How Can Health Care Costs be Reduced & Who Will Make it Happen?
Whining About Health Care Costs
I have received several emails and comments in regards to my post on health care costs that I want to address. There are people paying 3, 4, 5, and even 7 times the amount we’ll be paying for family health coverage. Compared to these prices my rate increase seems minor and I feel somewhat ungrateful for complaining at all.
I feel bad for everyone paying high health insurance bills and don’t mean to come across as unappreciative of having affordable coverage. However, that doesn’t mean I’m not always looking to save money wherever I can so when one of my expenses goes up 50% I take notice. Of course taken in the broader perspective of health insurance rates across the country my new cost of doesn’t seem so bad.
Reader Response
One reader e-mail points out those of that can afford health care are lucky since there are many that have to go without:
“My family plan costs approximately $500 per month. Had we gone through my wife’s plan, the monthly premium would be $900. But I don’t think we should be thankful that we pay premiums of $80, $250, $500, or whatever. Such complacency is dangerous and obscures the fact that our health care system is broken, inequitable, and immoral and that we all suffer as a result. Access to health care should be an inalienable right. The fact that we have 50 million uninsured Americans and millions more underinsured worrying about adequate care while insurance companies, drug companies, and their investors prosper on their misery is inexcusible.”
Who Will Make Health Care More Affordable?
I agree that our health care system has many problems and unfortunately think it will get worse before it gets better. I certainly hope this problem is a top priority for our next president and not just on the campaign trail.
I am not a direct investor in any hospitals, insurance companies, or drug companies but am pretty sure I hold stock in some of them through one or more mutual funds. I don’t think me not investing in them would change their behavior. Of course if everyone stopped buying their stock that would be a different story but I don’t see that as a likely scenario.
Corporations in general exist primarily to provide a product or service for profit and these companies are no different. Right or wrong, they base their decisions on what’s best for the bottom line. I don’t disagree that corporations are making obscene amounts of money in the health care sector. The book Health Care On Then Less Than You Think gives some numbers for the year 2004:
– World’s 13 largest drug companies posted $62 billion in profits
– US hospitals reached aggregate profits of $26.3 billion
– Twenty largest HMOs in the US had profits of $10.8 billion
– Twelve top HMO executives earned 222.6 million in direct compensation
The problem for many people in this country is that health care just costs them more than they can afford. Obviously the high price of care contributes to the huge income numbers above and it does seem that in order to reduce the price to consumers these companies will be faced with lower profit margins. I don’t think these companies will change on their own so it seems to be the job of our government to provide rules and incentives that will make health care more affordable for its citizens and provide a safety net for those that still can’t afford it.
Going Into Business With a Friend: Smart Move or Dumb Idea?
Should you ever go into business with a friend? I’ve been presented with the chance to partner with a friend and my research on the subject last night seemed to turn up the message of yes, BUT……
Successes & Failures
The Business Opportunities Blog started off by reminding me of the success of two friend teams, Google co-founders (Sergey Brin and Larry Page) as well as Ben & Jerrry (ice cream buddies). Then it goes on to caution that “collaboration works but only if everyone is clear about the rules, boundaries, aims and expectations….. You can go into business with anyone you like as long you have a very clear understanding of who owns what and who does what”.
The title of a New York Times article warns that friends don’t always make good partners; but later goes on to tell the success story of two buds that started a business together right out of college and now have sales of over $200 million.
Smart Move or Dumb Idea?
The common theme is that 1) Some people work better together than others and 2) Regardless of how well you get along you should agree on everything upfront and document it in writing. The Times article would suggest my friend and I have a lot of work to do before we even get started working on the project:
“Experts say friends going into business should draft a detailed business plan with specifics on ownership and responsibilities, and a succession plan spelling out exactly how the business will be split up, if that becomes necessary.”
This is not a multimillion dollar project. We will both keep our jobs and run a web site on the side so we are not risking our livelihood or investing thousands of dollars. However, money is money and I would not want our venture to come between us at any point in the future. The problem with most partnerships seems to be not thinking through all of the what-ifs. There are many directions a project or your life can take you and it seems impossible to foresee them all.
Planning Ahead
We have already broached the subject and are making plans to sit down with another friend who is an attorney to talk through the details and come up with an agreement. We are both excited about working together, he’s the subject matter expert and I’m the business/technical guy. It started not long ago when I registered a domain, put up some sample content, and e-mailed some friends for some feedback. This guy was very excited about the idea and now we’re planning its launch!
If nothing else, it will be a good learning experience and should be lots of fun. If it is successful and we end up making more than $10 a month to cover hosting fees then we’ll have an agreement in place to guide us. Do you have any tips or advice for us?
Health Care Costs Increase While Our Income Goes Down
If you lost or quit your job today, how would you pay for health care? Luckily for my wife, we can add her under my health insurance for a “reasonable amount’ when she stops working.
Of course this means that as our income goes down our health insurance costs also go up. She was covered under her employer for only a small premium each month but the health insurance plan through my job really raises the rates for a family.
Right now we’re paying $30 a month for health care insurance for my son and $15 a month for my wife’s premiums. Once she rolls off her insurance at the end of next month our costs will go up to $87.50 a month. Even though its much less than some people pay for health care it’s still quite a large increase in terms of percentage.
From what I’ve read, I don’t have much to complain about. I’m in the middle of Health Care on Less Than You Think: The New York Times Guide to Getting Affordable Coverage by Fred Brock (thanks to Jim) and Brock makes it sound like employer sponsored health insurance will someday be a thing of the past. He predicts that as health insurance costs keep going up companies aren’t going to be able to pay for their worker’s insurance. If Brock is right then an increase of only $57.50 a month in insurance premiums will be considered not bad at some point in the future when we have to pay for health insurance on our own.
It will be interesting to see the different health care reforms proposed by the presidential candidates over the next year. The need to address the high price of health care and the number of people that can’t afford it is pressing. While I’m complaining about paying $87.50 a month for insurance some people pay much more or can’t pay at all. I really hope the next president takes some effective action to solve this problem.
When is it Time to Reduce Retirement Plan Contributions?
How do you know how much to contribute to your retirment plan? Of course the more you put into your 401k, 403b, or IRA now the more you should have later in life when it is time to retire; but can you invest too much?
Investing Decisions
I’ve always taken the approach of putting in as much as possible, maxing out contributions to our 401k and IRA and almost the max for my wife’s 403b. At least until now. The addition of a baby boy to our family means that my wife is staying home from work and we have some decisions to make.
Before she decided to stay at home I sat down and looked over our expenses to determine where we could cut enough money to make up for the loss in income. One of our biggest “expenses” has always been the money we put away for retirement. For about seven years now we’ve put away over 20% of our income into our retirement plans. We decided that we could afford for her to stop working if we cut expenses and reduced the amount we save for retirement.
Cutting Retirement Savings
With her last paycheck on the way next month, I put the plan into effect this weekend. Since her 403b investments will stop with her last paycheck 
I didn’t have to mess with that investment. I logged into her Vanguard account and canceled her automatic contributions to her Roth IRA. Then I cut my 401k contributions in half, reducing it from 20% of my salary down to 10%.
Balancing the Present & the Future
It was a strange feeling for someone that has always invested as much as they could but I think we’re making the right decision. What’s the point of putting all our money away for the future if my wife can’t be around our 
little guy in the present? The fact that we invested so much for the last seven years actually made the decision easier. We got a good head start on saving for later in life that will hopefully compound and grow over time. The balances won’t stop increasing, we only cut our contributions, not eliminated them all together. I’m glad we’ve decided to invest less in our retirement account and more in our family and that our past financial decisions have made it possible.
Personal Finance Review – Getting Old Edition
I guess it happens to the best of us, we all get old sooner or later. We were reminiscing about Spring Break 1998 at a friend’s 30th birthday party last night and a younger guest commented they weren’t even in high school at the time, wow I feel old.
This friend is a nurse and sometimes shares various sad stories of patients passing away. Every time I hear one of these it makes me realize that life is short and we should spend as much of it as we can doing what we love. Before I know it, we’ll be celebrating his 75 birthday and we’ll be the ones in the hospital being cared for by a nurse who’s just turning 30. Life is short, so make sure you enjoy your weekend! Here are some money articles I enjoyed this week.
– The Digerati Life talks about investing internationally and the Sun’s Financial Diary takes a look at Vanguard’s new Europe Pacific ETF.
– Money, Matter, & More uses the KISS (Keep It Simple Stupid) approach and gives us 10 simple steps to becoming wealthy.
– Gen X Finance saw that I have carpal tunnel and reminds us of the importance of disability insurance.
– Five Cent Nickel is looking for the best 529 plan and the Lazy Man offers a guide to choosing a 529 plan.
– Free Money Finance is letting his Smart Money magazine subscription expire.
– Blueprint for Financial Prosperity takes a look at synthetic diamond rings; I tend to agree with him, diamond rings are over hyped and overpriced.
– The minimum wage went up this week. Mighty Bargain Hunter wonders what’s the point of minimum wage, Consumerism Commentary talks about future minimum wage increases, and Cash Money Life ponders whether the increase is good or bad.
– I wrote a few articles on money mistakes to avoid; MoneyNing gives an example of how low cost index funds can help avoid the mistake of selling low and buying high.
eBay MasterCard Creates eBay Layaway Plan
If you already know what you’re getting that special someone for Christmas and can get it on eBay then a new eBay MasterCard promotion might just be your own layaway program!
Layaway Plans
I first learned about layaways as a military brat, during a summer job at AAFES. The store offered an option where soldiers or dependents could make installment payments on an item they wanted to buy but didn’t have the cash for. We would hold onto an item in the back stockroom, they would make monthly payments, then pick it up when it was paid off.
eBay Layaway
You can make your own layaway plan with this promotion that offers no monthly payments and deferred interest until 2008 on your eBay purchase over $50 when made on an eBay
MasterCard. The promotion is only open to first time eBay MasterCard customers and you have to pay off your balance by Jan 1, 2008 to avoid “finance charges assessed on the promotional balance from the date of purchase”.
Unlike a traditional layaway plan you will take possession of the item right away but it will likely be out of sight until December, hidden away from package pinchers. You’ll have to save enough money each month between now and then to pay off the item before Jan 1, 2008 but you can keep the cash in your ING Direct account and earn interest on it while you save!
eBay Mastercard
The nice thing about the new eBay MasterCard card is that its fully integrated with PayPal and will show up in your PayPal wallet. You have to already have or sign up for a PayPal account in order to apply for the card.
The card does offer a rewards program, for every dollar you spend, you receive one point which can later be redeemed for eBay purchases but it’s unclear how to redeem reward points and how they equate to dollars. The Mastercard comes in three different designs and allows you to customize your card with your eBay user id if those kinds of things float your boat.
Plan Ahead for Christmas
The card itself isn’t all that great or different than any other credit card; it’s the no monthly payments and deferred interest promotion that caught my eye. Items on eBay tend to be cheaper than stores and most places online so you can use the promotion to save money on a Christmas gift and force yourself to start saving up for it now!
My Son’s First Words Could Be Expensive
As we sat on the front step after work today my son pointed his little finger at to a passing vehicle and said his first words, CAR! After my excitement wore off, I had to laugh at his choice of first words and imagine what it might mean for the future.
He could have said mom, dad, book, bird, ball, bath; all things that he knows and loves. Instead he comes out with car! A big loud expensive piece of machinery that guzzles gas money and most people buy on installment plans. Of course I’m reading too much into this exciting event. I’m uber pleased that he’s starting to put words to objects and love the excitement in his wide eyes as he watches cars roll by! However, the little money man on my shoulder can’t help but dread the day he actually wants a car of his own.
I basically see cars as one big money pit. Between car payments, insurance, maintenance, and gas they can suck the life out of your paycheck, especially as gas prices rise higher and higher. Of course they are helpful for getting to work and transporting us around town but I’d prefer to live with one or zero cars if I had a choice, much cheaper.
I know one day my son will decide he wants his own car. As a teenager, the costs of car ownership will be the furthest thing from his mind. Having the freedom of his own ride will trump all common sense and all his hard earned money will be sunk into one of the most expensive pieces of machinery he’ll likely ever buy. Sure it will be a good lesson in responsibility but who needs one of those; he’ll have plenty in life, why rush into it?
For now, I’m just happy that the little guy is starting to talk and look forward to all the new words he’ll start to say. I’ll just have to make it clear someday that all the money we’re putting away for him now is intended for paying college bills, starting a business, or some other productive endeavor, NOT for buying a car!
Gambling for Fun and Profit
I’m not a big gambler but it is fun to get together with some friends and play poker when we get a chance. I have written before about the three investment rules that apply to Texas Hold’em and was reminded of them during our game last night
– Know When to Fold’em
– Know Your Odds
– Be Patient
Know When to Fold’em
I probably folded just as many hands as I played last night. Sometimes the hand starts off looking great with an ace, king but then the flop comes and you realize you have no hand at all. Psychologically, it’s tempting to stick around and chase another king or ace. Who knows, you just might get lucky. But following my strategy of playing a tight game, it makes more sense to fold’em at this point. It is hard to do, kind of like selling a good stock gone bad, but it makes the most sense.
Know Your Odds
I’m not experienced enough to know the odds of each hand but I can reasonably judge the risk reward relationship on many hands. If I’m dealt an 8, 3 non-suited the odds are good that I won’t have a winning hand. If the betting is low I could try and stick around, hoping to make two pair on the flop but the odds tell me to save my money and wait for a better opportunity.
You can try and calculate the odds for a company’s performance by looking at their financial statements and outlook for the future. If the last several years have been poor and the outlook is grim, odds are the company’s stock won’t do so well over the next period. It may be better to keep looking for a better buy elsewhere.
Be Patient
It seems one of the biggest mistakes in Texas hold’em is to get impatient. If you are not getting good hands you might start betting on cards you normally wouldn’t just so you can play. Being patient can help prevent losing your money on hands that just aren’t quite good enough.
Patience is also a virtue in investing world. As I’ve said before, poker games are won one hand at a time, just like investment portfolios grow over time with smart, steady investments. Don’t bet all your money on the first three hands. In other words, don’t approach investing with the attitude that you’ll get rich quick. Steady investing over time leads to wealth.
Manage Your Risk
Hanging out with the guys was fun but it was even more fun because I won the card game! Walking away with a small profit is always nice but it’s good to start the game with the expectation you might lose it all. This is different than investing because you never want to lose it all in the stock market; that is why diversification and allocation are so important. You really could lose all the money you invest in the market but if you diversify your holdings, the odds are you’ll come out okay. If you set your expectations about how much you’re willing to risk and how much you stand to gain when you get started investing, watching your portfolio rise and fall will be much easier on your psyche over the years.
Blockbuster vs Netflix: Why You Should Sign Up For Both
How can you save money on movie rentals by signing up for both Blockbuster online and Netflix? It’s pretty simple really, the battle between Blockbuster and Netflix in the home movie rental industry gives you a lot of leverage as a consumer. You can use this leverage to get free and cheap movies.
Enjoy Free Movies
Both Blockbuster and Netflix have had offers of the first month free for new customers. We took advantage of these offers to get free movies for the majority of two summers. After our one-month trial with Blockbuster online was over I called and complained about some aspect of the service that wasn’t up to par and got another free month. The wonderful thing about the competitive market is that companies will do what they can to make you happy and try to keep you as a customer.
My wife went back to work at the end of summer and we canceled our Blockbuster subscription. The next summer I did the same with Netflix, then canceled when the free movies were done. Almost two summers worth of movies for free! One thing to be aware of. Make sure you send your movies back prior to the end of your free trial or they will charge you for another month of service the first day after the promotion ends. I was able to talk them into a refund but it was a hassle, so get them in on time.
Competition is Good for You
Once the free trials are over the fun begins! What’s better than being a preferred customer? How about being a former customer? Both Blockbuster online and Netflix know you’re interested in renting movies and for all they know you have switched to the competing service. Why should they try and find new customers when they know you are a good lead AND they know how to get a hold of you. Instead they’ll try and lure you back to their camp.
You will start getting e-mails from Netflix, “come back to us and we’ll give you this great special”. We received coupons in the mail from Blockbuster this summer that allowed us to rent any movie we wanted for only a $1.99. Once we were in the store they tried to sign us up for Blockbuster by mail but we weren’t interested.
The current price war between Blockbuster and Netflix keeps driving down the price of online video rental while the price of gas keeps climbing. So skip the trip to the video store. Take advantage of your spot in this battle, sign up for both Blockbuster and Netflix and enjoy the spoils!
American Express Helps the Rich Spend their Money
High incomes and steep annual fees will get you access to some of the most exclusive credit cards available such as the American Express Centurion Black Card and the purple Coutts World Card.
In addition to providing a feeling of prestige, these cards actually help their wealthy owners spend more money through concierge services. An article in the Times Online illustrates how credit card companies get their rich customers to put more money on their cards by finding them things to buy. Some crazy examples from the article are:
- A discontinued design of wedding dress – it was sourced and shipped from Italy to the UK in time for the big day.
- Champions League tickets – delivered to the customer outside a stadium in Spain.
- A specific model of Renault coupé not produced since 2003 – one concierge service located three of these rare cars in Europe.
- Top tickets for a hit London theatre show needed urgently by a customer who had forgotten his wedding anniversary – booked.
- Exclusive hospitality packages for Wimbledon, the Cannes Film Festival and the Monaco Grand Prix – all have been arranged.
Now if “go to work and do my job” for a week was on the concierge list, I might consider applying for the card. Since I know I don’t make enough to be approved anyway, I will just stick with making $125 off of a credit card promotion!
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I'm Ben Edwards and I've been addicted to personal finance since I was 12 years old.
That passion for money has paid off for my family - so in 2006 I founded Money Smart Life to help you afford the life that you want. Read My Story...
