Health care

It was about five years ago that I sat in my kitchen with a mortgage broker who told me I could borrow $300,000 to build a house with no money down and no proof that I could repay the loan. He said at 6% on a 30 year fixed my monthly principal and interest payment would be $1,800. He said it that was too much I could get an interest only loan for $1,500 and if that was too much I could get a negative amortization loan for $1,200. All this with no documentation as to my income or even if I was employed at all. What I didn’t realize at the time was that this same conversation was going on in millions of kitchens across the country and within a few short years this mortgage crisis had the whole world in recession and millions of people lost their homes. While I was still recovering from this free lunch scheme the President told me he was going to insure 31 million new people and it would save the country a trillion dollars over the next ten years. When I asked how, I was told to pass the bill and then we would figure it out. Well we did that and now the details are leaking out and the savings is disappearing like smoke in the wind. The latest blow to this Obamacare has not yet hit the news but it will shortly. Cities, counties and states are faced with something called legacy benefits. These are payments they have promised their employees to cover things like health care, including dental and prescription drugs after retirement. These entities do not set aside money for future payments as is required by law to cover pensions so they have to pay for these out of current income. Since most of these entities have defined benefit pension plans most employees retire at age 62 and for many much younger. As the population ages these cost rise and there is no money to pay the piper. But not to worry! Just at the darkest hour to the rescue comes Obamacare. All they have to do is to transfer their health care over to the federal government. Walla, problem solved! The answer is simple because the federal government can just print up money. Next in line, of course are all of the private companies who are saddled with the high cost of health care and they will soon be lining up at the trough. Now what will this cost? The IRS estimates that the cheapest Obamacare plan for an average family of five will cost $20,000. This, the cheapest plan is called the bronze. There are three others called silver, gold and platinum and each is more costly than the other. How much more we have yet to find out. As a financial advisor I would like to tell my grandchildren to save a third of their income to take care of their future needs but that would be folly since I believe that inflation will eat up their savings. Perhaps there will be some innovative concept that will save the day but I don’t see it at this point. The US has always survived by finding a Bill Gates or a Steve Jobs. I’m counting on the new generation to produce a miracle.