This week I have new health insurance; an annual ritual. This time it was because my rates increased 50% because I turned 40. I have good health with no pre-existing conditions, but health insurance is a for-profit industry, even the non-profits. Insurance is a joke in this country. For example, I don't dare go to the doctor in case I have some minor condition that locks me into my insurance company, rates ever escalating. They don't pay for such visits anyway, so there is no incentive to stay healthy, only punitive medical costs. Customers are hot potatoes, and they would rather I die of complications under someone elses plan a year from now than get sick on theirs. Oh yeah, and my life insurance is also set to double this year, in typical Logan's Run style.
From a business perspective, health insurance is what will eventually force my employees to move on to other jobs. I can't possibly afford to offer it, and even larger corporations are cutting back and grumbling. I think a nationalized health plan would take a lot of pressure off small businesses especially. Instead, employees for small business are generally pulled from the college age crowd, who have their parents subsidizing their insurance costs. My dream is being able to employ a stable workforce at a living wage, with the benefits they need to work long term for me. We have a country where the wife with a second job (WW2J) or the family of college students pays these costs.
My wish is to have a simple return on investment for basic services we already pay for. There are three areas that sometimes make me want to move my family to another country: health insurance, schools, and retirement. All are things we already pay for dearly but with a horrendous return on investment. All favor the wealthy, punish the poor and need fixing desperately. Both my business and my personal life would have much greater stability if....
- Health Insurance. I knew I would have stable rates and service from my health insurance. If I could focus on prolonging my life with my health insurance instead of saving it.
- Schools. I knew I could send my son to a good school, despite my zip code. One of the biggest incentives to re-arrange my life and work for someone else is the desire to move to a better zip code, soley for the purposes of finding better schools. This is a big California problem, and you could argue that the federal government screwed this up worse, but something comprehensive and national should be done. It's not like it hasn't been done before.
- Retirement. Being 40, I'm still assuming I'm going to be left holding the bag when I retire, having paid for my parents retirment and being dumped on the sidewalk when it's my turn to collect social security. Right now social security is the bulk of my retirement plan, and it wouldn't be so bad, if it was there when I needed it.
What gets me with those who are against more government involvement in health care is that all their arguments are about a half century out of date, because they all center around "choice." There is no "choice" in the current system.
ReplyDeleteYeah, our parents and grandparents had some choice, but that was before the age of HMOs. I keep seeing arguments like "we don't want bureaucrats deciding what health care we get!" I've got news for those folks, the bureaucrats already decide for the vast majority of Americans. The only difference is that they decide based on profit motive and are responsible to shareholders instead of elected officials.
I prefer a system where preventative and catastrophic costs are covered but elective treatment is still allowed as long as you pay out of your own pocket. That's real choice, not the false choice between equally bad options that we currently have.
Unfortunately, since the insurance companies are such prolific contributors to congress, change will be difficult. It is pretty funny since studies have shown that the govt run health care programs are cheaper than the private programs.
ReplyDeleteWe can only hope Obama pushes more towards govt funded healthcare. The one tipping point may be Ford/GM etc wanting to dump their health care costs onto the govt so that they can better compete with Japan and Korea.
Yes, as more big companies cut health care benefits we will eventually reach a tipping point where the government will be forced to do something. It's really a question of how long that will take and how painful the transition will be.
ReplyDeleteI hate health insurance companies, and pay out the nose for my fiancee's insurance. That being said, I'm not looking forward to government funded health care. The US government is a bunch of screw ups. Take a look at Social Security. What a joke. They need to fix Social Security before they lay hands on my wallet again. I can't even believe people are willing to trust the government with universal health care when they've displayed such a poor track record with SS. Even if you receive 100% of your benefit, the present cash value of the benefit you receive is barely worth the 6.2% EMPLOYEE payroll tax you are forced to pay. The EMPLOYERS contribution basically goes into a black hole. It's a sophisticated shell game.
ReplyDeleteThe same problems with Social Security - too few tax payers supporting too many beneficiaries - will rear its head in an even uglier way if we have universal health care.
As an economist, I regularly deal with issues regarding health care costs and government benefit programs. There's a lot I could say, but overall I find they typically screw the middle class. I don't expect this one to be any different.
There are lot of supposed good reasons for moving to universal health care, but I'm not convinced. The European model is not the bed of roses it's made out to be. It's just another glorified form of rationing, with all its attendant problems wuch as long wait times, denial of service, etc. I know there less socialistic versions of universal health care on the table, but they are almost just as bad.
Times are tough indeed, but I'm not desperate enough to believe the feds will pull a rabbit out of their hats. When we turn to the government for "efficiency" we have truly lost our bearings.
I am reading "Lives at Risk" by Goodman, Musgrave, and Herrick. It's an interesting book, although I don't agree with what it says 100%.
I'm willing to consider all alternatives, but I'm not willing to stay with the system we've got. A decade ago I worked as a personal injury insurance adjuster. The system was broken then, and it's only getting worse.
ReplyDeletePart of the problem is that insurance companies are simply too good at their jobs. The better they get at predicting just who is going to need insurance, the less they are willing to provide that insurance to those people. The whole idea of insurance only works so long as there is some level of uncertainty on both sides as to whether or not you will actually need it. As actuaries get ever better at their job, the whole system breaks down as insurance companies only want to cover those who don't need it, and that's part of what we're seeing today.
I don't think that the government is capable of coming up with some perfect solution, but they're the only ones capable of doing anything to fix things at this point. Either through massive restructuring of existing regulations or through the creation of a completely new system.
I tend to favor the latter as, to mangle a metaphor, tossing the baby out with the bathwater at this point isn't an issue because the baby drowned a while ago.
All other modern industrialized nations seem to manage socialized medicine with pretty good results. Our own government has shown itself to be efficient in managing Medicare, with little overhead costs compared to private providers.
ReplyDeleteCombined with my other issues: education and retirement, and mix in stagnant wage increases for the middle class, and I see a gigantic divide between the haves and have notes. As someone who chose to downgrade their income, rather than being stuck with it, there are clear choices that I may have to make to join the "elite" versus suffering with the people. Of course this means sacrificing personal happiness for common services that EVERY citizen of the industrialized world enjoys, except ours.
"...the whole system breaks down as insurance companies only want to cover those who don't need it, and that's part of what we're seeing today."
ReplyDeleteAlthough we may disagree regarding the solution, I agree that this is a big problem.
"All other modern industrialized nations seem to manage socialized medicine with pretty good results." I don't really buy into this myth. You're more likely to die under the surgeon's knife or from cancer once diagnosed in the UK than the US. And you've got the endless wait times and surgery cancellations (more than the US). And it still provides much better care outcomes for people living in rich areas as opposed to poor (so much for egalitarianism). And it doesn't address the fundamental cost-drivers of care: growing elderly population and the increased sophistication and number of care items available. Europe can't afford to keep it's current system. They're going to take it in the hiney in a major way some time down the road. It's basically the US Social Security problem, exponentially worse.
Don't be fooled: Europe is "different" but not necessarily "better." If you're a very poor person economically, you might get overall care in Europe. But I'm not convinced it's the best thing for the middle class.
PS I forgot to mention that Medicare, which you seem to think is great, is anticipated to implode. Too many old people, to many services, to few young people to pay for it! No quick or simple fixes there. Like I say, if the government can't handle the critically important programs we have today (Medicare, SS), I find it completely absurd to try to venture into universal health care.
ReplyDeleteTry and have a nice day! :)
Gary is saying that the evidence shows that if you plug X dollars into Medicaid you get Y dollars worth of result, whereas if you plug X dollars into private insurance you get Y-Z dollars worth of result (I don't know if this is actually true, although I believe Gary has done some research into it, I haven't verified it myself).
ReplyDeleteThat's a separate issue than where the X dollars come from in the first place. The aging population may indeed cause Medicare, as it's currently constructed, to implode. That's an issue of funding, not of execution.
You have to have more details before you can usefully use statistics. For example, you say that europeans are more likely to die after being diagnosed with cancer than Americans. How exactly are those statistics calculated? Is it deaths per 1000 of overall population or deaths per 1000 diagnosed? If the former it's probably indicating that universal preventative care is detecting more cases than in the US, if the latter than there may actually be a problem. On the other hand, there may be other factors involved.
In any case, you mention that Europe probably won't be able to continue to afford its systems. You don't seem to get the fact that the US already can't afford the system we operate under, as shown by the huge number of people that are uninsured and can't afford basic health care.
Er, replace any instances of "medicaid" in the above with "medicare", doh!
ReplyDelete"In any case, you mention that Europe probably won't be able to continue to afford its systems. You don't seem to get the fact that the US already can't afford the system we operate under, as shown by the huge number of people that are uninsured and can't afford basic health care."
ReplyDeleteI do understand. I just disagree regarding the solution.
Many people can't afford health care in the US. So there is this push towards the great savior, the European model. The European model is too expensive, and destined to collapse. But it provides temporary relief through deficit spending. Ultimately, a Euro system is not sustainable. It's a mirage. More deficit spending is not the answer.
"That's an issue of funding, not of execution."
So? You can execute a universal health plan well, but if you can't pay for it, it's a moot point. The uncomfortable truth is, we'll never be able to cover everyone, or even as many people as we'd like, in a sustainable manner. Demographically, it's not going to work out. If you have universal care, you've got to take the growing population of elderly into account. There are too many benefit payouts and too few young workers to form the tax revenue base. This isn't some little funding snafu that can be fixed with good intentions, it's a demographic reality.
"So? You can execute a universal health plan well, but if you can't pay for it, it's a moot point."
ReplyDeleteIt's not moot when the point is to dispute the idea that a government managed system is somehow inherently less efficient than a privately managed one when the evidence actually shows the opposite is the case.
Once it is acknowledged that the government is, in fact, perfectly capable of managing health care in an efficient manner, then the nature of the argument itself completely changes. Especially if the government is actually more efficient than private insurers.
It's no longer a question of whether or not the government should be involved in health care, but instead it's one of how extensive that involvement should be.
In reality, that's the situation we face since millions of Americans already receive government managed health care either through medicare or the military, but by instead framing the debate in the form of an issue that was actually decided decades ago, the insurance industry postpones debate over the real issues.
OK, let me rephrase it again.
ReplyDeleteLet's say the gov is more efficient in providing care on a per capita basis. Even if the gov could provide care more cheaply per capita than private insurance, they still won't be able to cover everyone! That's the point I'm making!
I sincerely doubt that the gov is going to be so efficient on a per capita basis that the entire population will be covered. The fundamental reasons for cost increases won't be addressed: demographics and technology.
It's really convenient to think that our woes will be over when we get medicine out of the hands of insurance fat cats. But that's only one small part of the problem.
Fact: the elderly are a growing part of the population.
Fact: they consume the most care.
Fact: there's not enough young people to pay for their care at the standard we are used to.
Fact: medical care grows in sophistication yielding higher costs.
The outcome will be similar to Social Security. Today's elderly soak up the benefits, leaving today's young with an empty bag and a bill. It's intergenerational theft.
There seems to be a bit of misunderstanding as to how socialized medicine works. Since care is "costless" to the consumer, the system can only survive through rationing. This is how it survives - not through slick efficiency.
Over time, the "Greying of America" will guarantee an unsustainable level of expense. Too many elderly users, too few young taxpayers. Care items will grow in number and sophistication, driving costs. Yes, this will be the problem even if socialized medicine is a bit more efficient on a per capita basis. Will the government have the courage to ration more and more strictly as the total cost balloons? Will they say "no" to some patients? Who deserves care, and who doesn't? Who is worth saving? What care items will the government say "no" to? Will they "freeze" available care at a certain technological level as a way of rationing and containing costs? Will there be elected officials with the guts to ration care? Or will they refuse to ration and deficit spend into oblivion so that the young have no hope of receiving a future benefit (cough..social security..cough)?
The problem with the socialized medicine is that it misdiagnoses the problem, then applies a wishful solution. Insurance fatcat inefficiency is diagnosed as the main problem. Then, it is imagined that the per capita efficiency windfall from socialized medicine will be huge, ensuring the overall tax liability will be manageable. The real problems with socialized medicine, such as the demographic tidal wave, are ignored.
Right now, care is "rationed" to whoever has the money to pay for it. It's ugly, I know. The alternative is to have the government (1) responsibly deal with the ugliness of rationing care or (2) administer care irresponsibly without regard for cost, resulting in steep benefit cuts for future generations.
The farseeing powers of the Eldar and our past experience with Medicare and SS help me divine the answer.
I think I must be missing something. First, everyone would be covered by law, like our auto insurance state law. Everyone who worked would be taxed for this benefit out of their paycheck, and since we're including lots of young people who are often uninsured, I'm guessing this is an important offset.
ReplyDeleteYour point about the demographics of an aging population is a good one, especially when it comes to existing socialized medicine programs. It's something I would want to read about. This is the best argument I've heard against this.
"(2) administer care irresponsibly without regard for cost, resulting in steep benefit cuts for future generations. "
That's kind of where we're at now. Costs have skyrocketed. My family needs insurance, yet for the same amount of money each month, the service provided continually decreases. We're down to emergency medical care only, with my 3 year old deprived of preventive medicine now that he's beyond the majority of his vaccination years. His generation is getting a reduced benefit at the same or higher cost.
Like education, good health care has become a benefit for the wealthy.
I accept that bureaucrat are deeply entrenched in any health care system we are likely to have. What I do not approve of is to have that pack of confirmed thieves and bribe-taking scumbags collectively known as "Congress" to have control over everyone's health care.
ReplyDelete"Fact: the elderly are a growing part of the population.
ReplyDeleteFact: they consume the most care.
Fact: there's not enough young people to pay for their care at the standard we are used to.
Fact: medical care grows in sophistication yielding higher costs."
Fact: older people are much more likely to vote than people who actually have jobs to go to on a Tuesday. What we end up with is tyranny of the majority.
This is why Carlie Fiorina (sp?) brought up the fact that people can get coverage for Viagra (medically non-essential, but expensive) but not birth control (possibly the best social welfare investment our country can make) in many programs.
Why is it that, at 65, my mom can get taxpayer funded fertility treatments and drugs through Medicare, but a young worker with a condition that could be easily and quickly treated (allowing him/her) to return to work and remain productive isn't covered?
If I am paying even a penny of the medical cost for another person, I want to have some real input into things like cost decisions involving quantity v. quality of life, and operation (large one-time cost) v. medication (smaller costs, but ongoing).
On my dime, I usually buy the generic... why should someone else go first class on my dime when I can't afford it myself?
Umm, Gary, everyone is NOT covered by auto insurance in our state.
ReplyDeleteDrivers are legally required to have auto insurance, but there are thousands of uninsured motorist on our roadways. Neither the state insurance bureaucracy, the DMV, nor law enforcement accept any responsibility for not enforcing those laws if an uninsured motorist hits you.
In the mid-80s. the law was passed with the promise that, since everyone would be insured, your insurance wouldn't have to cover uninsured motorists, and would cost less.
I know that my premiums went UP as soon as the law went into effect (as did those of just about everyone I knew - perhaps young men were being courted by insurance companies before the law) - since the insurance companies have a loophole that actually allows them to get together and fix prices (creating a shared monopoly and eliminating competition).
Publicly funded agencies must only exist to provide services that promote the general welfare (socially and economically).
ReplyDeleteLaw enforcement agencies give us a good chance of being safe and secure in our lives and property. This allows us to make long term investments, and work as communities, instead of each family having it's own stronghold.
Regulatory agencies inspect and regulate products and services to ensure that things operate in a smooth, fair, and predictable manner - because this allows our society and economy to run smoothly.
Public schools (K-14 and Adult Education) provide our labor pool with educated and trainable workers. They also provide literate citizens who can be expected to make measured decisions as voters. Public schools thus provide both economic and societal rewards.
Public Universities (CSU and UC campuses here in CA)provide highly skilled people for our professions, as well as a pool of better educated people who can be expected to provide leadership in our society. They are also a means by which social mobility is possible (a societal value held in high regard in America). Public universities thus provide both economic and societal rewards.
School lunch programs are supposed to combat malnutrition and allow poor children to concentrate on their studies - as well as lead healthier, more productive lives. (Instead, they seem to free up cash so the kids can have $120 sneakers, I-Pods, and Cell Phones>)
It can be argued that a public health system is required to ensure that we don't have widespread epidemics of communicable disease, that we have enough healthy citizens to provide workers for our economy, and to extend the productive years of the average citizen's life so that the investment in education and experience has more time to pay off.
We have some of this. The government provides many vaccinations free. Many emergency rooms are required to admit patients, whether or not the patient has a means of paying for their care. There are also various state and federal programs that cover health care for certain segments of the population. One of these is Medicare.
Medicare is ass-backwards. Most of our taxpayer funded medical should go to people who need the care to get them back to work, so they can contribute to our economy. As it is, the vast majority of it is spent on measures to stretch out the lives of people who are already past the age where they contribute to the economy.
I'm not saying cut people off at 30 (as in Logan's Run) or even at 60, 70, or 80. I'm saying that we need to look at how much money we spend on each treatment, and what return we can expect on it.
Do you need a "C-Leg" at 80, or would a wheelchair do the job?
A motorized scooter, or a cane/walker?
How long should you spend immobilized and hooked up to machines when your body can no longer function on it's own (and you can't move or communicate)?
Hospice or hospital bed?
Private or shared room? Maybe a bed in a larger ward?
Is Viagra a medical necessity, or a recreational drug? A wise investment of public funds, or a wasteful boondoggle that benefits pharmaceutical companies - and those who they make political contributions (or even outright bribes) to?
What about appetite suppressants? A face lift?
Hair implants?
Breast implants?
Penile implants?
Treatment for lung cancer for a life-long smoker?
Treatment for an alcoholic who poisoned their own liver?
AIDs cocktails for IV drug users?
AIDs cocktails for former prostitutes?
Abortions?
Insulin for people whose eating and exercise habits bring upon type 2 Diabetes?
Assisted suicides?
Surgery (and pain killers, antibiotics, etc.)for accidents while motorcycling, skateboarding, biking, skiing, etc without a helmet or protective gear?
Bungled suicide attempts?
Fertility drugs for a 65 year old woman? Great, this dramatically increases the chances of her giving birth to a mentally or physically handicapped child - one that will cost ten times as much to educate as a normal child, who will need more medical care (and more expensive medical care), and who has less chance of contributing to our society and economy.
If we go to any kind of "universal" health care system, it needs to address the problem of how to properly deal with individuals and employers who already have/provide benefits.
ReplyDeleteMany people have figured medical benefits into their overall compensation package - as salary, retirement, or both.
fx - I have reasonable and low cost medical benefits as part of my retirement from my former employer. It is the only really valuable part of my otherwise insulting retirement package.
If the state (or fed) creates a taxpayer funded coverage plan that meets or exceeds my current plan, will my former employer have to keep paying for my coverage, or will I be eligible for the same coverage as every other citizen?
If my employer continues to pay for my coverage, will I get a tax credit or rebate each year?
If my employer gets to cancel my coverage, will they be legally bound to now give me a cash amount equivalent to the lost benefit - or is this another government bailout for businesses who have made poor financial decisions?
If Ford and GM say they can't afford to provide the benefits they contractually promised to their retired workers, and those workers fall under the taxpayer supported plan, don't Ford and GM owe those workers something?
Having Ford or GM reimburse the government isn't fair - that is essentially an extra tax on those businesses (and, indirectly the employees/retirees). If the employers don't have to pay the employees, it is a taxpayer bailout of employers - with the most tax money going to larger and more poorly managed companies (let's reward the CEOs of companies who screw their employees, retirees, and the American public - after all, they give lots of cash to politicians).
I'm not terribly concerned with what went before. You were promised health insurance and you should get it. Should you get apple pie and a hooker on your birthday because this duplicates your promised benefit? Should I get irate as a home owner that people in default are getting help keeping their homes when I'm struggling with my mortgage? No, as a society, these things benefit me indirectly.
ReplyDeleteWhat makes sense to me, which we probably won't see, is a mandatory plan that includes everyone unless you want to opt out, with opting out being equivalent to self-insurance (perhaps a million dollar bond), rather than a private plan. This won't happen because we believe in choice, even if it's a mirage.
Countries that make socialized medicine work do it by taxing the healthy. That broad base of healthy payers who don't access the system often can easily satisfy hips, birth control and even Viagra, at least from what I've read. They key here, is that their systems seem to work BETTER.
Nick's point about a rapidly aging population bubble puts all this somewhat in doubt in my mind, but it seems a temporary logistical problem that could be covered with increased taxes/reduced benefits, kind of like what we'll need to do to save social security.
This stuff is pretty severe. You shouldn't lose your house because you got sick and your insurance maxed out. You shouldn't be insured but be forced to avoid doctors for fear of a crimson mark next to your name. You shouldn't have to choose between food and medicine. You shouldn't have to work at a McJob because our country can't compete because the playing field isn't level.
Oh, and I do think you should totally get a tax break if you're paying into the universal health care system and you've got some sort of promised benefit (but no hookers).
ReplyDelete"Should I get irate as a home owner that people in default are getting help keeping their homes when I'm struggling with my mortgage? No, as a society, these things benefit me indirectly."
ReplyDeleteYou should be getting upset that your pocket is being picked to subsidize their poor decisions - as well as subsidizing the poor decisions of those corrupt businesses who made the ridiculous loans to them.
I heard one politician whining about how Fannie May and Freddy Mac are "victims" of the housing crisis - and that people who falsified their incomes and signed up for loans that they had no hope of paying are also "victims". He was all for punishing someone (the banks, I guess)- but not the voters who would feel indebted to him, or the large corporations that give so readily to politicians.
Fannie May and Freddy Mac helped create the problem by encouraging lenders to loan unreasonable amounts for overpriced homes.
This overpricing drove many people out of the market. Those people - who looked at the market and said "I'm sorry, I can't afford a home at that price, I'll just have to rent until the market adjusts" are now being expected to pay not only their own rent, but the mortgages of the idiots who overbid and drove up the price of a home to unrealistic levels, and also pay to bail out the "government sponsored, semi-private" corporations that allowed the sham to continue and escalate.
The best benefit to me, as a renter, would be for the housing market to collapse to a realistic level.
Not only would this put a house into my price range, but it would also force many lenders to allow homeowners to refinance their homes in order to get some kind of return on their (high risk) investment. Smart businesses will quickly figure out that refinancing existing mortgages will cut into profits, but allow them to stay afloat.
This is the equivalent to a merchant selling off a dead product line at or below cost. It isn't profitable in itself, but allows the business to survive and seek profit elsewhere.
The problem is for existing home-owners who are current on their mortgage. When foreclosures occur in my area, it drives down the value of my home, which creates an incentive for more people to default. This has nothing to do with the ability to pay, and everything to do with making payments on an asset that no longer has value.
ReplyDeleteEventually, I'll be looking around at all those vacant homes and seeing that I'm upside down on my own mortgage (owing a hundred grand or so more than it's worth) and say what the heck, and send my bank the keys and walk away from my house.
That level of "what the heck" is different for everyone, depending on when they got into the housing market. I've owned my home for 8 years, so I'm still confident. However, if banks can write off mortgages on their books, *I* would be a fool not to consider writing off my mortgage at a certain point, declare bankruptcy and go for a "do-over". It's financial, not moral. Anyway, I very much want to avoid "what the heck" scenarios in my own life and in the lives of my neighbors. If it takes an act of congress to keep me from losing everything I own, so be it.
My point is this:
ReplyDeleteEither employers who already pay benefits will continue to do so (keeping their employees out of the public health care program), or they will stop paying for benefits, and leave their employees in the public health care program.
In one case, there should be an exception - such as those made for Social Security payments for employers who provide a retirement system for their workers (railroads - schools in CA, etc.).
In the other case, shouldn't the workers get some cash value for the benefits that are part of their negotiated total compensation package? Otherwise, it is a taxpayer bailout of businesses who no longer want to pay employee health coverage. A younger employee can move to a different job for a better compensation package, but an older employee, or retiree, is stuck with a compensation package that has just been devalued by a program payed for with their own tax dollars.
If my employer pays for my health care as part of my total compensation package, I should either be exempt from the healthcare tax (at least while I work for that employer), or get a tax credit/deduction/rebate for my "share" of the benefit.
If my employer/former employer gets to stop paying for or providing me with benefits because I'm covered under the public system, what should happen to the money that they would be paying for my care? Since it is part of my negotiated benefits package, shouldn't I be the one getting that money, rather than it being a taxpayer subsidized windfall for the employer?
Large organizations (corporations and unions) that have accrued financial liabilities for employee/retiree health care stand to receive billions of dollars in taxpayer funded bailouts from a national health care plan. Of course they will lobby for it, and grease the palms (and freezers) of congress-critters to ensure that such a program would be created.
My current employer gets away with giving me $1,250 a year because I'm already receiving medical coverage through my retirement - when they claim to pay over $15,000 a year per employee for medical insurance. Because I work for a public agency within the state of California, I am not at liberty to individually negotiate for part of that savings. Because most of my coworkers are not in a similar situation, there is no union interest in negotiating this point. This is about $14k that goes back to the taxpayers, as an involuntary gift from me.
Is this unfair to me, since I am receiving about $14k per year less in total compensation than a coworker at the same grade and step?
Or, is it unfair to other workers in competition for the same job, because I can be employed for $14k less than they can?
"The problem is for existing home-owners who are current on their mortgage. When foreclosures occur in my area, it drives down the value of my home, which creates an incentive for more people to default. This has nothing to do with the ability to pay, and everything to do with making payments on an asset that no longer has value."
ReplyDeleteThis is where your bank (or the investment firm that holds your mortgage) might need to negotiate with you to refinance your home at a lower rate - since it's better business for them to lose profit (or even lose a few thousand dollars) than to have you walk away and leave them with a stripped house that they will have to expend time and effort on selling for a small fraction of what is currently owed on it.
Once it's in your best interests to "write it off" it's probably in their best interests to negotiate a compromise, where you keep paying (but maybe not as much) and they keep receiving some money (even if they lose a little on the deal).
This provides the most stability over time.
Some people are already managing to do this kind of renegotiation, even without federal tax money reimbursing the banks for doing it.
Would universal healthcare create an incentive for employers to drop their health insurance? Hopefully. Create a payroll tax and let everyone be involved. Perhaps employers could opt out and not pay the tax with proof of private insurance, but private insurance is the enemy of such a system. We *want* everyone in the pool. A selective pool is where it breaks down. If universal healthcare becomes the "insurer of last resort," it means the costs will go up as the mostly uninsurable soak up the benefit.
ReplyDelete"If my employer/former employer gets to stop paying for or providing me with benefits because I'm covered under the public system, what should happen to the money that they would be paying for my care?"
Maybe they can up-armor some humvees or provide you some actual books or pencils in your classroom. Both of the organizations of which you speak are badly broken and on the verge of collapse.
"This provides the most stability over time. Some people are already managing to do this kind of renegotiation, even without federal tax money reimbursing the banks for doing it."
ReplyDeleteBanks don't negotiate until you're about to lose your house, and even then they often don't bother. Meanwhile, my credit is destroyed in the process. They want you to pay a stiff penalty before this will happen. What happens to people with good credit, who played by the rules, who are being harmed here? Do they have to become lecherous foreclosure candidates before anyone will help them?
This would also increases the downward spiral. More foreclosures from bad credit risks result in declining home values, which results in good credit people dumping their homes or re-negotiating their new, lower home value, which results in more people doing the same, which results in lower home values, and the cycle continues.
I suppose if there was one-time program to assess and re-value homes, this would work fine. But it's not like banks are going to go for that. Remember, they still have the money.
Are some financial institutions too big to fail? Even conservative economic types believe the answer is yes. Are American home owners too numerous to fail? The same logic says they need to be thrown a bone too.
Let me also point out that this problem is unprecedented. It was caused by our financial system becoming over-sophisticated and over-confident.
Another question: If home loans became securitized, and were traded like stocks, and home values are down dramatically, the wealth of 66% of Americans evaporating, who dumped these paper assets and made all the money on this? When all that wealth was transferred, who made out?
"This would also increases the downward spiral. More foreclosures from bad credit risks result in declining home values, which results in good credit people dumping their homes or re-negotiating their new, lower home value, which results in more people doing the same, which results in lower home values, and the cycle continues."
ReplyDeleteThis is exactly the market incentive for the mortgage holder to come to the table and renegotiate to cut their losses and keep other home values from plummeting - similar to what can happen with debt consolidation for non-mortgage debt (the lender gives up hope of getting everything, in return for getting as much as the borrower can actually afford). This is also what we do for countries that owe us a lot of money but can't/won't/don't want to pay... which brings me to China. China supposedly owns so much of America, due to the way their govt/military invests. Isn't it likely that they hold most of the paper for these mortgages? Why not just tell the Chinese to eat their share of the loss, and concentrate on protecting the interests only of American investors. Sure, it would have a temporary impact on overseas investment in the USA, but people would get over it - much like lenders get over a personal or corporate bankruptcy.
The banks, like home owners current on their mortgage, are hoping to ride this out until the housing market improves. If it requires some band-aids for borrowers in the most trouble, it would probably be cheaper to help them than re-valuing all the homes. Of course, tax payers pay the bill on that one (of which 2/3 are home owners).
ReplyDelete"Why not just tell the Chinese to eat their share of the loss...."
Because our currency would become worthless. $5/gallon gas? How about $50/gallon? Axis & Allies War at Sea packs for $150/each.
There was an interesting program on NPR recently about the banks "overnight rate" for loaning each other money. This is an interest rate charged between banks with the threat being that during the night, the US economy will completely implode, leaving them holding the bag.
The rate is very low, usually .5%, and those "in the know" use this to measure how banks truly measure the health of the economy. Lately the overnight rate has jumped to 1.5%, meaning the US economy is about 3 times more likely to implode than a couple years ago.
Good words.
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