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Healthcare costs are killing this economy, and drug cards and discounts are not going to help.

By Andrew Pollack on 06/01/2004 at 05:06 PM EDT

Living in a small town in New England, we still have small scale democracy at a very granular level. Our town of well under 10,000 people and the small town adjacent share a school district -- MSAD51. For both the town budget and the school district, a vote is required and its always a very contentious time.

Town budgets are made up almost entirely of property tax assessments, and being a coastal town the rate of tax and at the same time the valuation of property has increased dramatically. People are loosing their houses. Working class people who have had homes here for decades can no longer afford to pay the taxes on them as the valuation increases.

Why is this? Healthcare costs.

80% of our town taxes go to the school district. Roughly 75% of the school budget is human resources. Nearly 40% of that is healthcare. Healthcare has been going up 28% per year. Do the numbers. If you cancelled almost every other new program, didn't expand, and just tried to run the district, you'd be needing to increase the budget constantly.

Is it just our school? Of course not. Your healthcare costs are up. Your employer's healthcare contribution costs are up (though it seems they're paying for less to you), EVERYONE's costs in this area have gone up and up and up. As a result, everything else costs more. It costs more to make chairs, because the employees at the chair factory cost more. They don't TAKE HOME more. No, in fact they have less discretionary money to spend because they too are having to pay both higher healthcare costs and higher taxes to cover the increases for others.

Federal taxes? Guess what, healthcare (Medicare) and military (has high healthcare costs too -- and bombs but that's another issue).

So what does the federal government do? Discount cards. Hello? Economics 101 -- discount cards do not work on a broad scale. The drug companies use higher U.S. based incomes to pay for their research costs, advertising costs (why advertise drugs?), and everything else. We can debate how efficiently those companies have cut costs compared to other companies but either way, the price for a drug is based on the available spending capitol of the buying public. When you discount the drugs, it briefly increases that spending capitol but quickly the prices on drugs matches -- particularly where there is no competition and now people without the discount cards are worse off than when you started.

Reducing health care costs needs to be the #1 priority in this country, and playing bait and switch games with discount cards that are economically unsound is not the solution.


There are  - loading -  comments....

Excellent post!By Ben Langhinrichs on 06/23/2004 at 11:21 AM EDT
I couldn't agree with you more. We had better get health costs under control in this country soon, or besides all the pain and suffering, we won't be able to compete with countries that have it better under control.
A topic near and dear to my heart...By Rob McDonagh on 06/23/2004 at 11:21 AM EDT
Speaking as a member of a small town Finance Committee, I know exactly what you mean about the impact of these costs on our towns. I have to rant a bit now, I'm afraid. I apologize in advance for jumping off on a tangent, but local government budgets are insane lately. It isn't ONLY the health care costs that are killing us, though they've become a HUGE factor in the last few years. In Massachusetts we have a hard 2.5% limit on local tax increases. I don't know if Maine has a similar law. Since healthcare costs have increased in the double digits for the past several years (in my town, $3.5 million in this year's budget - $1.9 million 3 years ago), we're not even close to keeping up. Here's what makes me really nuts, though. Add in the federal cuts to state aid, which in turn led to state cuts to local aid, and every town in the state has been cutting programs for the past three years. A few towns have been lucky enough to pass an 'override' to allow a larger tax increase. My town passed one this year, but it only passed because we built a new high school that's ready to be used and we had no money to run it. We still don't have the money to restore the programs we had to cut, which means no art or music in our high school, no physical education for some grades - a violation of state law there - and no, repeat no, computer education. Not that high school kids need to know about computers or anything... And to make things even more absurd, my genius of a Governor (Romney) is now proposing a half billion dollar tax cut. WTF?!? After cutting aid to towns every year he's been in office, now he claims he has $500 million dollars in surplus? Here's a radical idea: give it back to the towns you stole it from, you rat b*st*rd! Or admit there's no such surplus and the tax cut is just an election year ploy. The federal and state governments like to pretend their tax cuts wind up in our pockets, and maybe in some places that's the case. But where I live, I can point to program cuts or local tax increases to balance out every tax cut they've "given" to us since I've been on the FinCom (4 years). News flash for those who don't pay close attention to funding rates at ALL levels of government: it is largely a zero sum game. You can't cut at the higher levels without affecting the lower levels in a negative way. Don't believe me? Get involved in your local budgeting process. In less than a year, you'll be ranting and raving just like I am... Sorry, Andrew. You hit a nerve...
Universal ProblemBy David Bockes on 06/23/2004 at 11:21 AM EDT
Down here in Texas, we're in the middle of a huge school financing issue and nobody can seem to figure out what to do. For exactly the reasons you mention we're unable to pay for schools in an equitable manner (rich vs. poor districts). I recently moved to an unincorporated rural area where I have no city taxes, but my property tax bill is almost no different (proportionally) than when I lived in the city. So now, the govenor (in an election year move), wants to halve the property tax rate when there is not currently enough money to pay for education now. It's too much to get into, but our days as a state without its own income tax may be coming to a close. To your point, health care costs are way too high. And if you don't have insurance you're screwed even worse because those folks who can afford it the least, pay the most because they have no choice. What would I do about it, well lets just say that I'd take a "left of center" approach to it. ;)
This is near and dear to me...By Alex Wilson on 06/23/2004 at 11:21 AM EDT
I am an EMT in a small rural PA town. I am also an IT consultant 9-5. I have a good health plan with reasonable rates, but they are always going up. As an EMT, I see part of the reason why: We were out driving around the other evening in the ambulance training some drivers about our coverage area. We passed through a small development (low income, high drug use, many psych patients). Within 10 mins we had a call from one of our "frequent flyers". For those of you that are not in EMS, that is someone we see on a regular basis, either for legitimate or questionable reasons. In this case, we got to provide this person with taxi service to the hospital. She won't go to a doctor to get a regular prescription for her psych meds so whenever she runs out and is feeling low, she calls us for a ride to the hospital. She always uses the same excuse - acute headache. The hospital provides her with a 2 week supply and a note to see a doctor. Guess what - we have to run 46 miles round trip, take an ambulance out of service to carry her, and risk the care of other legitimate patients. We charge her insurance plan for the trip. Of course, she never pays the copay to us... we get stuck with it, forcing us to raise rates to cover our losses. It is a vicious cycle. The problem is multi-dimensional. 1. Lawsuits and malpractice cases are raising rates to cover the cost of premiums. 2. Abuses of the system raise rates in several ways - more claims, unpaid copays. 3. Drug companies are killing us. They sell the same stuff overseas for less. They know a good welfare system when they see one. It all needs to be controlled and controlled soon. Between the medical costs and gas costs (which is also killing us in EMS), we are headed for a major depression. What is driving it faster is the amount of outsourcing and bringing in more H-1Bs. I know of 3 people who could use a job where I am (and are qualified), but we have 3 H-1B's filling these positions and at lower rates then usual. I vote and urge others to do the same. Unfortunately many in office are just there for the perks.
Nationalize it all, turn it into a non profit.By Carl on 06/23/2004 at 11:21 AM EDT
Nationalized/socialized med...By Alex Wilson on 06/23/2004 at 11:21 AM EDT
is not all that it is cracked up to be. If it were, then why do so many Canadians come to the US for treatments?

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