Wednesday, August 20, 2014

Obamacare costs, again


The Wall Street Journal: Risks Create Tumult for Tech, Health-Care Firms
Seismic shifts in the technology and health-care sectors highlight why executives are divided or undecided about taking financial and strategic risks. … At the opposite end of the spectrum is the health-care industry. The still-evolving Affordable Care Act, has made many companies hire thousands and plow millions into their businesses. The health-care sector is expected to post revenue growth of 12.2%, the highest of any sector, and earnings growth of 15.9%, second only to the telecommunications industry. Health-care companies increased spending on buildings and equipment by 15%, the greatest surge of any sector and compared with a 24% decline in the second quarter last year, according to FactSet (Knox and Murphy, 8/18).
Kaiser: Under the Affordable Care Act, the federal government pays 100 percent of the costs for newly eligible Medi-Cal enrollees for the first three years.
So, given that health care is 15% of the economy, the 12% revenue growth comes to 1.8% of GDP, paid for mostly with new federal debt.  Obamacare taxes will be a small part of the budget picture, most of the new enrollees are heavily subsidized. The expectation of a 3% deficit/GDP is gone, replaced with a 5% of deficit/GDP.  The increased capital gains tax is here now precisely to cash in on the expected higher interest rates.


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