Personal Finance Tips

There’s much debate around the healthcare system reform proposed by President Barack Obama. And while there are many people who protest against it, and those who support it, it is important to know what it is all about in the first place. Here is a short overview of the reform, which is comprised of three essential parts:

1. Assure all American citizens with access to comprehensive and affordable health coverage

The main features of this part are:

• New Public National Health Plan, which will be very close to the current health coverage provided to federal employees. The main difference is that the new plans will be available to all US citizens for a reasonable price no matter of their financial situation. Deductibles and co-payments will be reduced to minimum, while low-income persons will have the possibility to use additional subsidies.
• National Health Insurance Exchange, which will allow US citizens to look for private health plans. It will set regulations on private insurance providers in order to make sure that private plans are not too different form public ones.
• New business mandate requiring national enterprises to pay for the Public National Health Plan.
• Individual mandate aimed specifically at children.
• More support provided to existing programs like Medicaid and SCHIP.

2. Improve the quality of healthcare services and lower their costs

This initiative presumes federal financial assistance for improving the quality of the services and lowering the costs, with additional assistance to enterprises that cover high-risk employees.

To President’s belief the following actions may also contribute to lowering cost and improving services:

• Special disease management programs for improving chronic care.
• Improving transparency in what concerns quality and costs of healthcare offered by providers.
• Lowering the rates of medical errors.
• Introducing financial incentives to stimulate substantial improvements.
• Providing support for researching new and alternative healthcare technologies.
• Eliminating ethnic disparities in access and quality of healthcare services.
• Popularizing health IT.
• Stronger regulation of insurance and drug markets in order to lower medication costs and allow cheap health insurance.
• Preventing Medicare private plan participants from overpaying.

3. Wellness and healthy lifestyle promotion

This initiative is to be supported through the following actions:

• Special wellness programs at working places.
• Eliminating child obesity with school activities.
• Better education for present and future healthcare workers.
• Promotion of healthy lifestyle in communities.

Saving possibilities with the new initiatives

President Obama estimates that in average a typical American family will be able to save about $2,500 on an early basis after the plan will be implemented. These are the possible sources for such savings:

• Health IT introduction and implementation.
• Improved quality of services.
• Limitations on health insurance provider profits.
• Federal funding of catastrophic coverage that will lead to cheap health insurance.
• Universal coverage availability.

As you can see the Plan requires significant federal funding and that is one of the major points of those who are against it. Other arguments include direct implication to health insurance market, which of course is not quite welcome by the insurance companies. But is the idea of cheap health insurance for everyone that bad?

There are several options available to maximize the chance for children to be included in a health plan. Employer-provided plans routinely offer cover for family members and adding children to private plans is relatively inexpensive. For those families with low incomes who cannot afford cover, there are federal and state funds available to pay for basic cover. But all these options disappear when the child becomes an adult. This is the magic time everyone used to look forward to. Finally, the law recognizes people are old enough to take responsibility for their own actions and removes the built-in protections. Except, of course, these new adults are either still in full-time education or joining the group with the highest unemployment rate in the country.

For young adults going through college and university, this is the time when debts are really starting to mount up. Tuition fees and living costs take years to pay off. Adding in the cost of a health plan is often the straw that breaks the camel’s back. Even though all the better colleges and universities offer good value group insurance, this is one additional cost too many. Younger people take the rational view. They have good heath and statistics on their side – the statistics show the vast majority of people enjoy good health during the prime of their lives. The main risks come from accidental injuries with many hit with big bills following traffic accidents. So most young people put off the decision on buying into a health plan and hope their parents will solve the problem for them.

This calculation may be about to change. The insurance industry applies a simple formula to set premium rates. It guesses how much it is going to pay out over the next twelve months, adds its operating costs and a profit margin, and then divides this total among all the people holding a policy, i.e. everyone in the group pays a more-or-less equal share. Because millions of young adults opt out, the cost of medical treatment falls unevenly on older people and those with existing medical conditions. The premium rates for everyone would fall if the cost of the nation’s medical bills was divided between all adults. That’s why the legislation working its way through the House and Congress includes proposals to make holding an insurance policy mandatory or to fine people who do not have a health plan. This is a form of single payer program because it matches the idea that all the employed should contribute a percentage of their earnings toward universal health coverage.

Health insurance is the big political hot potato right now. But, if medical costs are to be controlled and everyone is to pay only a fair amount for insurance, some changes will have to be made. Mandating insurance for the young is not a bad way of paying for universal coverage. As it stands, health insurance companies routinely refuse cover for people with pre-existing health problems. Allowing a redistribution of the additional costs of treating these people among the fit and healthy is the fair option. Whether the politicians will think so is another matter. The Republicans believe this infringes basic liberty. The Democrats are not united. It’s going to be interesting to see who wins the argument.