CA Health & Home

Had an opportunity to speak with local business owners about Medicare insurance and how these findings may shape the Medicare/Health care debate and Policy.

• Currently covers 39m 65 and over. And 8m permanently disabled. By 2030, there will be 80m Medicare beneficiaries.
• Because health problems tend to rise with age, medicare beneficiaries generally use more health care services than younger adults. In 2006, 82 percent of all beneficiaries had one or more physician visit, 21 percent were hospitalized, and 30 percent had one or more emergency room visit.
• medicare beneficiaries are highly dependent on prescription drugs to manage their acute and chronic health conditions, with virtually all beneficiaries (88 percent) taking at least one medication in 2006.
• In 2010, about one in four people on Medicare (24 percent) are enrolled in a Medicare Advantage plan.
• The Affordable Care Act of 2010 modified Medicare’s method for paying Medicare Advantage plans to phase down overpayments to (MAPD) plans, while providing bonuses to plans with high quality ratings.
• Beneficiaries eligible for Medicare and Medicaid tend to be in poorer health and have greater medical and long-term care needs than others on either program, and thus account for a disproportionate share of spending under both programs—36 percent of Medicare spending in 2006 and 40 percent of Medicaid spending in 2007.
• In fiscal year 2010, medicare spending is expected to total $524 billion, accounting for 20 percent of national health expenditures, 15 percent of the federal budget, and 3.6 percent of the gross domestic product (GdP).
• medicare is responsible for 20 percent of the $2.6 trillion in total national health care expenditures in the u.s., but 40 percent of the nation’s total home health care spending, 30 percent of hospital spending, and 24 percent of prescription drug costs.
• In fiscal year 2010, medicare revenues come mainly from general revenue (43 percent), payroll taxes (37 percent), and beneficiary premiums (13 percent), with the remaining 7 percent of revenues from taxation of social security benefits, payments from states, and interest.

For the complete report go to: http://facts.kff.org/chartbook.aspx?cb=58

So when is $600b just not enough? It appears the recent decline in interest rates (from treasury to mortgages) have been on the rise since the Feds announced their intent to keep interest rates down. I don’t know the exact reasons rates have increased since this announcement, but it appears that the Fed is doing their part to ensure our economy doesn’t double dip into recession. Based on the 60 Minutes interview with Ben Bernanke, his intent is to prevent falling prices (deflation) and is willing to take on the risk of inflation.

I’m puzzled, as it seems prices from energy to food have been on the steady increase even during this recession. Rates are now on that upward direction. While low rates appear to be good for borrowers, these low rates really don’t matter as most people aren’t able to obtain a mortgage. I know for a fact the “cookie-cutter” approach big banks use reject many prospective borrowers, when in fact with a bit more work CAN qualify for a mortgage.

It is clear that the Fed wants inflation. The idea that they want lower rates, isn’t the whole story. I think rates will be on the rise from here on out, but there will be opportunities driven by the “unknowns” in the world (financial melt-downs, war, and natural disasters to name a few).

Get off the fence if you are thinking of buying a home or refinancing a mortgage. Now just may be the time to act.

12062010 MTG hist

Hard to believe how quickly time flies. Can you believe we’ve been in this “recession/depression” for almost 3 years now?

Many have concluded that this recession is over as of Q4 2009. It’s certainly hasn’t felt as if we have fully recovered and the job’s numbers aren’t too impressive either with unemployment in CA still around 12%. GDP is expected to be about 3.5% growth, well off the post recession avg. growth of 6%, post WWII.

I’ve long been an optimist about our recovery and am excited about the new opportunities that exist in our future. Get ready for a “new normal” as coined by the smart people at PIMCO.

Our “new normal” may not include a super robust jobs recovery. CA was hard hit in housing. This may take decade to fully rebound from. Make no mistake, CA will recover.

I would expect mortgage interest rates to remain low through 2010 and early 2011. I’d also expect that lending standards will eventually loosen up by year-end, however I wouldn’t be surprised if mortgage lending rules tightened up here in the short-term (e.g. FHA down payment requirements up to 5% from 3.5%).

I also expect that the housing recovery is for real. As banks get more confident about housing prices stabilizing and even appreciating, they’ll back-off the ridiculous conditions. Likely to remain are tough times for new home builders, but I’m starting to read articles about pending housing shortages. It will be all about location and product. Well priced entry level homes in desirable communities should fly off the shelves.

Consider these: Housing affordability (prices stable), low interest rates, improving consumer confidence, improving job numbers and eventually more relaxed lending standards. All of these factors will fuel a new run in housing. Location, location, location.

Don’t get too giddy. Financial discipline is important. Housing is still a long way off the 2005 peak. Expect it to take about 10 years to achieve values last seen in 2005. Opportunities exist.

Despite all the prospects of doom and gloom, the US is still by far the most desirable “safe-haven”. This should draw more foreign $ to the US Dollar and US Treasury Bonds. I’m betting on a strengthening US Dollar and low interest rates through the rest of the year.

I would love to hear your comments. For some, it’s fun to dwell on the negative and easy to blame something we can’t control. Avoid this time-consuming and non-productive position and find your opportunity in our “new normal”.