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Over the last month or so, aside from Russia, all we read and heard about in the news is the repeal and replacement of Obamacare and the epic fail by the Republicans in their attempts to do so.
This is a passionate concern of many Americans, regardless of their political persuasion. People care deeply about the issue and those who now have access to healthcare don’t want to lose it.
But, the reality is that the cost of this care is rising and it’s becoming difficult for more people, and businesses, to afford it.
To offset the expense, many in the so called middle class are taking, or retaining lower paying jobs because they provide them with health care coverage. Employers that provide that coverage make up for the rising costs in reduced wages or hours.
It’s harder for new entrants and the unemployed to get these jobs since the people who have the jobs won’t let go of them.
For those in the low to moderate income range, the government subsidizes the coverage. But, these subsidies are borne by those in the middle and upper-income ranges in the form of increased taxes.
Somebody has to pay. The net effect is that overall people have less disposable income at all levels.
This has partly driven many homeowners to use their home, and its equity, as an ATM machine. Homeowners draw cash, via refinance or equity lines, to cover other expenses.
This additional borrowing bolstered the mortgage markets and the economy for quite a while; but no more. Others refinanced to consolidate debt and reduce their monthly mortgage obligation. These refinances reduced the supply of homes for sale and drove up the price of those homes that are for sale.
As a result of less housing inventory, higher prices, and less disposable income, it’s difficult for many to find homes for sale that they can afford. This is stymying the housing and mortgage markets.
Over time home values will begin to decline as a result of people being unable to afford the homes now for sale. That may be good for some, however, those who refinanced and took equity may be hurt by the decreasing values.
If wages stay low and health insurance costs continue to rise, these homeowners may be at risk of default and foreclosure.
As health care costs, and health care insurance premiums and deductibles continue to rise, unless income and wages can keep pace, consumers will continue to have less disposable income. That means, among other things, less money available to buy and afford a home.
That’s not good for housing, the mortgage market, or the economy. Something needs to be done. Maybe it’s time for Congress to step aside and let the private sector take a shot at solving the health care cost problem.
