Sunday, October 23, 2011

Rising Healthcare Costs

Rising healthcare costs have led many companies to trim costs and find clever ways to minimize the bill.

Wells Fargo is planning to cut costs by promoting insurance plans that will encourage employees to spend less on healthcare.  The options are either to put pretax dollars in these accounts or have the company fund an account this will mean the employee will pay higher insurance premiums.

The accounts puts the employee in a position that makes them more involved in how they are spending healthcare dollars.  If employees decide to fund the accounts with their own pretax dollars they will pay more of their medical expenses depending on how often they get sick.  On the other hand if they stay healthy they get to enjoy lower premiums.

According to the Center for Disease Control about half of all chronic diseases are linked to problems that are preventable such as obesity, physical inactivity and smoking.

Many studies have shown that patients with chronic diseases that get involved in their own care and take an interest in their health, have lower health care expenses because their health improves.

Job seekers are more attracted to work at a company that offers better healthcare benefits 25% of them will choose employment based on better health benefits according to the Kaiser Family Foundation.  But In this economic environment they will happily take just about any employment and healthcare package that is offered.

According to the Commonwealth Fund Biennial Health Insurance Survey 2007 about 50 million Americans did not have health insurance and 25 million of them were underinsured.

What have the uninsured and underinsured done to survive? 

Couples have been marrying to give their significant other health care benefits.  Others have chosen to travel to receive medical attention.  Destinations such as South America, Central America and Asia have been chosen for those seeking hip replacement, heart surgery, dental work as well as other medical procedures.  According to Josef Woodman author of "Patients Beyond Borders" savings from medical tourism can add up to 40% per procedure.

About 400 organizations worldwide have been accredited by the Joint Commission International.  Of course there are pros and cons when considering medical tourism.  If a medical complication arises or post operative follow ups are necessary the patient will have to travel once again or prolong their trip. Also the doctor overseas will not be familiar with the patient's medical history. On the other hand the patient will get to take advantage of the trip and get to visit popular tourist destinations.  Some oversea doctors have been trained and schooled in the U.S. making them highly qualified.

The Commonwealth Fund found that the uninsured and underinsured both behave very similar when it comes to taking care of their medical needs.  Many of them do not visit the doctor regularly, undergo check ups and lab tests or fill prescriptions. 

The highest rate of underinsured at about 31% can be found in families with incomes under the poverty level.

It appears that the uninsured and underinsured are not as proactive when it comes to medical care and are less likely to seek medical attention.

Friday, October 14, 2011

The Severity of The Recession

The odds and predictions of another recession have changed so often that it is hard to say what the outcome will be.  One thing is clear this has been the longest recession since the Great Depression.  Many have referred to it as the Great Recession for the economic period that begun in December 2007 and ended in June 2009 according to the National Bureau of Economic Research

Some analysts argue that we are not headed towards a double dip recession since the economy never actually came out of the recession as of this date.  Whether the economy will head towards slow growth or a double dip is up for debate.  Just a few weeks ago the market was trading as if we were headed towards another economic calamity.

Before letting the sky fall and before investors start selling securities at the slightest worry lets compare how the Great Recession measures up to the Great Depression.

The Great Depression started in 1929 and it lasted a decade.
The Great Recession started in 2007 and it lasted 18 months.

From 1930 to 1931 GDP decreased by 16% compared to a 6.2% decrease from 2007 to 2008.

At its peak the unemployment level reached 24.9% in 1933 compared to 9.5% in June 2009 although it did top 10% in October 2009.  In 1933 about 4,000 U.S. banks closed compared to 25 U.S. banks closing in 2008.

One thing to consider is that during the 1920's even when the economy was doing well unemployment was fairly high as a result of technological improvements that increased manufacturing productivity.  Currently unemployment hovers above 9% leaving Americans in uncharted territory.  The prolonged length of time that the unemployed have endured has not been witnessed since World War II.

The Dow Jones fell about 89% between September 1929 through July 1932 compared to the near 50% drop in the Dow Jones from December 2007 through March 2009.  Close to 7 trillion dollars in wealth vanished from the U.S. stock market in the 2007 recession.

As the Depression deepened in 1932 President Hoover decided to raise taxes, cut spending and raise interest rates. Unpredictable currency rates and tariffs brought world trade to a halt which made the situation a nightmare.  In Contrast during the 2007 recession the Federal Open Market Committee lowered interest rates and is expected to leave them at the near zero rate until the middle of 2013.  The present government also implemented stimulus packages and cut taxes to boost the economy.

After World War II there has consistently been at least one recession per decade ranging from mild to long in average.  Recessions before the Great Depression lasted about 20 months, recessions after the depression have averaged about 10 months in length.  On the other hand the 2007 recession lasted 18 months. 

The Great Recession may not come close to the economic catastrophe lived in the 1930's but it did out due every other recession after the depression.  Perhaps that memory is still very vivid in people's minds and they fear a double dip even when the economic data points to slow growth.

Sunday, October 2, 2011

Bitcoin a Digital Currency

In a time where banks are raising their fees and charging consumers for using their debit cards, going bankless and using other means of payment has caught on.  About 1 in 5 people are reported to have gone bankless and have resorted to gift cards and prepaid cards as a means of payment and consumption.  People are trying to avoid paying fees for transactions and services consumers also desire to protect their anonymity and privacy.  A fairly new digital currency which was introduced in 2009 by Satoshi Nakamoto has emerged.  A Bitcoin is a digital currency that can be used to purchase items online.  

Bitcoin is an open source software that allows peer to peer digital transactions.  Users create wallets which have an address, each transaction is broadcasted among the entire network and is stored to prevent double spending.  Some privacy and anonymity is offered through Bitcoin. As a result politicians have criticized the currency of being used for illicit transactions such as money laundering.  There are several exchanges where one can convert the digital currency into dollars, euros and yen as well as other currencies.

It is said that the total limit number of Bitcoins will reach 21 million, most trading for Bitcoins goes on in MtGox.  Some people are warning others not to make large investments on the digital currency since it is seen as a high risk investment.  On the other hand small businesses have started to accept the currency for payment.  Many retailers remain skeptical to accept the currency since the exchange rate risk is high and there are no methods that allow to hedge against the wild currency movement and thin trading volume.

The currency and its value are sighted as being affected more by the currencies fluctuation correlated to goods rather than by major currencies.  Since the currency is fairly new the value is influenced by speculators.  There is also another concern that there isn't a single price quoted at any time rather several prices on different exchanges.

The Bitcoin wallet is a file on your computer therefore the threat of theft by hackers and viruses is a possibility.

Bitcoins as a digital currency has appreciated very fast, but this summer the currency suffered a security breach in which a large amount of Bitcoins where sold sending down the currency's value significantly.  Since the hacker attack the currency has steadily decreased in value.  Yet it still trades rather high compared to the dollar about $5 for 1 Bitcoin on MtGox.

All of this comes at a time when the Canadian dollar hit a 12 month low against the U.S dollar on Friday, the euro is also losing ground against the dollar.  The U.S. dollar is looking attractive to the market because of its liquidity it is also a safe haven.  The dollar was up against most major currency pairs on Friday.

Although this currency suffered its first crash and is fairly new, there are still questions to ask as Bitcoin moves forward.  How safe and well monitored is this new form of digital currency? Will any other online currencies enter the game? Is this changing the way in which we will handle transactions and does this show a step towards a universal currency?