War Room 30 July 2013 Obam( aca )re – Future of Health Care

War Room 30 July 2013

Obam(aca)re – Future of Health Care

War Room•Monthly macro discussion

•Using tools in context

•Update on HiddenLevers Features

•Your feedback welcome

Obam(aca)re: Future of Healthcare

I. Affordable Care Act – What’s in the bag?

II. Obamacare – Impact on Employers

III. Obamacare – Winners + Losers

IV. Scenarios

HiddenLevers

AFFORDABLE CARE ACT – WHAT’S IN THE BAG?

US Healthcare – Something had to be done

Healthcare Spending• US ranks first• Per capita ($8608/year)• Percentage of GDP (18%)

Quality of healthcare• US ranks last among first world countries• bad ROI on public + private spending

System = broken• 50million uninsured (16% of population)• Medical debt contributes to 60% of

bankruptcies• 25% of senior citizens declare bankruptcy

due to medical expenses

sources: US Census, World Health Organization, Commonwealth Fund

Guys… I got this.

HiddenLevers data

US Healthcare – Costs Contained as of Late

source: Manhattan Institute

Manhattan Institutedata

Watch out for biased research on Obamacare

Affordable Care Act – Nitty Gritty

Mandate

Health care exchanges:Online marketplace to shop around for healthcare plans

US residents can get their own, or continue with their employer-based coverage

Uninsured face penalties

Tax credits for low income households to cover healthcare

Medicare Cost Cuts = $700b

Cuts already made in Fiscal Cliff deal

Medicare payment board (IPAB) empowered to cut costs

Reductions for re-admissions

Lower premium subsidies

payments to provider based on productivity/outcome

Medicare Advantage program gutted

DELAYED ENFORCEMENT

2013 until 2015

sources: Center for Medicare + Medicaid Services

Obamacare – Rhetoric vs Reality

Political rhetoric

Massachusetts experiment is going great

Opponents of ACA are opponents of universal healthcare

Obamacare will help the US catch up to the rest of the first world

Obamacare = Freedom

Political Reality

Building + running exchanges is going to be difficult – IT challenge

Higher premiums for most, more comprehensive coverage

Premium hikes likely undercut coverage expansion

Health care cost inflation not controlled directly

Lots of concessions to healthcare industry

Politicians: never ever two faced.

Previous healthcare program hiccups:

CHIP

MedicarePart D

Obamacare – Will Young Americans Dodge?

Moms - desperate to have insurance for kids• Insurance profile of 8yr old = excellent• After infants cross 1 year mark, they are super cheap on system.

77% of 18-25 year olds - healthcare is very important• Penalty = 2.5% of income vs cost of insurance• ~$150 for a 26year old in California

You’re not young forever.

I’ve never been young.

No way I’d buy health insurance.

source: Washington Post

We need these people to participate

Penalty will hurt within 2 years

Affordable Care Act – Know your stuff

cost cuts to Medicare

employer-based coverage

the youts

incentives

OBAMACARE – IMPACT ON EMPLOYERSHiddenLevers

Employer-Based Coverage

As Health advances drove up cost in 1920s, new forms of payment needed – enter Blue Cross

Why it Arose Challenges Today

Natural risk pool – employment not typically tied to your future health

Healthcare costs have risen faster than inflation for decades

Tax deductibility and third party payment act as steroids for health care cost growth

Tax deductions enacted during WWII and 50’s fueled growth – benefits as compensation

US firms complain of competitive disadvantage as they bear health care costs

source: EH.net

Employer-based Coverage: History Employer-based coverage• 9% in early 1940s• 70% in 1960s

Tax breaks for health benefits fueled this expansion in ’40s and ‘50s

Health Insurance 1940-1960, USA

But… Employer-based healthcare waning since late 1990s

Source: Source Book of Health Insurance Data, 1965

Health Sector Grows, Others Stagnate

Endless rising employment?Healthcare employment has risen through the recession while all other sectors stagnate.

This shift between sectors puts tremendous pressure on employer healthcare model.

Source: Brookings Institute

Health care gobbling up all resources

Obamacare + Employers: Review

$2k/employee without coverage

small companies exempt

40% tax on expensive plans

enforcement delayed - 2015

Will Obamacare accelerate trendaway from employer healthcare?

Source: Heritage Foundation*

Employer Plan Cost:$15475/yr

Penalty Cost:

$2000/yr

• Employer could drop coverage, pay the penalty, and provide a $13,475k raise to employees.

• Employer drops fast growing expense and HR overhead

• Might become common if Americans become used to buying health insurance directly

*The Heritage Foundation has a vested political interest in the failure of Obamacare.

Employers Ditching Healthcare?

75% of company plans may have to scale backdue to ACA excise tax

Detroit may drop young retirees onto exchanges to cut costs

30% of companies considering dropping insurance per McKinsey

HiddenLevers

OBAMACARE – WINNERS + LOSERS

Obamacare – Winners

pre-existing conditions

pharma+

preventative care

health insurers

newly eligible for Medicaid

anyone under age

26

small business owners

healthcare IT

companies

MFGs+

industrials

Municipalities

Obamacare – Losers

healthy youth

population discontinued health plans

high deductible

plans retailersrestaurantshospitalityhospitals

+ home health

providers

doctors+

care givers

OBAMACARE SCENARIOSHiddenLevers

Obamacare – What does success look like?

exchanges rollout on

time

Americans sign up on exchanges

Medicare cuts stick

big drop in percentage

of uninsured

healthcare cost

inflation contained

Obamacare – What does failure look like?

Congress overrides Medicare cost cuts

no one signs up

ranks of uninsured stays same or grows

healthcare costs

explode

delays in rollout

If that tech rollout is anything like the custodians we’re goners.

Poor word choice doc.

Obamacare – Defunded via Govt shutdown?

political brinksmanship

analysis

government shutdown

threatened

previous attempts failed

smells like summer 2011

resurrection of Fiscal Cliff scenarios

GoodObamacare

succeeds

BadObamacare

fails

UglyObamacare

defunded

Obamacare – Scenario Outcomes

If successful, Obamacare will make USA more competitive by lowering health care costs.

Obamacare will fail if costs balloon, causing a drag on GDP growth.

If attempts to defund the ACA force a government shutdown the US risks a replay of the fiscal cliff – and it’s difficult for the Fed to step up further.

HiddenLevers – Product Update• Healthcare levers - Updated

• Non-correlated Securities Screener

• Proxy mappings for unknown symbols

Coming soon:

1. Muni-Bond Crisis – Scenario Update

2. Integrations: Albridge

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