How The American Health Consumer Saves Money By Not Buying Health Insurance

While there is little discussion in the government about how we can reduce health care expenses, American consumers spend $827 billion just on health insurance (out of a total annual income of more than $12 trillion), the largest category of consumer spending, according to the nonpartisan Congressional Research Service. The biggest reason Americans are so unwilling (to say no) to spend for themselves: they are being forced to pay so much they’d rather go broke, in some cases. This blog post summarizes the costs and benefits of health insurance in America.

I would like to address the question: “Should every one spend so much time, energy and money to insure themselves for the rest of their lives?” For starters, there are three simple things that Americans have in common: 1) they all purchase health insurance when they are in their twenties , so they are not getting a bargain 2) their health care expenses exceed their disposable income . 3) when they are older, they are forced by an overburdened Medicare program to pay more for their health care.

The simple answer is no — just no (you are better off living without health insurance than getting it; if you had insurance, you’d be paying more for it). There are, however, three problems with this simple answer:

1) I live in my mid- forties and we’re not there yet, but I’m saving $3,000 annually — yes, it’s a “substantial” amount; it’s like a house and car in one — and we’ve spent about $90,000 for this house and car in the past decade — an astronomical cost to live in today’s economy. I’m saving because I’m working less and spending less. To save more, it doesn’t necessarily mean working more. Yes, I’m going to work extra hard to get by and make the most money for now. I’m just taking a more calculated risk that in a few years I may be out of money, in which case the money we’ve spent on cars and houses might as well be lost, since they’re not going to be around when I need them.

2) The second is the most important one, that I have a hard time hearing. For some time now, I’ve been hearing people say “You’d do it all over again.” This is not me saying “you should,” but rather, that I think there’s something to this — it makes sense if your life is about to change a lot and you don’t have a very long time to make the switch. For me, in 2004, it did, and I would work a lot less but still have plenty of fun. That’s the reality of my situation. To be clear, I do believe in personal responsibility (I think it’s healthy and wise to do so), so I am not saying, “you should” or “should not” work. I am saying this will not solve the bigger problem, which is how to reduce America’s health care expenses, especially since the percentage of people without health insurance is expected to increase. And if the solution to that is simply to be more frugal and work less, my belief is that doesn’t work anyway, since people with lower incomes, who are most in need of health insurance, will be hit the hardest. But how do we make that happen and why?

3) I’m happy my health care coverage costs $3,000 per year — that’s an enormous number. I pay $7,500 for my premiums, which is a pretty good deal but still a lot of money. I pay about $500 per month for my out-of-pocket medical expenses, which is a little cheaper. But that doesn’t cover the doctor visits (a couple of them every month) and all other medical expenses I incurred when I worked fulltime, like my medications. That’s another $1,000 a month that I have to pay out of pocket. I don’t need it, but it does take money out of our budget, so that means less buying and saving for other things that could help us save more.