Tag Archives: healthcare

Rasmussen polls

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65% Now Hold Populist, or Mainstream, Views

55% Favor Repeal of Health Care Bill

I find his polls as good as any. He shows 54% favor repeal of the new health care law, with 70% of seniors against the Medicare cuts.

The lack of understanding of the monetary system is taking an increasing both economically, politically and socially.

With almost 20% of the workforce unable to find full time work, and near record low capacity utilization in general, our leaders saw fit to raise taxes and cut spending which will lower demand and undermine their political careers to ‘pay for’ a very modest spending increase of about $100 billion a year, and with delays, of the perhaps additional $1 trillion of fiscal adjustment needed to get us back to full employment in a reasonable time frame.

Also, part of the rise in costs goes to insurance reserves which are a demand leakage.

The politics get uglier by the day, and from watching the news over the weekend the loudest health care protest seems to be over the expense and how it will add to the size of the deficit. Seems this means more ‘fiscal responsibility’ is on the way, including letting the tax cuts expire next year and maybe even a VAT which is an absurdity under any circumstances, apart from a desire to cut consumption.

Add to that the reality of the eurozone actually offering Greece nothing of value, opening the way for wider credit spreads spreading to the entire eurozone.
It also looks like their combined deficits are now large enough for the added non govt financial assets to now be driving down the euro independent of the credit issues. This continues until exports increase sufficiently for the automatic stabilizers to tighten fiscal balances. They aren’t anywhere near there yet.
Additionally, the dollar index chart is beginning to pick up a bid from commodities traders as well.

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>   
>   On Mon, Mar 22, 2010 at 10:18 AM, wrote:
>   
>   Warren, don’t know if you saw this analysis from David Kelly.
>   

Thanks,

My current take is very similar:

Looks to me like this is about health care insurance and not health care per se.

Most all that seems to have happened is that government is now helping/funding up to 30 million more people to purchase private health insurance.

It’s a health care insurance bill, not a health care bill. It uses taxes and medicare cuts to ‘pay for’ private sector insurance company premiums.

So most of the funding goes to insurance companies, a portion of which will then be paid to providers and pharma.

The underlying health care system, with all it’s problems, remains largely unchanged.

It requires insurance companies to accept high risks, extend coverages, etc. and therefore raises costs for the insurance companies. This would raise premiums, however there are some controls on that, which would narrow margins.

This is a very odd mixture- using public funds to subsidize private sector insurance premiums.

After reviewing the timing of expenses and taxes and cuts I agree it doesn’t look like there’s much of an immediate macro issue. Maybe a very small negative bias upfront if some expenses go up.

The Investment Implications of Health Care Reform

By David Kelly

This morning, after almost a year of heated debate, the President has achieved his goal of a major reform to the health care system. Yesterday, the House voted to approve the 2409 page Senate Bill passed in December along with 153 pages worth of amendments, on the understanding that the Democratic majority in the Senate would accept these amendments without alteration. Presuming that Senate Democrats do not renege on their pledge, the combined bills will shortly become law.

So what does all of this mean for investors?

First, we need to recognize that in discussing this issue, like any other issue in investing, it is critical to leave politics and emotion to one side. People have very strong opinions on all sides of the health care debate – they are entitled to those opinions. These comments are solely focused on the investment implications of the combined bills.

So passing over the generally recognized positive of expanding coverage to roughly 30 million of the 50 million U.S. residents who don’t currently have insurance, what does it all mean for the economy and markets?

Taxes: The most obvious quantifiable impact of the bill is an increase in taxes for upper income Americans, particularly on investment income. Starting in 2013, the Medicare tax rate on households with income over $250,000 will be increased from 1.45% to 2.35%. In addition, a new 3.8% Medicare tax will be introduced for the same group on investment income.

Currently, the tax rate on dividends and long-term capital gains is 15%. In 2011, those rates are expected to rise to 20% for households earning over $250,000 and with the new Medicare tax, these rates will rise to 23.8% for the same group. Under current tax law, investors get to keep 85% of the income stream from taxable stock market investments. Under this new law this will be cut by 8.8% to 76.2%, reducing the value of the income stream by 10.4% (that is 8.8% of 85%). This is obviously a significant number. However, it is worth noting three things about this:

* First, roughly half of U.S. stocks are owned by households with income under $250,000 and roughly half are held in non-taxable accounts. Thus, using a number of broad assumptions, the value of the average stock should be reduced by one quarter of 10.4% or 2.6% – not good obviously, but also not an overwhelming reason to avoid stocks after 12 month period in which they rose by over 70% and still appear undervalued.

* Second, this bill does not put stocks at a further disadvantage relative to fixed income. The maximum federal tax rate on bonds and cash accounts is currently 35% and with tax changes coming in 2011 combined with these changes, that maximum rate will rise to 43.4% for households with income over $250,000 in 2013.

* And, third, it’s not like we haven’t been here before. On average over the past 40 years the maximum federal tax on capital gains was 24.7% and the maximum tax rate on dividends was 44.6%.

For the Medical Care Industry, this bill will expand demand without much effort to reign in costs. A combination of federal subsidies and mandates will increase the pool of insured, and while there many constraints preventing insurance companies from limiting coverage there are few which limit how much they can charge for it.

The pharmaceutical industry will benefit for this as well as a plan to remove the donut hole from the Medicare prescription drug benefit program by 2020. Early in the debate on health care, the White House negotiated deals with pharmaceutical, insurance and medical device companies to dissuade them from fighting the reform effort. Under these deals, they appear to retain autonomy on price setting. However, they will pay cumulative taxes of $107 billion between 2011 and 2019. To the extent that they are able to pass these costs on to consumers they may all do OK in this reform, although they may still be a target for future reform efforts.

The American Medical Association and American Hospital Association have both endorsed the health reform effort with a number of reservations. For the most part, the legislation does not interfere with patient-doctor relationships and, by expanding the pool of the insured, will reduce the number of hours which doctors are forced to devote to charity cases. Most doctors are naturally happy to see patients not lose their coverage due to pre-existing conditions clauses, annual caps or non-renewal of existing insurance due to illnesses.

For the Federal Deficit: According to the Congressional Budget Office, the passage of this legislation would reduce federal deficits by a cumulative $143 billion between 2010 and 2019 and by greater amounts in the following decade. However, these estimates should be taken with more than a grain of salt. It is obviously very hard to estimate what total federal health care spending will be over the next decade. However, whatever else is said about this bill there is nothing in it to suggest a reduction in either the quantity or prices of health care services consumed.

* There is no meaningful malpractice reform.
* There is no reduction in drug patent lives.
* There is no compulsion to force insurance companies to compete across state lines.
* There is no effort to limit health care procedures in the last year of life.
* There is no movement in the direction of forcing consumers to confront the cost of services at the point of purchase, and,
* There are no meaningful incentives to force the insured to take better care of their own health.

In fact, for the most part this bill moves away from, rather than towards, the principles of market economics. In 2007, the U.S. devoted 16% of its GDP to health care spending compared to 11% in the country with the second highest spending which was France. Despite this it ranks 38th in the world in life expectancy at birth. Sadly, this bill isn’t likely to change either of these numbers for the better.

For the economy: Despite dire predictions, it’s not clear that health care reform will really slow economic growth that much. Most of the tax provisions don’t kick in until 2013 and the mandates on businesses and individuals don’t kick in in a big way until 2016. Between now and then, the economy is quite capable of staging a full cyclical recovery. It may be that businesses will, in the end, be forced to pay more for the health care of their workers – however, overall, American business is quite capable of limiting wage increases to add to benefit costs. It may be that America as a society ends up spending more on health care. However, if we spend more on health care and less on housing or education or hamburgers, that is our choice. The jobs created in the health care field are American jobs and still some the highest skilled and best paid jobs out there. It should be noted, however, that to the extent that the government incurs more debt to pay for higher health care costs, it probably does mean higher long-term interest rates.

Finally, for politics: The passage of health care reform is a huge victory for the President and it may ultimately work out better for him politically than many Republicans had hoped or Democrats had feared. The economy is improving, and if it continues to do so, many may feel that their fears about health care reform were unfounded. The reality is more complicated. Health care reform wasn’t about to stop the economy in its tracks anyway and the President will be the beneficiary of a cyclical bounce-back which, on its face, appears to owe much more to pent-up demand than government stimulus. Either way the Democrats will lose seats in the mid-term election. However, the end-game for health care reform may well mean less of a swing to the Republicans in November than many had thought.

All in all, a lot to consider but also, more importantly, a lot to keep in proper perspective.

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In paradigm Health Care criticism from the left

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This Is Not The Way To Do Healthcare Reform: Democrats Propose Windfall For Insurance Industry

By L. Randall Wray

It is beginning to look like Congress is going to vote to pass health care legislation on Sunday. According to the NYTimes, Democrats are practically celebrating already. here
It is interesting, however, that no one is talking about providing benefits to the currently underserved.
Rather, the “good news” is that the bill is supposed to be “the largest deficit reduction of any bill we have adopted in Congress since 1993,” according to House Democratic leader, Rep.Steny H. Hoyer of Maryland. “We are absolutely giddy over the great news,” said the House’s number three Democrat, Rep. James Clyburn of South Carolina. (Of course, deficit hysteria is nothing new. See here


Who would have thought that health care “reform” would morph into deficit cutting?

As Marshall Auerback and I argue in a new policy brief here
, the proposed legislation is not “reform” and it will not reduce US health care costs. I will not repeat the arguments there. But very briefly, the most significant outcome of this legislation is the windfall gain for insurance companies—who will be able to tap the wages of the huge pool of nearly 50 million Americans who currently do not purchase health insurance. Since many of these are too poor to afford the premiums, the government will kick in hundreds of billions of dollars to line the pockets of health insurers. This legislation has nothing to do with improving health services for the currently underserved—it is all about increasing the insurance sector’s share of the economy.

You might wonder how Democrats can call this a deficit reduction deal? Elementary, dear Watson. They will slash Medicare spending. No wonder—it stands as an alternative to the US’s massively inefficient private insurance system, hence, needs to be downsized in favor of an upsized private system.

There is nothing in the deal that will significantly reduce health care costs. At best, it will simply shift more costs to employers and employees—higher premiums, higher deductibles, higher co-pays, and more exclusions forcing higher out-of-pocket expenses and personal bankruptcies. As we show in our paper, the US’s high health care costs (at 17% of GDP, double or triple the per capita costs in other similarly wealthy nations) are due to three factors. As many commentators have argued (especially those who advocate single-payer) part of the difference is due to the costs of operating a complex payment system that relies on private insurers—resulting in paperwork and overhead costs, plus high profits and executive compensation for insurance executives. This adds about 25% to our health care system costs. Obviously, the proposed legislation is “business as usual”, actually adding more insurance costs to our system.

In addition, Americans spend more for medical supplies and drugs. Since the Democrats ruled out any attempt to constrain Big Pharma through, for example, negotiating lower prices for drugs, there will not be any savings there.

Finally, and most importantly, the biggest contributor to higher US health care costs is our American “lifestyle”: too little exercise, too much bad food, and too much risky behavior (such as smoking). here
 This is why we spend far more on outpatient costs for chronic diseases such as diabetes—40% of healthcare spending and rising rapidly. Ending the subsidies to Big Agriculture that produces the products that make us sick would not only do more to improve US health outcomes than will the proposed legislation, but it would also reduce health care spending—while reducing government spending at the same time. That would be real healthcare reform! But, of course, no one talks about this.

Interestingly, according to the NYTimes article, President Obama likened the legislation to fixing the financial system or passing the economic recovery act. “I knew these things might not be popular, but I was absolutely positive that it was the right thing to do,” he said. That is an apt and scary comparison. This legislation will do as much to “fix” the US healthcare system as the Obama administration has done to “fix” the financial sector and to put the economy on the road to recovery?

Of course, we have not done anything to “fix” the financial sector, or to put Mainstreet on the road to recovery.

I think the President’s comparison is uncannily accurate. So far the main thing his administration has done is to funnel trillions of dollars to the FIRE sector in an attempt to restore money manager capitalism. The current legislation will simply continue that policy—the trillions spent so far to bail-out Wall Street have not been nearly enough. Hence, the effort to funnel billions more to the insurance industry.

But what is the connection between Wall Street and health insurers? As Marshall and I argue in our brief, they are “two peas in a pod” since the deregulation of financial institutions. We threw out the Glass-Steagall Act that separated commercial banking from investment banking and insurance with the Gramm-Leach-Bliley Act of 1999 that let Wall Street form Bank Holding Companies that integrate the full range of “financial services”, that sell toxic waste mortgage securities to your pension funds, that create commodity futures indexes for university endowments to drive up the price of your petrol, and that take bets on the deaths of firms, countries, and your loved ones. See also here


Hence, extension of healthcare insurance represents yet another unwelcome intrusion of finance into every part of our economy and our lives. In other words, the “reforms” envisioned would simply complete the financialization of healthcare that is already sucking money and resources into the same black hole that swallowed residential real estate. here


Just as the bail-out of Wall Street was sold on the argument that we need to save the big banks so that they will increase lending to Main Street, health care “reform” was initially promoted as a way to improve provision of healthcare to the underserved. What we got instead is a bail-out for insurers and cuts to Medicare. Funny how that happens.

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Rasmussen Poll and deficit reduction

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Don’t underestimate the power of public opinion on Congress.

Deficit myths remain public enemy number one.

Daily Presidential Tracking Poll
Saturday, October 24, 2009

The Rasmussen Reports daily Presidential Tracking Poll for Saturday shows that 30% of the nation’s voters Strongly Approve of the way that Barack Obama is performing his role as President. Forty percent (40%) Strongly Disapprove giving Obama a Presidential Approval Index rating of -10 (see trends).

Thirty-eight percent (38%) of voters say deficit reduction is the top priority for Washington to obtain while 23% say health care is most important. Among Democrats, health care is most important. Among Republicans and unaffiliated voters, health care is fourth on the priority list.

Check out our review of last week’s key polls to see “What They Told Us.”

The Presidential Approval Index is calculated by subtracting the number who Strongly Disapprove from the number who Strongly Approve. It is updated daily at 9:30 a.m. Eastern (sign up for free daily e-mail update). Updates also available onTwitter and Facebook.

Overall, 47% of voters say they at least somewhat approve of the President’s performance. Fifty-one percent (51%) disapprove.

Tracking poll data shows that just 56% of conservatives consider themselves Republicans. Separate polling shows that 73% of GOP voters say Congressional Republicans have lost touch with the party’s base.


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Obama: Government will make it easier for workers to save for retirement

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A glimmer of hope in the last sentence but fails to state that any policy that reduces spending needs to be ‘matched’ with a tax cut to sustain output and employment.

If this is implemented without a tax cut, score one more move to reduce demand and suppress output and employment.

Obama expands workers’ retirement savings options

Obama: Government will make it easier for workers to save for retirement

By Charles Babington

September 5 (AP) — The government is trying to make it easier for Americans to save for retirement, President Barack Obama said Saturday, as he noted the toll the recession has taken on extra income and savings accounts.

Actually, saving has of course gone up as the federal deficit has gone up

One initiative will allow people to have their federal tax refunds sent as savings bonds. Others are meant to require workers to take action to stay out of an employer-run savings program rather than having to take action to join it.

“We know that automatic enrollment has made a big difference in participation rates by making it simpler for workers to save,” Obama said in his weekly radio and Internet address. “That’s why we’re going to expand it to more people.”

The new federal steps, which do not require congressional action, include:

— Making it easier for small companies to set up 401(k) retirement savings plans in which all workers are automatically enrolled unless they ask to be omitted. Employers can set default amounts of each worker’s pay — perhaps 3 percent — to automatically be deposited into the accounts without being taxed. Workers can raise or lower the contribution levels, and they choose how to invest the money. They will pay taxes on the money only when they withdraw it as retirees, when their tax rates are likely to be lower than when they are working full-time. A similar process would apply to savings plans called SIMPLE-IRAs.

— Allowing such plans to automatically increase the amount that workers save over time unless the workers object.

— Allowing people to check a box on their federal tax returns asking that any refund be sent as a savings bond. More than 100 million U.S. households receive refund checks each year, and many are promptly cashed and spent.

— Allowing workers, when leaving a job, to direct unused vacation pay to a retirement savings account rather than taking it in cash.

The administration earlier asked Congress to make it easier to set up retirement accounts for people whose workplaces do not offer them. No legislation has moved thus far.

“Tens of millions of families have been, for a variety of reasons, unable to put away enough money for a secure retirement,” Obama said. “Half of America’s work force doesn’t have access to a retirement plan at work. And fewer than 10 percent of those without workplace retirement plans have one of their own.”

While saving for retirement is universally seen as a good idea, any increase in savings rates could somewhat slow the nation’s rebound from the economic recession.


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Deficit Myths doing real damage

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While I much prefer my proposal for health care, Increasing the size of the deficit during this period of deficient aggregate demand should not be the reason for rejecting or accepting the proposed health care act.

Deficit myths have moved the discussion off point.

Scrap Health Care Reform If It Adds To Deficit

August 5, 2009 – Scrap Health Care Reform If It Adds To Deficit, U.S. Voters Tell Quinnipiac University National Poll; Voters Disapprove Of Obama’s Handling Of Health Care

American voters, by a 55 – 35 percent margin, are more worried that Congress will spend too much money and add to the deficit than it will not act to overhaul the health care system, according to a Quinnipiac University national poll released today. By a similar 57 – 37 percent margin, voters say health care reform should be dropped if it adds “significantly” to the deficit.


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Obama taxing health care benefits?

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>   
>   On Sun, Mar 15, 2009 at 11:40 AM, MAuer wrote:
>   
>   How about adopting the Mosler health care proposals?
>   

Yes!

This is what happens with an administration that does not understand taxes are about managing aggregate demand and distribution, not raising revenue per se.

Someday we may have a president who knows how the monetary system works.

And what about all the economists who know or should know health care should not be a marginal cost of production?

Administration Is Open to Taxing Health Benefits

by Jackie Calmes and Robert Pear

Mar 15 (NYT) — The Obama administration is signaling to Congress that the president could support taxing some employee health benefits, as several influential lawmakers and many economists favor, to help pay for overhauling the health care system.


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