Financial Health Literacy
The Foundation Course
“Unless you’re Bill Gates, you’re just one serious illness away from bankruptcy”, Dr. David Himmelstein warns. Dr. Himmelstein is a Distinguished Professor at the City University of New York’s Hunter College and Lecturer at Harvard Medical School.
Dr. Himmelstein et al, authored a study, that revealed the ominous truth of the state of health insurance, “Even the best job-based health insurance often vanishes when prolonged illness causes job loss-just when families need it most. Private health insurance is a defective product, akin to an umbrella that melts in the rain,” according to Himmelstein.
In 2014, The American Institutes for Research (AIR) found that only one in five Americans was likely to correctly calculate what he or she owed for a routine doctor’s visit. Fifty-one percent cannot predict their out-of-pocket healthcare costs for 2019 - a troubling finding from research by Alegeus. The same research predicts that consumers will leave nearly $85 billion in tax savings unclaimed this year due to a lack of health cost fluency.
Navigating the gap between financial literacy and responsibility was the subject of Devinir Blog, January, 2018. Whose responsibility is it anyway to educate consumers about healthcare choices and the healthcare plans that will accommodate their needs and those of their families? The Affordable Care Act aimed to address that question by developing a “marketplace” where the average consumer can purchase their own insurance according to certain variables. The big idea was ease of purchase for affordable health insurance plans offered to individuals who were not covered by their employer or who were self-employed. The aim was to increase the consumer’s role in order to alleviate some of the gaps in perceived coverage. The consumer would then be able to keep the doctor they were working with and have more control over choices of procedures , follow health markers and gain autonomy designed to lower costs by increasing participation in their health decisions.
While the dynamics of the healthcare marketplace have shifted to empower the consumer, they continue to struggle to do so effectively. According to the 2017 Healthcare Consumerism Index by Alegeus, “Healthcare consumers are more engaged and thoughtful about buying a TV and booking travel than they are about making decisions that concern their own healthcare.”
The head in the sand attitude seems counterintuitive when we are constantly regaled with the horror stories of the unforeseen consequences of unexpected medical bills. Nobel Prize winning economist, Richard H. Thaler commented on this by saying,” Professor Sydnor and Chenyuan Liu, a University of Wisconsin colleague, studied 331 firms that offered high-and low-deductible plans with an average difference in deductibles of $1300. Their analysis showed that for as many as half of the companies, the high-deductible option clearly appeared to be the smart choice for nearly everyone.” Yet, most people chose the costlier plan. Thaler attributed it to “inertia” or “deductible aversion”.
In my experience with consumers of healthcare, from a practitioner point of view, patients rarely know what their plan covers. The norm is for them to call the office and ask if you take their insurance. The expectation is on the doctor to call the insurance carrier and determine the exact parameters of coverage. The patient may or may not know the amount of their co-pay or if they also have a co-insurance fee. They certainly are not likely to know the difference.
Negotiating the waters of health insurance is no easy feat. There are sea changes often that are unpredictable. One service was covered last year and not covered this year. The number of office visits allowed per year changes as well. Consumers do not keep abreast of these changes. They expect the doctor to do so. The first time that they become aware is when they receive a bill in the mail.
The conundrum lies in the question of who is ultimately responsible for the educational requirements of procuring the insurance that suits your and your families needs. In bygone days, the insurance salesman would provide the explanation of your benefits package . With the Obamacare marketplace, people are left to figure it out on their own. I personally found that the insurance options offered only listed a cover page with little information, just the basic numbers for premiums and co-pays, out-of-pocket limits and hospital benefits. When I inquired further to acquire the whole policy, I was told they don’t have that. So, you do have to go into the purchase without all the information, and you’ll find out what was covered or not only after you have entered into the claims process.
Galit Tsadik, Founder and CEO of Tsadik G. Management in Rockaway Beach, NY,(www.financialsharktress.com) shared a similar experience. She told me that the marketplace is a difficult place to navigate if you don’t know what to expect. Certainly, the majority of people don’t know what to expect. Many are coming from companies where there was an in house Personnel Dept. who handled these matters. Or your parents did and may still do if you are under 26 years of age. Galit told me “ I was paying $600./ month and I was scared to use it because it was not good insurance. It was an 80/20 policy but it wasn’t clear what that meant. I foresaw hospital and medical bills that I could not predict. There was no dental, no vision, no out-of-network benefits. I was scared to use it . It actually prevented me from getting healthcare.”
This attitude represents the other end of the financial literacy spectrum. These people pay the premiums but lose on the health literacy end of things by not taking care of healthcare needs that could lead to extreme or emergency conditions later on. Either way the consumer loses and the insurer wins.
Ms. Tsadik claims that people need to be educated about how to make intentional purchases with their money in general.
“The problem is that people are not paying attention to their budget, to where their money is going. They operate from fear. From a poverty consciousness. It is a desperation mentality, not enough, never enough. When they actually look at their reality, they likely only have to re allocate things. Then they can know how to manage their budget, their lifestyle, their health in finances and body/mind. She empowers her clients by saying, “You can’t win a race if you don't know where the starting line is. That’s where the power lies.”
The Foundation Course necessary to avert financial devastation such as bankruptcy from medical bills is education.
Financial Health Literacy 101, according to Alegeus, must contain significant education, tools and support for consumers to assume more financial responsibility for their healthcare costs.
Tsadik G Management counsels their clients to be educated and financially literate in all areas of their finances. Purchasing healthcare insurance is one area that can predict a healthy bottom line and can prevent financial collapse. She advises her clients to open their eyes about reality. She counsels them to set intentional goals, and to use the money to achieve those goals. “Money is never your end goal. Don’t wait until you have enough. If you waited until it’s perfect, you’ve waited too long.”
Ms. Tsadik advises her clients that it is never about the money. It’s always about what actually matters in your life.
Reframing the attitude about money in this way takes the fear out of it making choices easier. Galit told me,” I tell my clients that they need an FU Fund. Whatever goes wrong in your life, you need a foundation. “
Tsadik G Management’s Foundation Health Literacy 101 course starts with this premise, start small. “I recommend starting really small. When we hear about saving money, people’s first reaction is that they don’t have money to save.” “ I don’t know one person who doesn’t spend $1.00 per week on something they don’t need,” she tells her clients. She advises that they set up an automatic transfer from checking to savings with that small amount. If you haven’t felt a problem, deprived, then go up by small increments every few months.” Put away whatever feels easy”, she advises. “Personally, I was saving about $1,000./month without even thinking about it.”
This is so simple and it makes good common sense. It is doable. It is not scary. And slowly but surely your fund will grow so that if you do have an emergency, you have the foundation to support it. The realistic view taking and the obvious return on your investment will give you the courage to delve into other unknown waters, like purchasing insurance plans that now fit your needs as you know them to be with eyes wide open.
Galit Tsadik’s Financial Health Literacy Foundation Course really is the quintessential story of success . “As a child, my first memory was going with my mom , collecting bottles and what my mom didn't use, we got to deposit in our bank account. It showed me that every little amount matters.”
The story has a happy ending. You don’t need to be Bill Gates. You don’t have to find yourself on the precipice of disaster, “just one serious illness away from bankruptcy.” The solution is simply another face of self-care. Self- reliance, as Ralph Waldo Emerson wrote, is the foundation. His famous quote is one of my favorites,” The power which resides in him is new in nature, and none but he knows what that is which he can do, nor does he know until he has tried.”