Patients Turn to No-Interest Loans for Health Care

Also from my wife (who I’m told to point out is sick, yet not receiving adequate levels of attention from me. I, unfortunately, was not babied when sick, growing up: our attitudes towards deserving attention merely for having a summer cold differ), and from the New York Times:

Zero-interest financing, a familiar come-on at car dealerships and furniture stores, has found its way to another big-ticket consumer market: doctors’ and dentists’ offices.

For $3,500 laser eye surgery, $6,000 ceramic tooth implants or other procedures not typically covered by insurance, millions of consumers have arranged financing through more than 100,000 doctors and dentists that offer a year or more of interest-free monthly payments.

This has two points of interest. The first:

The room for expansion looks ample, as rising deductibles, co-payments and other costs may force more of the nation’s 250 million people with health insurance to finance out-of-pocket expenses for even basic medical care.

“As more and more of the costs of care are shifted to consumers, people are going to need more credit,” said Red Gillen, a senior analyst at Celent, an insurance and banking research firm. “They are still going to need health care.”

The zero-interest plans are not for everyone. In fact, they are available only to the creditworthy — meaning they offer no help to those among the nation’s 47 million uninsured who are in difficult financial situations.

This was of course turned out wonderfully in Michael Moore’s latest enterprise, Sicko. I have health insurance – it is a condition of employment at my University, just as it is a condition of enrollment for foreign students. I still do not, for a second, actually believe that, should I suffer a catastrophic, or even adverse, health event, my health insurance will do any good. It is also principally the reason my wife and I aren’t staying in the US for long.

The passage also highlights what ought really to be discussed far more than it is: it is the ‘disappearing middle’, such as we are wont to call it, that will (a) only benefit from but (b) surprisingly, needs this line of credit. Not that it ought to be that surprising, given that the median wage has stagnated over the last many years, here, while health care costs most certainly have not. The rule was always to have insurance while in the US, because you cannot afford to be sick (Americans: you probably would be surprised at the low regard in which you are held, internationally, with regard to health, health care and health outcomes). Now it would appear to be evolving: you cannot afford to be sick in the US, insured or not.

This also concerns the steady decline in savings in this country. Households simply do not save. We (because the trend most certainly includes countries like Australia and England) purchase on credit; anticipating better days ahead – precisely why a few classes on the Permanent Income Hypothesis and the Life Cycle Hypothesis would do our societies a bloody world of good. If anything, what ought to be noteworthy is that it is taking so long for negative savings instruments (credit) to apply to truly unanticipated events. Even here, the application is fairly elective surgery.

The Grossman Model, and investing in your own health

Thus the second point. The Grossman Model of the demand for health care posits, essentially, that we do not demand health care because we like health care: we demand health care because we want health itself. Moreover, we invest in health as a stock – i.e. we invest in our own level of health stock. If we are unhealthy, we add to our health. If we are super-healthy, we do not bother. Just like education, health is an element of human capital, the set of productive skills and technical knowledge held by each individual, and a contributing factor to our lifetime income.

Ergo, according to the Grossman model, financing health interventions with debt is not a bad idea: it is a leveraged investment in future earnings, just like a mortgage, or a home loan that is used explicitly to improve the value of an existing home (or business, for that matter). Here lies the problem, though. Elective dental and optical procedures to not fit this mold. An operation to correct macular degeneration? Yes, that will increase your future income, relative to no intervention. Laser surgery so that you don’t need glasses? If you’re a professional athlete, maybe – but then, you would have the money already. The same is true of the Times’ anecdotal patient:

For people able to keep up their payments, though, the plans can make it possible to receive treatments that otherwise might be out of reach.

“There was no way I had $6,000 right out of my pocket,” said Nancy Schlachter, 40, who has dental insurance through her job as an accounts payable manager for a national construction company. She went to Dr. Mercurio for a series of dental procedures including a new crown, fillings and a tooth implant.

“The implant was very expensive, and it was not covered,” Ms. Schlachter said. But the dentist’s office arranged 12-month zero-interest financing. “It was the only way I could do it,” she said.

I must have made the point many times over, here and elsewhere, that the principal cause of the sub-prime debacle (and I flatter myself that I was among those with the sense to do this, however unnoticed, before ‘the media’ caught up) is people buying that which they cannot afford. Some people cannot afford to own their own home, and should not be allowed to be told that they should (up yours, Mr. President). Similarly, and definitely in the US, many people cannot afford cosmetic dental and optical surgery, and should equally (if not moreso! One cannot foreclose and sell their teeth to recoup a loss) never be led to believe that they can, with a little borrowing.

So, why? To protect the lie. The lie that the system in the US works; that the American Dream can be the American Reality. In Australia, the UK, etc. it is not that much different. A decade of Howard and Blair has to show that our wealth, as signalled by our ability to purchase, if not afford, things, has expanded. The politicians, the talking heads on Fox news, they all can afford to live above this mess in the first place, and as long as they can keep the lie going, they make their money while we elect them, watch them, buy their products and truly come to believe that Work Makes Free.

The fundamental difference, and one our conventional wisdom long ago left behind, is between “able to purchase” and “able to afford”. They are not the same thing, and as our ability to afford lifestyles has deteriorated in concordance with the rape of economics by utterly corrupt aristocracies (however defined), the mechanisms through which we can purchase them nevertheless, along with our own ignorance, vacuity and insularity, have increased. Are still increasing, in fact.

It’s getting late, and I am tired. There is an open invitation to fill the comments with counter-arguments about personal responsibility. If you’ve the mind to, see if you can do it while also addressing the media, rationality and information asymmetries.


1 comment so far

  1. opit on

    I haven’t chased them down of late, but Ezra Klein has posted many articles relevant to US healthcare in his personal blog – stimulating rich discussion – and interminable trollery.

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