Healthy Cuts?

A study published in McKinsey Quarterly is shining a bright light on some unwelcome side effects of the Affordable Care Act (also referred to as ObamaCare).  The Affordable Care Act, passed in March of 2010, is the legislation designed to phase in over the next several years that promised to provide more affordable healthcare to all of us, including individuals that may not have coverage today.  This will be accomplished indirectly it seems, by increasing the level of government-controlled healthcare (which brings on its own set of side effects).

U.S. unemployment now over 10% for first time in 26 years

In October U.S. unemployment rose over 10% (to 10.2%) for the first time in 26 years, and only the 2nd time since the 1948 employment record keeping began.  Behind this headline number we examine additional concerning details:

• the rate of unemployment rises to 17.5% when including those who have stopped looking or are working part-time since they can't find full time work
• although unemployment in management and professional occupations is only 5%, the rate in production is about 15% and the rate in construction is about 20%

Although the 3rd quarter U.S. GDP was recently announced at a preliminary estimate of growing at an annual rate of 3.5%, the jobs report shows this growth has yet to reach Main Street America.  Further, some now estimate additional increases in unemployment such as Moody's Economy.com who sees the rate peaking at 11% in mid-2010.

In the meantime, Congress and the White House have been focused solely on healthcare legislation.  Expect this to change in the near future as voters this week sent a signal of dissatisfaction with election of Republican governors in New Jersey and Virginia.  Although the White House claims to have saved or created 640,000 jobs with fiscal stimulus, the math by observers reveals the cost-to-date of each such job to be $92,000.  A jobs credit bill is now being discussed, but the already record-high U.S. budget deficits make any such action challenging for lawmakers.

The big question for the economy and investment markets seems "Will U.S. consumers continue to spend as concerns about unemployment grow amid a diminishing ability of government to do anything about it?"  We shall see.

Healthcare reform- some key facts to consider

Washington is presently dominated by the debate over healthcare reform.  It is a very important issue, because a US federal budget that is already showing sizeable deficits will be blown up by Medicare costs of the baby boomers if past health cost rate of increases continue.

Here are a few key facts to consider as we all hear so much on this subject according to Moody's Economy.com:

• Insurance is the most capital-intensive of all US industries.  This explains why insurance companies continue to consolidate into larger surviving companies.
• Consolidation has resulted in near-monopolies in some areas, with a single health insurer holding market share in excess of 70% in 1/6th of all metropolitan areas.
• Because of reduced ability to spread the risk, the cost of individual health insurance premiums (up 80% in last 5 years) has increased much more rapidly than large group insurance premiums (up 35% in last 5 years).
• Of the 46 million uninsured, approximately 30 million earn more than $25,000 annually and about 20 million of those earn more than $50,000 annually.
• Of the 46 million uninsured, the vast majority (almost 40 million) are of working age between 18 and 64.

We present these facts with no editorial comment just help the reader as you see the continuing outflow of healthcare "fixes" from Washington.