[F219]Financial Planning Wealth Management

When we go shopping for something, whatever it may be, we can expect to pay more for higher quality. And as Americans, we are privileged to live in a country that offers the best health care in the world. On the other hand, everyone knows the cost of health care has become inordinately high. Disagreement only exists with respect to how to fix the problem.

There's an old saying: "The only thing we can really be sure of is death and taxes." But these days, worrying about health insurance and uninsured medical costs is enough to make us all sick, and some of us are paying more for protecting our health and managing our health care costs than we pay in taxes. We must first realize that responsibility for the rapidly increasing health care costs begins at home.

Do you have employer-provided health insurance? If so, consider yourself lucky. You have probably been accepted into a group that's large enough to offer you the same coverage that costs the rest of us significantly more, just because we're either self-employed or our employer cannot afford to split the cost. (Look at your payroll deductions for health insurance and multiply by three; that's roughly what it costs the rest of us.) Typically, employer group policies (or trade/association group health insurance policies) are non-cancelable as long as you continue to pay the premiums, and they cannot single you out for a rate increase because of your personal claim history. Your rates will go up every year based on the risk and costs incurred by everyone in your group regardless of how well you take care of yourself or how many claims you personally file. Essentially, this means the more claims you make the greater the benefit you'll receive for the premium paid, as compared to others in your group who make fewer claims but ultimately have to pay for your claims through higher premiums. Group health care systems reward those of us who are prone to take advantage at the expense of others, whether knowingly or unknowingly.

If you think the answer to our problems is in government sponsored heath care, you might want to think again. Government sponsored health care is potentially no different than a group insurance policy with the same exposure to abuse, but on a much bigger scale. What's worse, the bigger the government program, the more restrictions on personal choice and the more we all pay in higher taxes. Ask yourself: How well do you think the government has managed our existing tax-based Medicare and Medicaid programs? Regulation to protect the public safety and welfare is one thing. Expecting our government to go into the health insurance business and manage it better is another.

By current federal law, no one in this country can be refused medical care when needed regardless of whether or not they are insured, and there are tens of millions of people living here who are uninsured either because they choose not to be insured or they can't afford the premiums. Who do you think pays for their healthcare costs when the service provider cannot collect from the patient? Recoupment of costs can only come from one of two places -- your premiums or your taxes. (Do you see the "catch-22" here?)

Do you visit the doctor every time you have a sniffle or a hangnail? I bet you wouldn't if you had to pay the full cost of the visit from your wallet, instead of a minor insurance co-pay amount that lulls you into thinking the cost of your visit or prescription is cheap. This example is offered only to prove a point: Don't abuse your privileges; you'll end up paying for it later. And whenever you see the term "out-of-pocket" expense referenced in an insurance policy, remember that your premium is one of your biggest out-of-pocket expenses. The less attention you pay to what your insurance provider is shelling out to cover you today, the more you can expect the costs to keep rising tomorrow.

Have you ever had your doctor recommend a barrage of tests that you weren't sure you needed, and why were those tests were being recommended? Even the best doctors make mistakes just like the rest of us. But all doctors are paying increasingly high malpractice insurance premiums because of the increasing risk of frivolous lawsuits from those of us who expect them to be right all the time and then seek a fast buck if even the slightest mistake has been made. Just like in every other business, the cost of this risk is passed along to you.

When we go to the doctor, we're usually at a disadvantage because we don't feel well. Consequently, we will often defer to his or her advice without asking important questions like: "How much experience do you have? What are your references? Are your fees negotiable?" Yet these are the same kinds of questions we expect to answer when seeking a job, so why don't we ask our doctors?

We've restricted advertising for tobacco and alcohol in this country. But when was the last time you watched a commercial TV program without seeing an advertisement for some other kind of drug? Have you noticed how many of them there are? How many hundreds of millions of dollars do you think are being spent each year by all those drug companies to make you "tell your doctor" why you should have him/her recommend or prescribe their products? Did you ever actually consider buying one of these drugs or going to the doctor just because you suddenly realized you might have the same symptoms as described in one of those commercials? Do you think doctors are happy that drug companies are telling you to tell them what to do? Again, I ask you: Who do you think is paying for all of this? (Can you hear the cash register going "ka-ching?")

Short of becoming an activist for health care reform, there are a few things you can do right now to help you manage your current and future health care costs.

Be responsible for your own life and habits? If you don't currently have health insurance but can afford to buy it, then do so. Do your homework; you may be able to find affordable coverage if you look for it? Increase your health insurance deductible amount and/or co-pay amounts, which will reduce your premium costs? Open a tax-deferred Health Savings Account (HSA) and make regular contributions to it, to help you pay for your deductible and out-of-pocket expenses.

Even with health insurance coverage, some experts currently suggest that out-of-pocket medical costs for many of us can still be expected to approach $200,000 (or more) in the event of a major illness in our lifetime. (Without insurance, one major illness could bankrupt you.) When planning for retirement, it would be wise to allow for such out-of-pocket funding in your savings plans whenever possible. If you own your home, you might want to consider including the value of your home equity in your savings allocations for this. And while you're at it, don't overlook your potential need for long-term care insurance.