cold or a minor condition that they would just buy over-the-counter medications for otherwise because they were paying for it anyway.  This would push the costs to cover everyone up, causing premiums for everyone to increase.  Again, individuals would end up paying more than they would have if they had just paid for the medical series themselves.

The ACA forces people to buy coverage, but not really.  The idea of the law was that, by forcing younger, healthier people to buy coverage and pay for more healthcare than they were likely to use,  the costs for the older, sicker people would decrease.  Tax subsidies, paid for by the general population, would also be used to reduce the costs for the older, sicker people.  Our fifth person in our scenario would be paying his premiums and paying for the care of the two individuals who were only paying $6500 per year but using $10,000.  That fifth person would need to hope that there were people around to pay for him when he was older and started using more healthcare since he would be paying out money when he was young even though he was not sick, making it difficult for him to save up for when he needed more care later in life. 

The penalty from the ACA, however, is not that large.  Only a few hundred dollars a year, or 1% of income.  Many younger people figured out that they could pay out thousands of dollars in premiums for care they would not use, or they could just pay a few hundred dollars.  Because fining the young voters who elected the Democrats who put the ACA in place was not a smart move near the 2014 elections – right at the time the penalties were supposed to be enacted – there were even liberal waivers granted so these individuals didn’t even need to pay a fine at all.  This meant it cost nothing to not comply, so many people just went without buying coverage.

As a result, the only people who enrolled are the older, sicker people who use more healthcare than they pay for.  These indiviauls might use $100,000 per year in healthcare, but only pay $12,000.  This meant that the health insurance companies, who were counting on a lot of healthy people paying premiums and using little care, were stuck paying out a lot more than they were receiving in premiums.  Luckily for them, there were provisions in the law in which the taxpayers would reimburse them for their losses.  That backstop runs out, however, so insurance companies are now raising rates to account for the older, sicker pool of individuals in the health exchanges.  This means that insurance premium costs are increasing by 20% or more in some states.

So what is the solution?  You need to get everyone who can pay for healthcare, if they put saving for healthcare ahead of other things like smart phones and vacations, to do so.  Most individuals could easily cover the healthcare costs of their own families if they were putting away 5% of their paychecks and saving up the money for when they were older and using more healthcare.  Think about the $10,000 in insurance payments you currently make (between you and your employer) if you have coverage.  If you saved that money instead, you’d have enough for a major surgery in just five years.  Saving and investing over a working career, even with a surgery here and there along the way, you’d easily have enough money for healthcare in retirement and for a nursing home at end-of-life (or even a live-in nurse).

There would be a few people who were unfortunate.  Those who got cancer early in their working careers or who were born with diabetes, for example.  If most people were saving and paying for their own healthcare, however, doctors and hospitals could treat these few unfortunate people for free or very reduced costs.  Costs in general would also be lower without the costs of administering the health insurance plans.  As a last resort, public healthcare could be provided via clinics and government hospitals.  Of course, given the quality of care at the Veteran Administration hospitals seen today, most people would work hard to avoid having to use this option.

Contact me at vtsioriginal@yahoo.com, or leave a comment.

Disclaimer: This blog is not meant to give financial planning advice, it gives information on a specific investment strategy and picking stocks. 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. All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.

Why You Don’t Want Your Insurance to Pay for Everything


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Many people are disappointed when their medical insurance doesn’t pay for everything.  They want their office visits completely covered, their prescriptions covered, and any type of tests or x-rays covered.  They even want things like birth control, which can be purchased for maybe $20 per month, included in their coverage.  “Free” preventative care sounds great – who wouldn’t want that?  Well, you probably don’t.  Here’s why….

Would you like to buy auto insurance that covered oil changes and tires, not to mention things like transmission fluid changes and that expensive timing belt change?  You probably would, but your auto insurance would cost an extra $1000 per year.  The reason is that when insurance includes something that is certain to happen, all you are doing is paying for it through your policy instead of paying for it separately.  When it gets wrapped up in that policy, there are fees and profit for the insurance company tacked on, costs associated with filing and paying the claim, and additional amounts tacked on by the place doing the oil change for the hassle of needing to file with the insurance company.  While you could go get an oil change for $30 (or do it yourself for $15-20), you’ll pay the insurance company $40 to pay for it for you.  Tires might be $100 each if you just pay yourself, but the insurance company will charge $150 each.  You have involved a lot of middle men, all of whom need to get their cut for providing the service, plus you’ve picked a really complicated way to pay for things, which adds to your costs.

In addition, it is in the insurance company’s best interest to try to control the transaction to increase their profits.  If they find a shop that will give them a break on what they pay for an oil change, they’ll require their customers to use that shop.  With medical care, insurance companies reduce their costs by limiting the doctors that you can see.  Don’t be surprised to see things like group visits to the doctor (several people with the same symptoms see the doctor at once and get a group diagnosis) or call-in and online office visits soon as insurance companies try to reduce the costs they pay and doctors try to still make money with the amounts they are reimbursed declining.  (Note also that the need for insurance companies to reduce costs is being driven by requirements by the Affordable Care Act to cover a wide variety of things and yet do so under specified premium caps.)

Insurance is designed to pay for things that are probably not going to happen, but you could not afford to cover if they did.  Most people would be in really bad shape if the home that they just started a 30-year mortgage on burned to the ground, so they have home owners’ insurance to pay for fires.  In fact, loan companies know that most people would never pay off a loan on a home that was destroyed, so they require insurance on the home while there is a loan outstanding, and they get paid by the insurance company before the homeowners see a dime.  Because the chances of your home burning down in any given year are very remote, the cost for insurance is fairly low.

For example, if you own a $200,000 home and live near a fire hydrant, the insurance company may calculate that the chances of your home burning down this year are 1000 to one.  They would therefore charge you $2000 per year plus a small amount for a profit ($2000 = the value of the home divided by the chance it would be destroyed by a fire this year).   Assuming they covered a thousand homes, on average one home would burn down in a given year, but because everyone is paying say $2200, there would be enough money for the insurance company to cover the cost of the fire and still make a $20,000 profit.  The insurance company also takes advantage of the fact that there are many years when nothing happens by investing the funds they receive until they need to pay out claims.  This is actually where insurance companies make most of their money.

So get home insurance.  Get term life insurance when you are young and the chances of you dying are low but the consequences enormous.  Get liability insurance so that when you have an accident you can pay for the medical bills of others.  Get major medical insurance that pays for the heart operation or the cancer treatments.  These are true insurance and are relatively inexpensive because the risk of the insurance company needing to pay you for a claim are remote, but cover things you probably will not be able to withstand financially if they do happen.  For the things that are certain to happen, however, skip the insurance and pay yourself, right from your pocket. You’re doing it anyway when “insurance covers it.”  You’re just paying the insurance company to write the check, and paying a higher price when you do so.

Contact me at vtsioriginal@yahoo.com, or leave a comment.

Disclaimer: This blog is not meant to give financial planning advice, it gives information on a specific investment strategy and picking stocks. 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. All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.