Paper Chase: One Year of Healthcare.gov
The Bank of China has lowered interest rates to stimulate their economy. Meanwhile, European Central Bank (ECB) President Mario Draghi started their bond buying program to jump start their economy. Central banks cutting interest rates and buying bonds definitely sounds familiar.
Existing home sales rose 1.55% in October well above economists expectations. The economy is improving. The environment now (protests and riots) has a lot to do with the bottoming out of wages which should improve.
Billboard will now count streaming music and digital sales towards album sales. The concept of an “album sale” has changed in an environment where people buy less albums in their physical form.
Following The Fed
The economies in Europe and China are going through cyclical downswing and require a lift. Coordination is a possibility here but unlikely. While action by the ECB was foreseeable, China is a bit of a surprise though their Purchasing Manager’s Index (PMI) has been oscillating for years. Meanwhile, the U.S. fed policy makers who gave us a jump on this years ago are now removing stimulus.
World central banks take their cues from us. Essentially, we printed a lot of money and even now the consumer is still chugging along at a 2% clip. It shows that you can create a favorable backdrop, but borrowing or buying can’t be forced.
The U.S. consumer did not save the world with spending as once thought and neither did the Chinese consumer afterwards. Chinese gdp is a fraction of what it was from its peak in 2007. The Chinese consumer can not spend enough to support the run up in production, prices, commodities, oil, gas, and cotton that was anticipated they would cover. Now, the rest of the world is moving on to plan b. THe ECB has to think about Europe, and the United States is better off than everyone for we are working on an actual economic recovery.
Recessions drive markets down. I don’t see conditions for a recession in our immediate future; therefore, the market will continue to hum along. It can be argued that we are at or just past the midpoint of the business cycle, and we can expect a buoyant stock market in the at least the near term.
Equity investors always want to see 3% or 4% growth in the U.S. The only way to accelerate economic activity from 2% or 3% to 4% is for credit to be issued and used. Once credit is at that consumer level, imbalances are built in. A lack of imbalances at our current growth rate means longer economic expansion. Instead of 7 or 8 years at 4% growth, we could be at 10-15 years of economic expansion at 3%.
The stock market also depends on the health of companies. They have been doing well which has in turn driven prices up. Company profits aren’t matching the price increases. Companies have been issuing profit warnings amidst falling profit margins. High stock prices are not impacting corporate bottom-lines. Consumers fill in that gap which is what Black Friday was about. Currently, consumers have record debt of 3.2 trillion (auto loans, student loans, credit cards) and the success of Black Friday will be dependent upon credit.
One Year of Healthcare.gov
The ACA is a complicated law affecting patients, providers and insurance companies. It’s mission was to improve access and quality as well as to decrease costs. Access has improved as more patients are insured now than ever. Mandated improvements in quality have resulted in fewer hospital readmissions and fewer hospital acquired infections. Check. Finally, the rate of increase in medicaid and medicare expenditures is diminishing. It is debatable whether the diminishing costs in healthcare are solely attributable to the ACA, but the goals of the bill are clearly being met.
Hospitals are under pressure. In NY, there is no influx of Medicaid patients because it is already a fairly generous Medicare state. There also hasn’t been a large influx of people who joined exchanges who previously didn’t have insurance. Decrease in revenues associated with so many aspects of policy by the Center for Medicare Services and the ACA have shrunk margins.
“Success” has really been location dependent. Areas where there are more Medicaid patients struggle for hospitals lose money on Medicaid. Areas of underinsured where people are buying commercial insurance because of the exchange are seeing many more patients and revenue.
Bending the cost curve in healthcare has to be the focus of politicians, academics, opinion makers etc. We are only beginning to scratch the surface.
Surprisingly, the most difficult issues are the ones we don’t want to deal with. For example, the majority of Medicare spending is in the last year of life usually on complicated and futile treatments for patients that, if they had the choice, would probably not have wanted. The question is how do we improve dialogue around end of life care with advance directives so we don’t do what patents don’t want which also happens to be expensive and futile.
There also needs to be a discussion on Type 2 diabetes and obesity. Specifically, should we subsidize corn that makes high fructose corn syrup which fuels obesity.
The discussion needs to be approached like tobacco. It is a healthcare problem. People need to be warned and discussions of problems with our sugar consumption must be had.
Room for Improvement
We need to find a way to facilitate advance directives so doctors and hospitals know what patients want. We should also think about warning labels for high fructose corn syrup and stopping corn subsidies altogether. Most importantly, we need to stimulate the development of those drugs most needed to bend the cost curve that most benefit the public. Let’s incentivize the development of the drugs we need the most.
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