The US Health Care System Bubble

The US Health Care System Bubble  by Bob Boog

  I'm a real estate broker, and for the last four or five years people used to ask me when I thought the real estate market bubble would pop. When the bubble did pop, most experts looked back and attributed the red-hot demand to baby-boomers, (people born from 1940 - 1965). The demand for homes by baby-boomers, they said, helped caused prices to rise out of control- until the bubble popped. Similarly, another bubble is in the making in the health care system.

Back in 2006, it was estimated that there were 67 million "baby-boomers." It was estimated that for every day for the next 30 years, there would be approximately 10,000 retiring - every 30 seconds. Ironically, with all the talk about diet and exercise, according to the Washington Post, baby-boomers are considered to be in poorer health than their Depression-era parents!

Will aging baby-boomers put a bigger and bigger strain on Fed health services? Is it like another real estate bubble waiting to happen - only bigger? The good thing is that both Democrats and Republicans agree that reforming Federal healthcare programs is needed. The question is the "type" of health care.

 75% of people who filed for bankruptcy because of a medical catastrophe had health insurance. The problem is, that the private health insurance company refused to pay their claims. For this reason, a Public Option is needed. Or legislation making it illegal for health insurance providers to deny claims.

 But a Public Option, critics fear, might eventually become the "only" option. Critics figure that because a government proposal would cost less, more people would use it, which would cause private options to evaporate. But government programs do coexist with many private programs and haven't put them out of business.

The largest investment that most people make, for example, is the purchase of a home. In the real estate business, there are cheap government loans (think FHA and VA) and more expensive non-government loans called Conventional loans. Government loans offer a low down payment, easier credit qualifying and often lower closing costs than conventional loans.

So why aren't government loans the "only" option today? (After all, these loans have been around for 75 years!)

The answer is simple. Conventional loans may cost more but there is usually less red tape involved so they usually close faster than government loans. Conventional loan buyers and sellers often experience less problems too. Government loans usually involve appraisers who not only check to see that the property being sold is worth the value, but that the stove and heating systems also work. If the stove and heating systems don't work, for example, the seller must fix them before the sale can close. In addition, the government loan requires that the lender make a last minute check with the IRS to ascertain that the income the borrower claims on his tax returns has not been falsified.

Has using government loans stopped consumers from obtaining conventional loans? No. In fact, it has helped keep conventional interest rates competitive and has allowed borrowers with limited means to purchase a home that they might not have been able to afford.

The way a government loan works, the Federal Government does not loan or collect the mortgage payments. The buyer arranges the loan with a local lender. Then the federal government insures the loan - so that if the buyer defaults, the lender receives a percentage of his money back.

Could the federal government "insure" health care? Yes. This is how Medicare and Medicaid work. For this reason, when critics of health care reform argue that the government "test" health insurance reform first or include "tort reform" before moving ahead, the question is, why? The government already offers Medicare & Medicaid Services. There are also VA hospitals as well as State and County non-profit programs.  

In other words, health-care reform involves changing and expanding the scope and depth of existing Federal/State/County services but does not involve putting private health care providers out of business.  Don't be fooled by people who say the two can't co-exist.

Some conservative radio talk-show hosts claim that reform is not about health care - it is about political control. They talk about "socialized" medicine and losing a way of life for their children and grandchildren. They claim that reforming the health care system would also lower the standards for everybody. So let's review these concerns too.

We currently have many socialized services in our country, and have had them for many years without too many problems. Granted, nobody is perfect but you currently enjoy the services of brave fire-fighters, paramedics and policemen, don't you? These services are "socialized", aren't they?  Think about it. Do you believe that the standard of service provided by our firefighters, paramedics and police personnel is poor or inadequate? No. So why would the care from professional doctors and nurses be any different?

Finally, some critics argue that reforming health care will cost too much. Our taxes will rise. For these people it is important that they realize that the current cost of US healthcare is five times the amount that the US spends on its defense. Without any significant healthcare reform, this amount will automatically double every four years - as aging babyboomers develop more chronic and serious conditions. So the idea of healthcare reform is to try to put a handle on it now, before costs spiral out of control.

Let's face it. Reforming the health care system will not make everybody happy - but just as life went on after the real estate market collapsed, people will adjust after heath care is reformed. Let's quit squabbling about it and do something now before the bubble pops!

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