Obamacare 1y Anniversary04 Sept 2014

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Presentation deck

Product UpdatesScenario Updates

I. Market Update

II. Obamacare Scenarios

III. Obamacare Year in Review

IV. Healthcare Macro Outlook

Future of USD

HiddenLevers

MARKET UPDATE

Market UpdateRussia/Ukraine Europe Stalling

ISIS Rising / Oil Falling

sources: HiddenLevers, NPR, ABC, FXEmpire, WSJ, Reuters

Everything Bubble

Macro Snapshot

From 1987-2000, only 2 corrections - don’t hold your breath. US is leaving Europe in the dust, and it may be Europe that is holding commodities and rates back.

Most pullbacks at 4%,None over 8%

OBAMACARE – SCENARIOSHiddenLevers

Costs Contained via ACA

Lower cost growth boosts

other sectors ->+ GDP Growth

Insurance access and lower costs reduces home foreclosures

Inflation stays low since a key

driver is in check

Health Care Inflation = under 2%

source: HiddenLevers, CBO

Healthcare IT spending keeps rising sharply

BAD: Costs Contained Despite ACA

source: HiddenLevers

Health Care Inflation = 2%

Markets not impacted if costs

held in check

ACA insurance expansion could

fail if GOP unwinds it

Both GOP and Dems will keep ACA cost cuts

Mild GDP impact if health

care policy in disarray

UGLY: Runaway Costs

Medicare solvent until

2030

Medical bills and bankruptcy drive correction

Healthcare costs reduce

S+P earnings

double digit rise in insurance premiums

sources: HiddenLevers, Forbes,

Health Care Inflation = around 4%

insurance pools are old + sick

people

Scenario: ObamacareGood

Costs Contained via ACA

Neutral/BadCosts Contained

Despite ACA

UglyRunaway Costs

If the ACA achieves its goals, healthcare inflation will decline, boosting growth in other sectors.

If healthcare costs remain low despite other failings in the ACA, markets will be relatively un-impacted.

Runaway healthcare costs would hit both corporate and govt. budgets, leading to a drop in GDP growth and harder times for healthcare consumers.

HiddenLevers

OBAMACARE YEAR IN REVIEW

$

ACA – Review of Medicare Changes

sources: New York Times, Kaiser Family Foundation

Provider CutsIndependent Payment Advisory Board (IPAB) on stand-by; various cuts to health services.

Insurance CutsMedicare Advantage subsidies reduced

Benefits ChangesElimination of drug “donut hole”, expanded preventative services and long term care.

Difference between original + current Medicare cost projections

$716b over 10 years

High-Earner Tax Changes

1.45% ->2.35% payroll tax

3.85% capital gains tax

ACA Year 1 – Success + Failure

SUCCESS FAIL

• 8M enrolled, exceeds 2014 targets

• 18% -> 13.4%: drop in US uninsured rate

• Medicare cuts sticking

• Supreme Court upholds ACA key tenets

sources: US HHS, Gallup, Washington Post, NY Times, The Hill, Health Affairs, Healthcare.gov, The Advisory Board

• Healthcare.gov rollout

• Canceled policies + premium shock

• Endless mandate waivers

• Incomplete Medicaid rollout – 28/50 states

ACA Year 2 – What’s Coming?

sources: Kaiser Family Foundation, New York Times, NCPA

Three month enrollment period instead of six

30%+ price swings in premiums

Convincing 8 M to re-enroll and get 5 M new enrollees

2013

Medicaid expansion into many red states

2014

HiddenLevers

HEALTHCARE MACRO OUTLOOK

ACA – Job Market Impact

source: Wall Street Journal, Economics Policy Institute, Washington Post, PBS

PROPONENTS: ACA = WAGE GROWTH SKEPTICS: ACA = WAGE DECLINEFalling health care costs for employers would be passed on to employees

Increasing labor costs would reduce take-home pay

ACA reduces labor supply, wages must rise.

Real wages would need to be cut to keep existing company insurance plans.

Low wage workers have no incentive to climb up – they’ll lose ACA benefits

Congressional Budget Office

ACA = 2 million to quit jobs or cut hours

Macro Comparison – Healthcare Trends

sources: Century Foundation + OECD, United Nations

US healthcare spending exceeds all other advanced economies, at roughly 16% of GDP

But long-term projections show sharp rises for all advanced economies – a global challenge

Macro Comparison – Healthcare Trends

sources: HiddenLevers, Deloitte, CDC, OECD, Pew Research Center

USA Global

OVER 6510%

WORLD

OVER 6527%

JAPAN

OVER 65 20%

EUROPE

OBESITY

Obamacare 1y Anniversary – Recap

net job impact unclear globally, ageing is driving costs

healthcare inflation lower than expected in USA

key lever = Healthcare Inflation

HiddenLevers Use Cases

data centerHealth Care

Inflation

scenarioGlobal

Deflation

Obamacare

macro themeRising

Healthcare Costs

data centerHealth Care

Spending

scenarioObamacare

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