Tag Archives: health insurance crisis

healthcare spending rate increasing

Government says Healthcare Spending Rising Faster than Economy

Healthcare spending and medical costs are out of control and could mean you’re not saving enough for retirement

On Tuesday, the Office of the Actuary in the Health & Human Services Department published a report into future U.S. healthcare spending, confirming that it will be growing faster than economic growth. This is due to a combination of factors, predominantly by widening coverage, as directed by Obamacare, the ever-aging American population and greater demand upon existing services. Healthcare expenditure are expected to increase by 6% annually by 2019.

The Office of the Actuary in the Health & Human Services Department report described the rising expense as “relatively modest.” President of the American Action Forum Douglas Holtz-Eakin doesn’t agree saying that “the bill [for healthcare] will continue to grow faster than the economy, which is what pays the bill.” In 2013, healthcare accounted for 17.4% of the overall economy. By 2024, this will have risen to 19.6%, nearly every $1 out of every $5 will be spent on healthcare.

Where is healthcare spending going and how to plan for higher costs?

While the pace of healthcare spending slowed over the 12 years to 2013, the pace of economic growth and wages slowed even faster and healthcare spending has started increasing at a much faster pace.

healthcare spending increase

With the general economy stuck growing under 3% a year, wages and social security benefits are going nowhere. Further, the investments put aside that were supposed to cover retirement expenses won’t be growing as fast as the slowing economy weighs on corporate profits.

With the government preoccupied with trying to make Obamacare work and forcing people onto health registries, the burden of rising health costs is increasingly falling on retirees. The Centers for Medicare & Medicaid Services has recently announced that per capital healthcare spending climbed to over $9,500 in 2015. That annual bill for healthcare may be manageable for a working family but it amounts to 72% of the average annual social security benefit.

Healthcare spending is already a major part of your expenses in retirement. While spending on things like transportation and housing decrease, spending on healthcare increases significantly from just 9% of total costs at age 65 to more than 18% of your expenses by age 85. As 401K investment portfolios stagnate and healthcare costs increase, the 4% withdrawal rate you planned for in retirement may not be enough.

Besides saving more for retirement and planning on higher healthcare costs, there are a couple of things you can do to prepare.

  • One of the five biggest regrets in retirement is that people didn’t take better care of their health. One nursing study found that changing to a heart-healthy diet can save up to $830 a year in associated medical costs when you’re older.
  • Make sure you hold investments in real assets like precious metals that will increase in value as the economy and the U.S. dollar struggles. Higher healthcare costs will put an increasing strain on the economy, weighing on America’s competitiveness and the value of the dollar.

There isn’t much we can do about rising healthcare costs, especially given the agenda in Washington, but we can prepare for it. A higher burden of healthcare spending will hit corporations as well as individuals so make sure you take control of your retirement investments through a 401K rollover into an individual retirement account (IRA).

stories that changed the world 2015

5 Stories that Changed your World in 2015

It’s time to look back on the most important stories of the year, the ones that changed your world and will change your finances in the years to come

This is my favorite time of year. Besides family dinners and holiday worship, it’s a time to look back on 401kRollover and the stories that shaped our lives in 2015. Looking at the most popular stories helps to put together a picture of where things are heading and a roadmap of how to meet our financial goals.

Unfortunately, the picture we found looking back at the five most read stories was not a pleasant one.

stories that changed the world 20152015: A Worrying Turn of Events

While the economy has not roared ahead since the financial meltdown, there have been signs of improvement since 2008. The Federal Reserve was ending its historic period of monetary manipulation and unemployment had come down to more normal levels. This year brought several events that seem to cue a new crisis on the horizon, one where massive government spending and debt comes to the forefront.

Bank Bail-ins, The $297 Trillion Monster Hiding in Your Closet

It’s been nearly eight years since the financial crisis and $29 trillion in bank bail-outs funded by tax payers. A new crisis is brewing and it could be ten times worse, bringing the dollar to its knees and changing the way we think about banking.

I’ve worked in finance and can tell you that nothing has changed since the financial crisis. Complicated derivative investments are still used to leverage up a bank’s capital and the next recession will catch the industry off-guard, yet again. The difference is that new regulations have given bankers the authority to cover their losses by raiding deposits. It’s called a bank bail-in and if you’ve got money in a savings account, you need to read this article.

Houston’s High Pension Costs Cause Other Budget Cuts

After Detroit became the largest municipal bankruptcy in U.S. history, filing to wipe out its $20 billion in commitments, I have been watching the municipal market really closely. Puerto Rico is on the verge of bankruptcy and Houston’s pension fund is underfunded by more than $5.3 billion.

The story is the same across America and it is going to affect you in ways you may not yet know.

  • State and local governments will first try to increase your taxes to cover underfunded pensions and other pork spending. Houston has doubled property tax rates over the last 15 years and still hasn’t been able to plug its budget gap.
  • Budgets for public services will be cut even as taxes increase. Spending on roads and utilities will shrink to nothing and quality of life could suffer.
  • Finally, local governments will just walk away from their debt and other commitments in nationwide bankruptcies. Banks, insurance companies and most pension funds invest their money in seemingly-safe municipal debt so the bankruptcies will resonate through the rest of the economy and could wipe out trillions in investments.

Anthem-Cigna Merger Reduces US Healthcare Options

Just as the government is forcing people to sign up for mandatory health insurance, companies are merging and reducing options available. Shareholders of Anthem and Cigna recently approved the formation of the nation’s largest health insurance company and regulators look to approve the deal within months.

The merger will cut costs for the two companies but will also decrease competition in the health insurance industry. Less competition means companies can more easily increase prices and people will be forced to pay because of mandatory coverage.

Veteran Affairs to Close Hospitals Due to Funding Gap

Budget gaps aren’t only hitting local communities but the Department of Veteran’s Affairs is also scrambling to cut benefits to the men and women that have fought for our freedoms. Chronic mismanagement led to a $2.5 billion shortfall in the 2015 budget and it’s beginning to look like the situation won’t improve in 2016.

In fact, the Obama administration is looking to make things worse for veterans and their families. The administration has proposed cutting veteran pensions by 20%, forcing military families out of Tricare Health insurance and into private plans and a wide range of other cuts to benefits and pay.

Opposed by the U.S., AIIB Holds Signing Ceremony

Among all this financial trouble at home, China is making its move to undermine the U.S. dollar as the world’s reserve currency. The world’s second-largest economy has pushed through the creation of its own “World Bank” that will give it overwhelming authority on the world’s financial stage.

The problem with this is that once the Chinese Yuan replaces the greenback as the major holding currency for central banks, a 30-year time bomb will explode. Our national debt is now the same size as the economy and there is nothing that can stop the coming fiscal meltdown. When the dollar is no longer supported by central bank reserve holdings, the value of the greenback will crash and inflation will surge.

stories to change the world

The country is in bad financial shape as we enter a new year and there may be nothing that can stop or even postpone the next collapse. Personal protection through self-directed retirement accounts and investments in safe-haven assets like gold may be the only way to ensure your own financial security.