{"id":79537,"date":"2015-10-13T13:09:14","date_gmt":"2015-10-13T17:09:14","guid":{"rendered":"http:\/\/countingpips.com\/?p=79537"},"modified":"2015-10-13T13:09:14","modified_gmt":"2015-10-13T17:09:14","slug":"thoughts-from-the-frontline-unhealthy-not-wealthy-and-far-from-wise","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2015\/10\/thoughts-from-the-frontline-unhealthy-not-wealthy-and-far-from-wise\/","title":{"rendered":"Thoughts from the Frontline: Unhealthy, Not Wealthy, and Far from Wise"},"content":{"rendered":"
October 13, 2015<\/div>
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By John Mauldin<\/span><\/h4>\n
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\u201cThe first wealth is health.\u201d
\n\u2013 Ralph Waldo Emerson<\/p>\n

\u201cMan needs difficulties. They are necessary for health.\u201d
\n\u2013 Carl Jung<\/p>\n

Decisions, decisions. Many Americans will have to make a big one in the next 60 days or so. How you decide will affect both your health and your wallet. Hospital management and doctors are seeing significant differences in the trends of patient care and are moving to adapt. Some of the changes they implement are going to create significant economic impacts on households and local communities.<\/p>\n

In this week\u2019s letter we\u2019re going to take another look at healthcare trends. Healthcare is roughly 20% of the economy and every bit as impactful as the energy and food sectors.<\/p>\n

Two years ago this week I wrote \u201cThe Road to a New Medical Order<\/a>\u201d with my friend and personal physician, Dr. Mike Roizen of the Cleveland Clinic. That letter was an attempt to calmly discuss the Obamacare launch and the changes it would bring. Rereading it now, I see that we missed some points but were on target with others. (Mike is the Chief Wellness Officer and head of The Wellness Institute at the Cleveland Clinic. He is one of the premier antiaging doctors of the world. He has sold over 12 million books (including numerous bestsellers), has written 165 peer-reviewed publications, holds 14 patents, and serves on all sorts of FDA committees and boards. His awards are numerous. He has often appeared on the Oprah Winfrey Show with \u201cDr. Oz.\u201d)<\/p>\n

Mike and I have had an ongoing conversation about the changes in the healthcare world, and we visited at length as I was preparing this letter. Some of the changes that are coming are very positive, and others are downright remarkable, creating trends that no one seems to have even guessed at. Others are not so salutary. We\u2019ll examine the great and not so great trends. Plus, I\u2019ll offer some practical healthcare-related personal-finance tips for those of us of a certain generation. I was actually pretty excited to find some of this information, and so I\u2019m going to enjoy passing it on to you. This week\u2019s letter should be fun. Let\u2019s dive right in.<\/p>

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<\/a>The Changing Healthcare World<\/strong><\/p>\n

We are approaching \u201copen enrollment\u201d time for Medicare, Obamacare, and many employer health insurance plans. You can keep what you have \u2013 maybe. You can change plans, too. Should<\/em> you change? No one really knows. Even if you manage to decipher what a plan does or doesn\u2019t cover and at what cost, the realities of your coverage and costs can change very quickly.<\/p>\n

Readers outside the United States often tell me they can\u2019t understand why we tolerate such a dysfunctional health care system and seemingly do our best to make it a little worse each year. I don\u2019t understand, either. There are at least a dozen potential \u201cfixes\u201d to the Affordable Care Act (ACA, aka Obamacare) that 90% on both sides of the political aisle agree on, but there seems to be little willingness on either side to bring up a bill in Congress to accomplish those changes. One side wants to make wholesale changes in the system, and the other side wants no changes unless we go further down the road to a single-payer system.<\/p>\n

Healthcare really should not be a politically divisive issue. We all want to stay in good health; we all want sick people to receive good care; and we all want to do it economically and sustainably. Yet our healthcare system will probably be a major issue in next year\u2019s election campaigns. As usual, the rhetoric will generate more heat than light.<\/p>\n

Today we will revisit some of the 2013 issues and predictions Mike and I shared with you and see how things are working out. Progress<\/em> may not be the right word, but we definitely see change.<\/p>\n

<\/a>Medicare Rate Shock<\/strong><\/p>\n

We\u2019ll begin with an impending change in the Medicare program for senior citizens like me. Having just turned 66, I\u2019ve been on Medicare for a full year. So far, my experience has been unproblematic. I haven\u2019t had any major health issues, so the worst part has been paying the monthly premiums.<\/p>\n

Premiums? This might come as a shock to younger people who already see Medicare tax money leaving their paychecks, but you will keep paying after you sign up for Medicare. Depending on your income, the 2015 \u201cPart B\u201d premiums are between $104.90 and $335.70 per month, per person. (So a married couple pays double those amounts.)<\/p>\n

In July, the Medicare trustees issued a report estimating that next year\u2019s Part B premium will have to rise 52% in order to keep the system solvent. That\u2019s right, 52%. This will be an increase of $50 to $175 per month, again depending on your income. So much for 2% inflation.<\/p>\n

(I\u2019m not really complaining, because my overall health insurance cost went down the day I went on Medicare \u2013 I was surprised by how much. And I haven\u2019t noticed a significant difference in service, not that I\u2019m in a hospital or the doctor\u2019s office very much.)<\/p>\n

Those increases won\u2019t stress me, but they will definitely be significant for many retirees who live on fixed incomes. These increases also illustrate the nuttiness of our system. Health and Human Services Secretary Sylvia Burwell, who will make the final decision on next year\u2019s rates, has already pledged<\/a> that some 70% of Medicare enrollees will be exempt from the rate increase<\/strong>.<\/p>\n

It gets worse. By what criteria, you may ask, will HHS decide who pays more or less?<\/p>\n

Current Medicare recipients who have their premiums deducted from their monthly Social Security checks won\u2019t see a rate increase. That\u2019s because the Social Security Act has a \u201csafe harbor\u201d provision that stipulates that a Medicare premium increase cannot exceed enrollees\u2019 annual cost of living adjustments. And because we have almost zero inflation, Social Security will likely have no COLA this year.<\/p>\n

Who gets to hold the bag, then? Anyone who is currently on Medicare but pays premiums separately because they haven\u2019t yet filed for Social Security. That includes people between ages 65 and 70 who are using the popular \u201cfile and suspend\u201d strategy.<\/p>\n

It also includes anyone who first enrolls in Medicare during calendar 2016. They will pay the higher rates from the very start.<\/p>\n

This is obviously insane. Healthcare costs did not suddenly increase 52%, so premiums don\u2019t need to go up that much for anyone. Yet because we have no inflation (at least according to the CPI), the government can\u2019t legally raise rates for most Medicare participants. It has to make up the difference by extracting extra-high premiums from the unlucky few to which it has recourse.<\/p>\n

It gets worse. If you are in the unlucky 30%, you may have an escape clause. If you are over 65 and did the file and suspend trick, Kenny Landgraf at Kenjol Capital Management<\/a> suggests just un-suspending for the rest of 2015. That will shift you to the other group so you can avoid the premium increase. Then you can refile and suspend again\u2026 maybe. No one seems completely sure about this.<\/p>\n

That maneuver, if it works, may be more hassle than it\u2019s worth for many people, but the need for it definitely points up the absurdity of our Rube Goldberg healthcare machine. And we haven\u2019t even looked at Obamacare yet.<\/p>\n

<\/a>Obamacare\u2019s Silver Lining<\/strong><\/p>\n

For those under 65, the ACA was supposed to make healthcare affordable and protect patients. Did it? The answer is a resounding \u201cMaybe!\u201d<\/p>\n

The reports I\u2019ve seen show rates, coverage, and quality are all over the board, depending on who you are and where you live. The only obvious winners are people with preexisting conditions who didn\u2019t have employer-provided coverage. In many states they couldn\u2019t buy health insurance at any price prior to Obamacare. Now they can at least get overpriced and underwhelming Obamacare policies. For this group there has been a clear improvement.<\/p>\n

Don\u2019t underestimate how much this development could help the economy as a whole. Economists have long noticed a \u201cjob lock\u201d phenomenon. People hold on to jobs longer than is rational, simply because they need the insurance benefits. My good friend Patrick Watson (who now works with us at Mauldin Economics) wrote about this back in 2013, calling the insurability of people with preexisting conditions a possible Obamacare \u201csilver lining.\u201d<\/a><\/p>\n

I think Patrick\u2019s point may well be proven right in time. As a nation, we can\u2019t afford to let talented people languish in jobs that don\u2019t fully utilize their skills. Job lock depresses economic growth and ultimately punishes everyone. To the extent Obamacare solves this problem, it is an improvement on the pre-2014 system.<\/p>\n

That may be where the improvement ends, though. Obamacare\u2019s expensive and complicated plumbing seems to have limited its value to millions of people. Going into 2014, about 32 million nonelderly Americans were uninsured, according to Kaiser Family Foundation<\/a>. As of June 2015, some 10 million people had enrolled in state and federal Obamacare marketplace plans. Another 14 million had enrolled in Medicaid. These are moving targets, so the numbers are approximate.<\/p>\n

These newly covered people took the uninsured rate down from 16.2% just before the Obamacare rollout to 10.7% by Q1 2015.<\/p>\n

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A majority of those who remain uninsured are self-employed or work for firms that don\u2019t offer insurance. That means they are probably eligible for Obamacare marketplace plans. Why don\u2019t they buy one? According to surveys, most say the plans cost too much. The tax credits available to those with incomes under 400% of poverty level don\u2019t seem to work for many in the target audience.<\/p>\n

And let\u2019s be clear: in some states there have been health insurance cost increases of 50 to 100% since 2010.<\/p>\n

To continue reading this article from Thoughts from the Frontline<\/strong><\/em> \u2013 a free weekly publication by John Mauldin, renowned financial expert, best-selling author, and Chairman of Mauldin Economics \u2013 please click here<\/a>.<\/p>\n

Important Disclosures<\/a><\/p>\n<\/div>\n

The article Thoughts from the Frontline: Unhealthy, Not Wealthy, and Far from Wise<\/a> was originally published at mauldineconomics.com<\/a>.<\/div>\n
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By John Mauldin \u201cThe first wealth is health.\u201d \u2013 Ralph Waldo Emerson \u201cMan needs difficulties. They are necessary for health.\u201d \u2013 Carl Jung Decisions, decisions. Many Americans will have to make a big one in the next 60 days or so. How you decide will affect both your health and your wallet. Hospital management and […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-79537","post","type-post","status-publish","format-standard","hentry","no-post-thumbnail"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/79537","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/comments?post=79537"}],"version-history":[{"count":1,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/79537\/revisions"}],"predecessor-version":[{"id":79538,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/79537\/revisions\/79538"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/media?parent=79537"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/categories?post=79537"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/tags?post=79537"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}