Obamacare 1y Anniversary 04 Sept 2014 War Room

HiddenLevers War Room Open Q + A Macro Coaching Archived webinars CE Credit Idea Generation Presentation deck Product Updates Scenario Updates

I.Market Update II.Obamacare Scenarios III.Obamacare Year in Review IV.Healthcare Macro Outlook Future of USD

HiddenLevers MARKET UPDATE

Market Update Russia/Ukraine Europe Stalling ISIS Rising / Oil Falling sources: HiddenLevers, NPR, ABC, FXEmpire, WSJ, ReutersNPRABCFXEmpireWSJReuters Everything Bubble

Macro Snapshot From , 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 – SCENARIOS HiddenLevers

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, CBOCBO 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,Forbes Health Care Inflation = around 4% insurance pools are old + sick people

Scenario: Obamacare Good Costs Contained via ACA Neutral/Bad Costs Contained Despite ACA Ugly Runaway 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 FoundationNew York TimesKaiser Family Foundation Provider Cuts Independent Payment Advisory Board (IPAB) on stand-by; various cuts to health services. Insurance Cuts Medicare Advantage subsidies reduced Benefits Changes Elimination 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 SUCCESSFAIL 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 BoardUS HHSGallupWashington PostNY TimesThe HillHealth AffairsHealthcare.govThe 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, NCPAKaiser Family FoundationNew York TimesNCPA 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, PBSWall Street JournalEconomics Policy InstituteWashington PostPBS PROPONENTS: ACA = WAGE GROWTHSKEPTICS: ACA = WAGE DECLINE Falling 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 NationsCentury Foundation + OECDUnited 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 CenterDeloitteCDCOECDPew Research Center USAGlobal OVER 65 10% WORLD OVER 65 27% 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 center Health Care Inflation scenario Global Deflation Obamacare macro theme Rising Healthcare Costs data center Health Care Spending scenario Obamacare

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