Medicine

No wonder you can’t afford your health care!

By Chris Rangel MD ⋅ February 19, 2007 ⋅  Email this post ⋅  Print this post ⋅ Post a comment

Old and busted: Saving for future health care costs.
New Hotness: 65 inch Plasma 1080p HDTV! - In 2005 Americans were saving money at an average rate of NEGATIVE 0.5% meaning that on average we spent more money than we earned. Spent it on what? Here is a list (link via Fark.com) of the average household credit card debt by state in real time. The numbers boggle the mind.

The average credit card debt is almost $9,000 with an average interest rate of 20.33%. Paying this off at $250 a month would take almost 5 years and cost an additional $5,000 in interest. This is assuming, of course, that you abstain completely from credit card use for these 5 years, which is usually not the case.

On the other hand, saving or even better yet, investing a mere $250 a month over 5 years at 8% would earn you about $2-3,000 and almost $16,000 in total savings. Over 25 years this would grow to over $200,000. In 40 years (i.e. starting at age 25 to age 65) it would be over $600,000 (in real dollars).

The average American plans neither for retirement nor for future health care costs even though it is well within the fiscal ability of most of us to do so. The usual scenario is to spend like fiends for 40 years and then let the tax payers pick up the tab. This is usually advantageous since the average American tends to utilize far more health care dollars towards the end of life than they actually contributed during their working lives.

It is into this sad context that universal health care will likely become a reality in the next 5-10 years. At that point there will be even less incentive to save money to pay for one’s own future health care costs because, after all, the general consensus is that health care is something that is paid for by someone else. And that someone else is ME; the taxpayer in the top income bracket. So you can go ahead and enjoy that 65-inch plasma HDTV even though you didn’t make enough money to afford it. It’s on me!