Health Care Reform

The news this past week has been the Senate passing a Health Care Reform bill by Christmas, hopefully a good gift to us but probably not. While many cover the political aspects of this bill, this newsletter will focus on the financial aspects.

A bill will get passed during 2010. Once the Senate passes their bill the process is only about half done. Next a compromise bill will be drafted by the House and Senate committees. This compromise bill will be approved by the House and Senate and then go to the President for signing. Expect this compromise bill to include many of the things that have recently been taken out. A main reason is that only 51 votes are needed in the Senate once it comes out of committee instead of 60 and the more liberal members of the Senate will require things, like the public option, to be added back before giving their approval. People who are more politically astute can give you the rest of the details.

Three underlying themes have existed during the debate: insurance coverage for more people, higher taxes, and reduced Medicare expenditures. These 3 things are going to happen regardless of the final outcome, public option or not. Personally, I am not sure a Republican bill would look much different than what is currently being proposed in the Senate. So what does this mean financially?

Insuring about 30 million more people who are currently not insurable means that most likely your future insurance premiums are going up. Since insurance companies are in business to make money they like to insure healty people who have smaller claims and expensive people tend to get dropped. Personally, I view insurance companies unfavorably for the way they tend to treat people to get bigger bonuses for executives. In essence, expensive people are going to be added increasing the cost of claims and raising rates.

The idea of higher taxes has been a constant theme. What is not known is how it will be done, this is still not visible to us. Expect less visible taxes, like estate taxes, to be raised and deductions to be taken away. This has been a constant theme this year.

Reducing Medicare benefits is not fully known yet. Obviously, the thing that is being touted is elimination of fraud and waste. While this is hopefully true, most likely it means that more expensive Medigap policies will be required to cover expenses once you reach 65 and go on Medicare as Medicare benefits are being reduced.

Bottom Line: This is going to cost you more money, avoid investing in health insurance companies, and be a good steward of your resources. You need to ready yourself, not rely on the government that is deep in debt for help, and be prepared for a future with fewer benefits from government organizations.