Healthcare or Housing? What’s wrong with this picture?

I came across a report that has me shaking my head. A new Commonwealth Fund report provides the following information on projected average family health insurance premiums as a percentage of median family income 2013 to 2021.  Here’s the data:

Projected Average Family Premium as a Percentage of Median Family Income, 2013-2021 · 2014 – 25%

· 2015 – 26%

· 2016 – 26%

· 2017 – 27%

· 2018 – 28%

· 2019 – 29%

· 2020 – 30%

. 2021 – 31%

When I was a young man entering the workforce and wanting to buy a home, the rule of thumb was that an average family should spend no more than 25% of their monthly income on housing. As I became more successful, I recall some mortgage brokers suggesting that I could spend 40% or more of my income on house payments. Thankfully, I rejected that advice. We all know what happened to far too many Americans that drank the Kool-Aid. Call me conservative, but when I see data suggesting that healthcare premiums will soak up 30% of the average family’s income, I can only conclude that we are in a heap of trouble. This is a train wreck.

Healthcare spending in America is out of control (even though recent economic reports suggest the acceleration is slowing). As a physician, I understand why this is happening. We can do amazing things for patients these days. We can replace organs. We can prolong life. We can spend tens of thousands of dollars a day trying to squeeze out a few more weeks or months of life when a patient or his family demands it. Then too, we have far too many people who are overweight, don’t exercise, smoke and drink too much, and have multiple chronic (and expensive) conditions. And by the way, Obamacare now mandates that there is no lifetime spending cap on medical treatment. All Americans will have a right to unlimited, lifetime coverage. Your insurance company must provide this.

Why does health insurance cost so much compared to other kinds of insurance? One reason is that health insurance isn’t really insurance. Insurance is something you buy to protect you and your family from high cost, but unlikely events like a house fire or automobile accident. The problem with health insurance is that everyone in America is insuring a Ferrari, and all Ferraris will eventually be totaled. Think of what your auto insurance would cost if that was true for the car you drive. In essence, health insurance premiums are like an annuity. You must take into account your average lifetime healthcare costs and come up with a monthly payment that reimburses all of it with interest and inflation between the time you start paying and the time you die. Remember, all Ferraris get totaled.

The only answer for this is to figure out a way to dramatically cut the cost of healthcare, and for all of us to make much better, more rational decisions about how we use it. Information technology and better, more efficient use of resources is part of the answer. Engaging patients to make better decision will also help. No one should have to chose between healthcare and a roof over their head. I can’t believe that we are even publishing figures that suggest average Americans will be able to spend more than 30% of their income on healthcare within ten years.



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