Health Reform Why Not Having a Public Option Will Reduce Your Chances of Being a Homeowner

“Whether or not the public option is part of healthcare reform” is how President Obama began his answer to a healthcare reform question. The manner in which he answered that question struck a central nerve in the healthcare debate, as many of the leading voices, of the Obama administration seemed to be threatening to abandon the public option, for expanding health insurance coverage.

Making sure every American has access to high quality healthcare, is one of the most important challenges of our time. With the number of uninsured Americans is growing, skyrocketing premiums and more people are being denied coverage every day. A better healthcare system is essential to rebuilding the economy. The President has said, that he wants to make healthcare work for the people and for businesses, not just for the insurance companies and the drug companies. And in my opinion, he is right it should work for everybody. The operative word here is everybody.

Currently, three house committees have passed healthcare legislation, which includes a strong public option. These government-run insurance plans are designed, to encourage choice and competition in the marketplace. However, the public option has been the focal point, used by critics who say the overhaul of healthcare, would amount to a government takeover of healthcare. And nothing could be farther from the truth.

If we took a second to honestly look at and discuss what this debate is really about and let everybody see it for what it is. This whole discussion boils down to, those who have and those who don’t have (insurance). On one side, providing you have a good job, that provides health insurance coverage, you feel there is no reason, you should have to face a possible tax increase, to help someone else who isn’t as fortunate as you. On the other side are the self-employed, small business owners and those workers who work for a company, which can afford a good or any health insurance plan.

In deciding which direct you feel is the best way to deal with this issue, here is some additional information that you may not be aware of.

A couple of years ago the GAO (Government Accounting Office) produced a report that stated, taxpayers currently pay for an estimated 50% of all healthcare costs in America. This means the way things are currently, if you are receiving healthcare coverage through your employer, you are paying for your own health insurance as well as helping to pay for nearly half of the nation’s healthcare costs.

Recently Families USA, a North Carolina consumer advocacy group, released a report showing how healthcare costs impacted the residents of the state, of North Carolina. Their report stated the cost of buying health insurance, for a North Carolina family increased more than five times faster, than income since the start of the decade. Since the year 2000, healthcare costs have doubled, yet income has increased only 18%. Insurance costs have risen from $6,650 to almost $13,100. The figure includes worker and employer payments for health care. The report says median earnings rose by 18 percent, from $23,100 to $27,330 in the same period.

Additionally, the middleclass is shrinking, in the near future more and more people are going to be classified as poor, as reported in Time Magazine, Economists View and numerous government reports. Worries about the middle class vanishing, shrinking, or otherwise dwindling are hardly new. The 2010 federal budget request addresses concerns that the middle class may be shrinking. It says: “Some Americans have not been able to keep up, falling out of the middle class and into poverty”; “the ladder into the middle class and beyond has become harder and harder to climb”; and warns that without high-quality schools, there is no way to “strengthen the middle class.” In fact, it is believed 80% of a middle class Americans who are currently leaving the middle class, are ending up being classified as the poor.

What effect will this have on housing and homeownership? The answer to that question can be found in the remnants of a very recent historical event, Hurricane Katrina.

According to the US Department of Energy’s Energy Information Administration, Hurricane Katrina severely interrupted the Gulf Coast oil industry. As a result, gas prices suddenly and dramatically increased substantially. With incomes not rising as fast many families found themselves facing financial difficulties, as the increasing fuel costs shattered the family budget. This forced many families to have to choose between having to pay for their rent or mortgage, food, healthcare and driving back and forth to work. In order to compensate their budgetary imbalances many families placed themselves in further debt with the use of credit cards.

During the spring of 2008 this process was repeated as oil speculators drove the price of oil to $143 a barrel, as result the cost of fuel doubled on consumers.

With healthcare rising at rate that’s five times faster, than income it is just a matter of before the costs of one accident or illness will be able to wipe out an average American family, leaving them financially destitute.

Again you may be asking, what does this have to do with housing? What does that mean to you, the person trying to purchase their first home or the homeowner needing to consolidate their existing debt?

First, it means without healthcare reform, in the not to distant future it is going to be more difficult to obtain mortgage financing. With healthcare costs increasing so dramatically and eating up more and more of the family’s budget, it means that people will have less money to put towards housing and it will become more difficult to save, meaning, it will be more difficult to come up with the money needed for their down-payments.

Without healthcare reform, it seems that health insurance pays less and less of the medical bill, even though premiums keep going up and up. Therefore, you can expect the number of medical collections and medical judgments to increase. This will have devastating affects on credit scores, driving them below the minimum acceptable credit score needed to buy a house. Medical judgments, just as all other judgments must be paid off, before a person can obtain a mortgage. This could increase the amount of money some people will need to complete their transaction, at a time when it is already difficult to save, and it will prevent otherwise qualified people, from being able to obtain a mortgage altogether. That also means less people to buy homes, a longer buyer’s market and lower home prices.

Secondly, if people have less discretionary money to spend, they will spend less, and if people are not spending employment and the economy are negatively affected. Here is the effect of that. In order to coax people into spending more companies must reduce prices, which thereby reduces their profit margins, which will make companies less stable and more vulnerable to failure. If your company fails, I don’t care if you were the Director of HR, Vice President of Production or the Senior Vice President of Marketing, if you don’t have a job, if don’t have a company sponsored insurance plan and you will need and you will want insurance, you’ll want that public option, also.

And finally, we have to start realizing nothing operates in a vacuum anymore. Every action or inaction has consequences. Healthcare affects employment, employment affects homeownership, homeownership affects retail sales, retail sales affect company profits, company profits affect a company’s ability to provide healthcare benefits. Everything is interconnected.

Greg Luchey is a licensed mortgage professional and loan originator in the states of North Carolina, South Carolina, and Georgia, a liability management advisor specializing in mortgage planning, the owner of The Strategic Homeownership Center and branch owner of Christensen Financial’s South Carolina mortgage brokerage office, radio commentator and author.