Paying for it

Currently, figuring out how to pay for health care reform is one of the most contentious issues in the debate right now. President Obama favors limiting income-tax deductions for high-income earners, but Congress seems to be more interested in taxing employee health benefits because many economists argue it mainly goes to high-income earners and discourages cost-consciousness (at least according to this article). Both are looking at cutting Medicare costs, particularly by having insurance companies bid for government reimbursements for offering private plans (known as Medicare Advantage). But perhaps the most controversial idea is increasing what are termed "sin" taxes, or taxes on what are considered bad behaviors:

Congressional analyses show that more than $200 billion over 10 years could be collected from new or increased taxes on sugared soft drinks, tobacco products and alcoholic beverages implicated in common health problems like obesity and cancer. Yet while the options are on the lawmakers’ table, Senator Baucus has said they are on “life support.”

The Joint Committee on Taxation calculated that a 3-cent tax on each 12-ounce sugared soda would raise $51.6 billion over a decade. But opposition is not limited to the bottling industry. Major sources of sweeteners include Montana, which has a large sugar beet industry, and Iowa, which produces high-fructose corn syrup — the home states of Senators Baucus and Grassley.

The government could raise $61.5 billion with an additional alcoholic beverage tax that would mean about 40 cents more for a fifth of liquor, 48 cents for a six-pack of beer and 49 cents on a bottle of wine. Advocates point out that federal alcohol taxes were last raised in 1991; adjusted for inflation, they are 37 percent lower now. But local wineries and microbreweries now operate in nearly every state, suggesting that major distillers will not be the only opposition.

Each of these taxes is often criticized as regressive, meaning it would disproportionately affect lower-income people. But proponents counter that the poor have the most to gain from universal health coverage.

I'm usually not a fan, as I imagine most people aren't. These kinds of taxes are most often proposed when legislators are too afraid to ask voters for a progressive income tax but desperately need revenue, so they opt for something silly like a tax on strips clubs (as seen here in Texas, though admittedly that must be a pretty big revenue stream!).

But when it comes to paying for health care, I'm more open to the idea. One of the main reasons our health care costs are so high in this country is because people eat too much, smoke too much, and drink too much. I don't want to tell people how to live, but it makes some sense to tax those things to help cover the costs created by them. It should at least by considered, and perhaps could be used in tandem with some of the other proposals.

As always, Americans want big reforms but they don't want to see taxes go up or deficits increased either. Unfortunately, you do have to spend money or borrow it to pay for these things. Given the current shape of our health care system, it's not like it's a bad investment. And unlike the other proposed taxes, you could actually get out of paying them if you cut down on junk food, cigarettes, and alcohol that are pretty bad for you anyway when not taken in moderation.

And hey, as someone who gets a bag of Cheetos out of the vending machine almost every day for lunch, I'm not saying it wouldn't annoy me sometimes too to pay a little extra than what I do now. But that doesn't mean I won't think it's fair or a good trade if we actually get real health care reform. To me, that's the bigger and more important issue in this debate right now than the cost and how to pay for it.

Medical debts shouldn't count

I saw this interesting article on MSN Money, of all places, that rings true:

It's a good thing Greg Hilfman of Los Angeles has health insurance because an unpaid medical bill has sent his blood pressure soaring.

Hilfman's wife was in a hospital two years ago for pancreatitis, and Hilfman said she was treated by a "cadre" of doctors and specialists. All but one submitted bills to their insurer, Blue Cross of California, in time to get paid.

Six weeks ago, however, a woman from a neurologist's office contacted Hilfman, explaining that the office "didn't have the right address for Blue Cross" and thus hadn't submitted the bill within the one-year period required for reimbursement. She demanded that Hilfman cough up $540.

Hilfman was furious. He'd never heard of the doctor and insisted he'd seen no bill or any indication there was a problem with payment. Now he's worried he'll have to pay a bill that should have been covered by insurance or risk damage to the couple's credit reports.

"How is this fair?" he asked. "They can say anything they want (to the credit bureaus), and I have no recourse."

Hilfman is right to be concerned. The Your Money message board is littered with complaints from folks whose otherwise pristine credit was sabotaged by a medical collection. Sometimes their records were besmirched over absurdly small amounts that nonetheless had big impacts on credit scores.

Poster "sunny_light," for example, recently discovered a medical-collection account for just $7.

"I pulled my credit report last week and found out," sunny_light wrote. "I promptly paid the collections people. But now my credit score is down by like 80 points."

A similar thing happened to me two years ago. I was out insurance and had to visit an ER for a bronchial infection. Even though I promptly paid my bill, it still got reported and my credit was ruined for a good while.

Even when medical debts are legitimately owed and left unpaid, though, some experts question whether they belong on credit reports.

There's no question that medical bills pose huge risks for the finances of many families. Medical problems were cited as a factor in nearly half of the bankruptcies studied by Harvard University professor Elizabeth Warren.

Still, many mortgage lenders who specialize in serving low-income communities have discovered that discarding medical debts often gives them a better picture of a borrower's true creditworthiness, said Michael Stegman, the director of policy for the MacArthur Foundation's program on human and community development.

"If all their other credit accounts are in good shape, or they haven't established credit but they've had no delinquencies on their rent," Stegman said, "the fact you have a bad medical debt or an outstanding judgment over a medical bill is not a good predictor of default."

So true, I take extremely good care of my finances. I didn't even have a credit card at the time of my medical bill and the only reason I have one now is because you need to establish credit to get a home, a car, etc. Medicals debts shouldn't be held against you the same way not paying for all the clothes you bought with your credit card does. But, of course, medical debts are big business for collection agencies.

The article has a few helpful tips near the end about what you can do if you're in this situation, but we need state or federal legislation to help protect people from this crap.