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 • Affordable Care Act – What’s in the bag? • Obamacare – Impact on Employers • 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 Guys… I got this. sources: US Census, World Health Organization, Commonwealth Fund

US Healthcare – Costs Contained as of Late HiddenLevers data Manhattan Institute data Watch out for biased research on Obamacare source: Manhattan Institute

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 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 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 Previous healthcare program hiccups: Politicians: never ever two faced. CHIPMedicare Part D

Obamacare – Will Young Americans Dodge? No way I’d buy health insurance. We need these people to participate Penalty will hurt within 2 years You’re not young forever. I’ve never been young. source: Washington Post • 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

Affordable Care Act – Know your stuff the youts cost cuts to Medicare employer-based coverage incentives

HiddenLevers Obamacare – Impact on Employers

Employer-Based Coverage Why it Arose Challenges Today As Health advances drove up cost in 1920s, new forms of payment needed – enter Blue Cross Healthcare costs have risen faster than inflation for decades Natural risk pool – employment not typically tied to your future health 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 Health Insurance 1940-1960, USA • Employer-based coverage • 9% in early 1940s • 70% in 1960s • Tax breaks for health benefits fueled this expansion in ’40s and ‘50s Source: Source Book of Health Insurance Data, 1965 But… Employer-based healthcare waning since late 1990s

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. Health care gobbling up all resources Source: Brookings Institute

Obamacare + Employers: Review $2k/employee without coverage 40% tax on expensive plans small companies exempt enforcement delayed - 2015

Will Obamacare accelerate trend • away from employer healthcare? 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 Source: Heritage Foundation* *The Heritage Foundation has a vested political interest in the failure of Obamacare.

Employers Ditching Healthcare? Detroit may drop young retirees onto exchanges to cut costs 30% of companies considering dropping insurance per McKinsey 75% of company plans may have to scale back due to ACA excise tax

HiddenLevers Obamacare – Winners + Losers

Obamacare – Winners pre-existing conditions health insurers newly eligible for Medicaid pharma + preventative care Municipalities anyone under age 26 healthcare IT companies MFGs + industrials small business owners

Obamacare – Losers doctors+ care givers high deductible plans healthy youth population retailers restaurants hospitality discontinued health plans hospitals + home health providers

HiddenLevers Obamacare scenarios

Obamacare – What does success look like? exchanges rollout on time Americans sign up on exchanges Medicare cuts stick healthcare cost inflation contained big drop in percentage of uninsured

Obamacare – What does failure look like? If that tech rollout is anything like the custodians we’re goners. Poor word choice doc. no one signs up delays in rollout healthcare costs explode ranks of uninsured stays same or grows Congress overrides Medicare cost cuts

Obamacare – Defunded via Govt shutdown? smells like summer 2011 political brinksmanship analysis government shutdown threatened previous attempts failed resurrection of Fiscal Cliff scenarios

Obamacare – Scenario Outcomes • Good • Obamacare succeeds • Bad • Obamacare fails • Ugly • Obamacare defunded 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: • Muni-Bond Crisis – Scenario Update • Integrations: Albridge • eMoney Advisor

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