The Real Obamacare Nightmare is Just Beginning
April 23rd, 2014
by Gary Halbert
of Halbert Wealth Management
IN THIS ISSUE:
1. Finally, Some Bright Spots in the Economy
2. The Real Obamacare Nightmare is Just Beginning
3. HWM ALPHA ADVANTAGE Webinar Recording
4. Some Parting Thoughts About Easter
Last Thursday, the Obama administration said that a total of eight million Americans had signed up for Obamacare. In a hastily called press event, President Obama spiked the football, took a victory lap around the White House and declared the healthcare law a smashing success – although they still haven’t told us how many enrollees have actually paid a premium, or how many were simply replacing their policies that were canceled due to Obamacare.
In any event, the millions of Americans who have purchased health insurance on the government exchanges are in for another round of shocks as they begin to try to actually use their new healthcare insurance. New nightmares are being reported almost daily and we’re only getting started.
The problems that will create the next Obamacare headlines will come in three main areas: 1) lack of access to doctors, 2) failures of the system to verify coverage and pay claims, and 3) the incredibly high deductibles and copays on the exchange insurance policies. I have reprinted an excellent article on this growing nightmare below.
Yet before we go there, let’s take a look at a few recent economic reports that are actually encouraging. Also, our webinar last Wednesday on the HWM Alpha Advantage investment opportunity was one of the most highly attended web events we have ever done. The presentation was excellent and the questions from attendees were spot-on. To view the webinar, CLICK HERE.
Finally, Some Bright Spots in the Economy
After a very cold winter with lots of confusing economic data, some important recent indicators suggest that the economy may be coming out of hibernation at last. We’ll take a look at these reports below. After a strong showing in the 3Q of last year, with GDP jumping a better than expected 4.1% (annual rate), the economy disappointed in the 4Q with growth of only 2.6%.
In addition, we had a couple of lousy jobs reports late last year. In December, for instance, the economy added just 84,000 new jobs, less than half of what it had been averaging the previous two years. Second, consumer confidence which had risen for much of 2013 declined rather sharply in the final months of last year.
Then came other disappointing readings earlier this year including poor auto sales in January and the Institute for Supply Management’s disappointing report on the service sector in February, which showed the weakest expansion of activity in four years – just to name a few of the numerous disappointments late last year and early this year.
One after one, the disappointing economic reports were blamed on the bad weather much of the country experienced in January and February. But other forecasters worried that the slump might be more ominous and that the recovery might be slipping back into a new recession. Many said it was wrong to place the blame on the bad weather.
However, some recent economic reports suggest that the blame-the-weather crowd may have been right to dismiss a severe winter full of worrying data. Here are three reasons why it appears that the economy may have shaken off the cold-weather blues.
1. Retail Sales. The Commerce Department reported last week that retail sales increased 1.1% in March, above the 0.9% increase economists were expecting. The increase was also the largest month-to-month rise since September 2012, suggesting that consumers had been waiting for warmer weather to spend more.
2. New Car Sales. US GDP is composed primarily of consumer spending. So when shoppers are spending on big-ticket items like cars, this is a good sign for economic output and, ultimately, job growth. That’s why economists were heartened earlier this month when automakers announced that they had sold, at an annualized rate, 16.4 million new cars in March – the highest number since June 2006.
Again, we see the effects of the weather. The jump was much higher than analysts expected and, according to an analysis by Gary Thayer, chief macro strategist for Wells Fargo Advisors, “Some of the car and truck sales were probably pent-up demand from the temporary dip during the past few months.”
In other words, don’t expect increases in sales of the same magnitude each month, but rather take the most recent jump as making up for a weak winter. Still, the recovery in auto sales is definitely encouraging.
3. Jobless Claims. For most Americans, economic data is meaningful only when it touches their lives. Is it easy or hard for me to get a job, start a business, and grow my income? This is why the press pays so much attention to monthly jobless data, which can, unfortunately, be very noisy and unreliable in any given month.
As a supplement, economists track the number of Americans applying for jobless benefits for the first time as a gauge of the labor market. If this number falls, it’s a good sign that the labor market is getting healthier. Last week, the Labor Department announced that this number dipped to 304,000, its lowest level since May 2007. The four-week average also fell to 316,250, below economists’ expectations, and to a level that is consistent with previous economic expansions.
As you can see, despite the noise in the monthly jobs numbers, jobless claims have been falling for years now, even without the very encouraging reading of just 304,000 last week.
It’s easy to make fun of economists and their predictions. After all, anybody predicting the future is going to be wrong more often than they are right. But at least at this point, it looks like blaming poor economic data on unseasonably cold weather may have been correct.
This remains to be seen, of course, and a lot could still change. Consumer confidence continues to be the key. As always, all we can do is wait for the next curves in the road. For now at least, it does not look like the economy is slipping back into a recession.
Consumer confidence, as measured by the UMich Consumer Sentiment Index, has risen sharply since the low in late 2012, which was roughly equal to the low in 2008 during the Great Recession. But it is also bumping up against a lot of overhead resistance from a technical perspective.
Since consumer spending accounts for apprx. 70% of GDP, it will be very important to see what happens next. There is so much uncertainty in the world today it is simply impossible to know what lies ahead. It will be very interesting to see if consumer confidence breaks out to the next level on the upside, or if there are new setbacks to come.
The Real Obamacare Nightmare is Just Beginning
I have avoided writing much about Obamacare since the president was re-elected in late 2012. Since the disastrous rollout of the Affordable Care Act last October, the country has been fixated on whether enough Americans (and the right age mix) would enroll in Obamacare. Last Thursday, the Obama administration said that a total of eight million Americans had signed up.
In a hastily called press event, President Obama spiked the football, took a victory lap around the White House and declared the healthcare law a smashing success – although they still haven’t told us how many enrollees have actually paid a premium, or were simply replacing policies that were canceled.
In any event, the millions of Americans who have purchased health insurance on the government exchanges are in for another shock as they begin to try to actually use their new healthcare insurance. What follows is a very good explanation on this subject from FORBES’ writer Jeffrey Dorfman.
Get Ready For The Real Obamacare Disasters As People Start To Use It
We have finally (almost, sort of) reached the end of Obamacare signups. The White House is claiming over seven million people have signed up with several million more now on the Medicaid rolls. Democrats are desperate to find a success somewhere in the Obamacare narrative, so reaching seven million is the story of the moment. However, as bad as the open enrollment period and its infamous healthcare.gov website was, the real problems are about to begin. Now people are going to try to use their new insurance.
The problems that will create the next headlines will come in three main flavors: lack of access to doctors, failures of the system to verify coverage and pay claims, and the incredibly high deductibles and copays on many of the exchange insurance policies. [Emphasis added, GDH]
Insurance companies believed that people shopping for health insurance on the government exchanges were very price sensitive so low prices were needed to attract buyers. Thus, the insurers only signed up doctors and hospitals willing to agree to low reimbursement rates to their exchange-offered plans. That means that many of the plans, especially the silver and bronze ones, come with much more limited networks than Americans are used to.
The newly insured are likely to find that, similar to Medicaid patients, it will be hard to find doctors who accept their new insurance. Having health insurance does not mean you can get care; you actually need a doctor for that, and a lot of people are in for a nasty surprise when they realize how limited their choices of providers are.
Similarly, it was hard for people on Medicaid to find providers who accepted Medicaid before. Now there are several million more people competing for space in the same number of doctors’ waiting rooms. Obviously, the problem of accessing care with your Medicaid coverage just got worse.
While the infamous healthcare.gov website eventually worked well enough to get seven million people enrolled, the back end to the system apparently still is more fictitious than functioning. That means that insurance companies are not sure who they are supposedly covering. Figuring out who has or has not paid their first premium and therefore actually has insurance is complicated. Doctors’ offices are having a hard time determining which patients they can see and then get paid for. As these newly insured people try to use their health insurance we are already getting stories about nightmares attempting to verify coverage. Again, if the provider cannot verify your coverage, you are not really going to have access to care.
Finally, there is the enormous problem of deductibles and co-pays. Depending on the level of coverage selected and the amount of subsidy a family is receiving, the out-of-pocket expenses can vary significantly. Still, many people are going to find that they have a deductible as high as $6,000 [a year] and are expected to pay 40 percent of the cost of their treatment as a co-pay.
According to Scott Gottlieb, families qualifying for the largest subsidies face limits [deductibles] that can still be as high as $4,500 in total out-of-pocket spending for a family. If you did not previously have insurance because you could not afford it, why would policy makers think that you can now suddenly come up with several thousand dollars [each year] to cover such large deductibles and co-pays?
In reality, many people have surely signed up for coverage through the exchanges because they are receiving a subsidy and the monthly premium cost to them is a figure they can afford (thanks to taxpayers and young people for covering the rest of the true cost). When these people first use their new coverage and a health care provider explains they owe a deductible and co-pay there is going to be a sudden and steep learning curve. Many doctor offices request immediate payment of these monies and many newly insured patients are going to be unable to make such payments. If they could afford a $6,000 deductible and 40 percent co-pays, they would have already had insurance…
The reality is, if you bought insurance through a new health care exchange, providers will be limited, the administrative, back-end stuff will not work for a while, and people will not be able to pay their deductibles and co-pays. Thus, as Obamacare moves from sign ups to actual usage it will all start to fall apart. [Emphasis added, GDH)
Given the push for health care to be a right and to be more equally and universally provided, calls will arise to force providers into networks and for lower cost to patients. Now that health care is a “right,” people will want it to be better, more available, and cheaper (to them).
Thus, expect calls to change the plans so that deductibles and co-pays must be lower. Failure of Obamacare will be seen not as a failure of government involvement in health care but as failure to go far enough. Single payer will return to the policy arena as the “obvious solution” to these problems.
That’s right; my prediction is that an epic government failure will spur calls for more government involvement to fix the problems caused by government involvement. The question is, with Republicans poised to add Senate control to their current House majority, will a Republican Congress and a Democrat, lame-duck president whose name is synonymous with the law in question agree on anything that fixes the problem?
Given Washington’s track record, I doubt it. Therefore, expect Obamacare nightmares to continue for a while. As far as problems with this law, we are still in the early days. END QUOTE
Some Parting Thoughts About Easter
A new Rasmussen poll taken on April 16-17 has some encouraging news for those of us who are religious. The survey of 1,000 randomly-selected Americans found that a majority (54%) planned to attend a church service to celebrate Easter, up from 47% last year. 70% said they would share a family meal to celebrate Easter.
Rasmussen found that 73% of Americans said their religious faith is at least “somewhat important” in their daily life, including almost half (49%) who said it’s “very important.” The survey found that 70% of Americans believe Jesus is the Son of God, and 69% believe He rose from the dead on Easter Sunday over 2000 years ago. I don’t know about you, but those numbers are very encouraging to me!
I hope you all had a joyous Easter weekend. We certainly did. The kids were both home from college and brought a few friends along for some fun on beautiful Lake Travis where we live. That kept me busy grilling and smoking various meats and cooking most of the weekend, but it was all well worth it. Easter and Christmas are my two favorite holidays!
Very best regards,
Gary D. Halbert
Forecasts & Trends E-Letter is published by ProFutures, Inc. Gary D. Halbert is the president and CEO of ProFutures, Inc. and is the editor of this publication. Information contained herein is taken from sources believed to be reliable but cannot be guaranteed as to its accuracy. Opinions and recommendations herein generally reflect the judgement of Gary D. Halbert, Mike Posey (or another named author) and may change at any time without written notice. Market opinions contained herein are intended as general observations and are not intended as specific investment advice. Readers are urged to check with their investment counselors before making any investment decisions. This electronic newsletter does not constitute an offer of sale of any securities. Gary D. Halbert, ProFutures, Inc., and its affiliated companies, its officers, directors and/or employees may or may not have investments in markets or programs mentioned herein. Past results are not necessarily indicative of future results. Reprinting for family or friends is allowed with proper credit. However, republishing (written or electronically) in its entirety or through the use of extensive quotes is prohibited without prior written consent.
Remember, if you have a question or comment, send it to [email protected].