Health Care Bubble?

Paranoid Renter over at Sacramento Land(ing) believes that the next bubble will be in healthcare:
"
The bubble I see is one where there are too many jobs created in healthcare and auxiliary industries. So the way I see this playing out:
- Lots of nurse positions; nurse salaries go up marginally. Nursing schools make out like bandits.
- Doctors salaries skyrocket and they start switching jobs like crazy to take advantage of pay hikes.
- Artificial shortages of drugs drive up prices of drugs and help the pharmaceutical industry report record profit.
- Lots of administrative positions created ("director of customer care for the hospital", etc.) and tons of bureaucracy in billing and hospital management. [For the record, my insurance/billing is not yet complete for a blood test I had last March!]. Errors in billing (usually amounting to overbilling) will proliferate.
- Insurance will cover less and charge more resulting in record profits for insurers."


My response, which was too long and not at all housing bubble related:

Nurse positions are chronically underfilled and have been for years. This article in USA Today sums it up fairly well. A bout 4 years ago, I sent away for a bunch of free promotional stuff , including a neat video, to encourage young people to go into nursing. I set up my table and video and posters and brochures at a local high school job fair, and there was enormous interest. During the fair, which also had representatives from Cal State (it has a nursing program) and American River College (ditto) , I was approached by one of the career counselors from one of the colleges, who told me that they had a waiting list several years long to get into their nursing program. The problem isn't convincing people to consider a career in nursing, it's convincing nurses to get the pre-requisite Masters or Doctors degree and teach nursing. Nurses make more by practicing their profession than by teaching it.
Laws mandate clinical nursing instructors supervise a very limited number of student nurses on the floor, as well, and that also tends to limit the number of students that can be admitted to a school.
We are currently importing a very substantial number of foreign nurses to fill positions that Americans want to fill and are unable to find training for.
It is hard to imagine a situation in which there will be an over-supply of nurses. The government already offers incentives to Colleges of Nursing, and while I would not turn down a pay raise, neither do I feel that I am not compensated enough . The laws of supply and demand work pretty darn well in nursing: we're in demand, and we get damn good salaries and benefits. We get paid more in California, because it is an expensive state in which to live and because it has a severe nursing shortage. California law mandates ratios of from 2:1 in Intensive Care units to 5:1 on Medical/Surgical floors. Considering the multitude of drugs and IV fluids/medications, and treatments, and assessments that must be performed a ratio of 5 :1 is not at all generous. Any parent who has ever cared for more than 1 sick child will immediately grasp this. People are not hospitalized for minor ailments any longer. Most routine surgeries go home within a day. My knees, hips and feet constantly ached when I worked on the floor, and it was a true aerobics and weight-lifting work-out. Statistically, the best care is of course one on one, but that is not economically feasable for any but the very sickest patients. Studies show that increasing the ratio beyond 5 patients leads to an increased mortality rate.

Doctors do not usually get salaries; they are usually in private practice and they receive compensation from a variety of sources. The exception is Kaiser docs, who do work for Kaiser and receive a salary. They also don't have to worry about paying their staff, including billers and coders and "authorization" clerks and not just the hands-on workers that take your vital signs when you see your MD. They don't have to worry about obtaining coverage for vacations, seminars or emergencies. They don't have to worry about malpractice insurance.

Medicare Part D has already driven up the cost of pharmaceuticals because the government is not allowed to bargain with drug companies on the price of the meds, and the drug companies are allowed to stop covering a medication in the middle of your coverage period if they want to, but the consumer is not allowed to choose a new plan until the next coverage year begins (and there are over 67 drug plans in California, btw). The Veteran's Administration, who up until the current political administration had provided excellent care to veterans since they cleaned up their act after the Vietnam War, actually gets very good prices on medications by driving a hard bargain. So do several HMO's who provide prescription medicine coverage.

There are already multitudinous layers of bureaucracy in healthcare. Your doctor, your clinic, your hospital (again, unless you are a Kaiser member) must staff entire departments who do nothing but submit and re-submit bills to insurers, trying to meet all their demands for verification and proof, and trying to get procedures authorized. Each insurer, and there are dozens of them, has different rules and paperwork. Medicare is probably the single biggest payer that most healthcare providers deal with, but it is not in the business of denying care to ensure fat CEO compensation and shareholder dividends, so it is tedious but quite possible to actually get paid under Medicare. There will always be administrative costs associated with healthcare; we are talking about people's lives and well-being. We are talking about your child, your mother, your lover. The state has regulations and inspectors, the feds have regulations and inspectors, and most hospital systems have the good ol' "Quality Assurance" department who keeps coming up with new goals to meet. And mistakes STILL happen, at an alarming rate.
Single-payer healthcare is more likely to reduce the need for clerical and administrative staff than to increase it. Knowing one set of regulations and codes is much more efficient than employing the staff necessary to specialize in each and every insurer's regulations.

Finally, insurance has been covering less and charging more for years now. Private insurance costs have risen at over twice the inflation rate in the past 2 years. Things have gotten so bad that even corporate capitalists are now screaming for a single-payer healthcare system -- at least the ones that don't work in the health insurance industry are. At this point, the greed of the few has pushed the tolerance of the many over the edge. Insurers refusing to pay for life-saving operations or procedures which are not experimental, but are very expensive, is now a fact of healthcare in the US.

Is this a "bubble"? I don't think so. Technically, a "bubble" arises in the financial sense when a commodity is irrationally valued without any basis in fact. The facts are that we DO have a growing population, of which an increasingly large number are living long enough to develop chronic illness. Additionally, we have made technological advances and are able to perform procedures that will add years to people's lives. None of this fits the definition of a speculative bubble.

I Give Up

When we moved to this rental in El Dorado Hills we believed that we would only be staying for 6 months -- maybe less.

That was nearly 2 years ago.

In the past week, a Streng atrium model home came up for rent on Craig's List. My daughter and I went out and looked around the yard, pool, etc. and peered in windows and I decided to pursue it. Sig went down and looked at it separately from me, but we both did the tour.
Frankly, it's not worth the rent they're asking. The property management guy did emphasize that the owners would be doing some fix-up and painting, to be fair. But the bottom line is that this Streng was somewhat poorly maintained, and the owners did some things that it would be hard for me to live with in this particular style of house: they took out one of the planters and put in planking which lays beneath the level of the room just enough to trip you, they put up a chair rail in the area off the kitchen (doesn't fit modern style at all, and since you have to look at it from all over the main open room, it's a constant thorn in your side). These are major design flaws that I would not feel free to correct in a rental house. In addition, they removed the Oriental-style lanterns and hung some kind of smoked-glass ugly lights, and of course put ceiling fans in. Ceiling fans seems to be the hot item that original owners switched the great modern globe lights or lanterns out for.

If it had been up to me, a notoriously impulsive person, I would have put a deposit on the place and moved, because I love Strengs. But Sig was not that impressed, and we sat down and made a pro/con list:
Pro: Cmyst likes Streng atriums and this is a Streng atrium.
Con: Sig is worried that the doggies will pee on the plants (not the end of the world, certainly...) and that grandkids will delight in removing the rocks, throwing the rocks, and perhaps eating the rocks (which could be bad if the doggies DO pee on the plants...)
This prompted a discussion on how much I really love this particular model and how it is likely to be what I end up purchasing, one day, if I'm not too old, and if mortgages are ever able to be obtained again without 20% down, and if house prices once again revert to their historical norms.
Pro: The yard is much smaller than the one we have, no lawn, no maintenance other than turning on the irrigation system in the summer to maintain the ground cover. Sig was very excited about this. Our present gardens are way too much for us, consisting of several pathways and decks and gazebo. Even hosting parties of up to 20 people, we use about 1/4 of the available areas comfortably. In addition, we have a huge front garden area that gets used even less. But we must still maintain these areas, as our landlords are notoriously lax about providing gardening services as were promised, but neither have they made any noise about raising our rent so we just do a lot of maintenance and keep our yaps shut.
Con: There is no real area that is safe to host large outdoor parties (which we do about 3 times a year) or to set up the grill in a way that the cook can maintain conversation with any diners. The yard is perfectly fine for a couple who never entertain more than 2 other friends. For a couple with a large extended family, it does not work.
Pro: It is closer in to Sacramento, and the neighborhood is safe. It would be much easier for me, as most of my work visits are in the area.
Con: Sig believes it will be noisier and that there will be more traffic congestion problems. I disagree with him, and really --- I know these neighborhoods lots better than he does.
Pro: No water bills! We are currently spending about $125/mo on water bills, an unexpected expense when we moved from an un-metered Sacramento Co. to metered EDH Co.
Con: Other utility costs MIGHT rise. The incredibly large skylight, which I love, might also be a huge energy cost from lost heat in winter and incoming sun/heat in summer.
Pro: There's a swimming pool and a hot tub, functional, and pool/spa servicing provided. There really isn't any con to this one, and Sig really wanted that pool. He talked a lot about it. Me, I want the hot tub.

So far, we pretty much have balanced pros and cons. But there are a final 3 cons:
Con: We would have to spend $3,000 minimally to move into the house. We will probably get a return of our current deposit of $1800, but that would be long after the Christmas season and it's likely we wouldn't get the full amount, no matter how clean things are. That's just the reality.
So, our entire savings would be depleted and we'd have to borrow for kid presents (only kids get presents in our family, which has made the holiday a lot more enjoyable for the adults) and for a post-New Year's weekend trip that we've already planned and made reservations for.
Con: The rent for this smaller house with a smaller yard in an OK suburb is the same as for our current house in a much safer, quieter and more upscale in reputation suburb.
BIG CON: We'd have to move. Sig feels that since I work outside the home and he doesn't, he'd have to do most of the moving, like he did when we moved here. We'd have to hire movers for the appliances and beds, as Sig had a neck/back surgery history that is supposed to prevent him from really heavy lifting. That would probably cost an additional several hundred bucks. Moving is an incredible hassle and is one of the main reasons that I want my own home: when I do purchase, I never intend to move again. That's it. No more moving.

There really was no logical decision other than to stay put. IF the Streng had been more nicely maintained by owners who understood they had a modern home, not a country home; IF the rental rate had been $300/mo. less; IF the yard had been a little bigger.

So, I'm really bummed now. I had plans to start a new Blog on my rental Streng. I was hoping to finally be done with waiting, even though I still can't afford to buy any decent Strengs that are on the market currently. I took a farewell tour of all the neighborhoods (minus the Elk Grove one, it's just too far to go on a Friday just before rush hour) where I have tracked Strengs: off Hemlock in Citrus Heights, the Northgate area where the rental house was, the Wildflower Circle area of Carmichael. And I gave up. There is no sense putting any more energy into this pursuit because it is fruitless. Prices will EVENTUALLY come down, but until they do I think it's best for me to just put Strengs out of my mind and do what I said I was going to do way back in my first post: settle in here, put up some pictures, de-clutter the boxes from the Den and perhaps fix that upstairs guest bedroom into a little office so I can remove all my work-related stuff from the dining area. Maybe I'll buy a good refurbished hot tub; there's a spa area with 110 and 220 already hooked up just outside. Maybe Sig will get a telescope for the upstairs deck. We talked about all of this when we first moved here, and I think that I've finally accepted that it is time to actually LIVE and that it is entirely possible to do that in this rental house.