Can Somebody Just Explain Why?

I take the train from Hartford to Springfield with a woman who is a nurse at a local hospital. While waiting for our train, we talk about life, work, and our daughters. She has four, I have two. Hers are older than mine and her last one is going to college in the Fall. We were talking about paying for it all, as my two will be going in a few years. Her daughters are apparently smart and got accepted into more than a few schools, but it has come down to how much they could afford, how much they could get for financial aid, etc. This last daughter is going to a very good college, with some “name” to it, but it is not Ivy League or anything.  I asked about the cost and she said, “$56,000 per year” and both of our jaws fell on the ground. I said, “That’s $200,000 — almost $225,000 — for four years! Who has that kind of money?!”. Even with financial aid, she pointed out, “It’s a good thing we like Ramen noodles!”.

In looking back on it, even if I had gone all four years at my most expensive college, it would have cost me $40,000. College is like health care and cars, we agreed. How can anyone afford them? Why are they so expensive? As we talked further, it occurred to me that my income (and hers, her husband’s or my wife’s, I suppose) have not gone up by 600 % in 25 years – not even close. And education hasn’t changed much. She said, “They still have the same dorms”. I chimed in with “I bet they still have the same food plan” and the subjects they teach are largely the same — same subject matter”. So, here’s the question: How can you offer the same product for six times the cost? What has changed? Has the quality of the service gone up that much? Really, where does the money go? How does a college keep going if the customer’s income has gone up maybe twice what it used to be? If 2x is income and 6x is outlay for college, how is it possible that anyone buys this product?

The same is true with health care — I know that access is a big issue but if my income has gone up by, say, 5% and the cost of health insurance went up 400%, how can anybody afford it?  There’s an article in the Huffington Post today about mental health and insurance companies where the author complains about the Kafka-esque system that makes people run around from here to there to get what they need. That is its own problem, but included in the health care issue is paying for something and getting nothing. If you have a deductible, of $5000 for instance, then you basically have no insurance until you spend $5,000. Your premiums continue to come in, and the rates continue to go up… and then you have to pay another $5,000 before you get anything!  While I understand Obamacare now and I approve of it, I have never been convinced that insurance is the reason that health care costs are so high. If I can walk down to the CVS and buy a bottle of aspirin for $3.00, why does one pill cost that much in a hospital? How can a doctor walk in a room, say “Hi.”, ask a single question and charge $100 for it? If you stay in the hospital overnight, just for regular recovery (whatever that is) and it costs $1200 or more, why couldn’t a person stay at the Hilton and have a private nurse 24/7?  It would still cost less! How is that possible?  Again, if your average person makes $10.00 per hour how can they afford $50.00 per hour in the hospital?  It seems that over the last, say, 20 years health costs have risen at a far greater rate than income has. How are people expected to pay for something that costs that much?  Can someone explain what’s changed in the hospital that costs that much? As of yet, I haven’t heard an explanation from anyone.

The last target of my rants is automobiles. It seems to me that the average cost of a car is $25,000 to $30,000. Americans love their cars, or so they say. America was built on the backs of the car industry so cars are important to the economy and the people of America, but who can afford one? Again, like health care and college, the cost of an automobile has gone up dramatically, while the income of the people buying one hasn’t. I hear car commercials all the time that make it seem like someone could afford a payment, but those are lease prices, they don’t include mileage that your average person might put on, you have to put down a good sized downpayment, and you don’t own the car when it’s done. If you actually want to buy the car now, you have to take out a 72 month (6 year!) loan to do it, when you used to pay it off in 4 – 5 years.  In addition, there are all the fees, the cost of fuel, the cost of parts (Oh, my goodness! replacement parts cost a lot of money!) and labor (Pep Boys charges about $100.00 per hour in our area) if your car needs repair. Oh, and car insurance costs money as well.

How does anybody afford this?

If the American dream is work hard, make enough money, take your car on drives across America with the family, then send your kids to college so that they can do better than you did, and if a health crisis comes up, pay for it with insurance, then the American dream is an impossible dream. The economy simply cannot survive this way. When basic needs and basic tools to get ahead are impossible to afford, it’s only a matter of time before the whole thing collapses. There are basic problems in the economy and no one can explain why they got this way, so we can’t fix them. What is up with that?

Peace,

John