I fear for America

[dcarrigg]

Re: I fear for America

Eh, I've told you a couple times before now that envy ain't my sin. Pride? Sure. Gluttony? Gotta watch for it. But envy, lust, greed, sloth, they never tempted me as much as they do many men. You keep coming back to it though. Somehow it's stuck in your craw. So I'm curious what it is you reckon I envy. Is it the fancy new luxury cars with touch screens? The big honking yachts and private jets? Or is it some kind of spiritual envy you're imagining? If not money, you think I want power? Just trying to suss out what it is you imagine it is that I want so bad that I am become hate.

All that leaves is wrath. And something about grapes. And truth. Marching on.

[Woodsman]

Re: I fear for America

Eh, I've told you a couple times before now that envy ain't my sin...

My mistake, then. I'll speak of it no more. Understand, it's a difficult thing to discern from wrath, as you say, so my apologies.

[dcarrigg]

Re: I fear for America

Cool. I'm just never quite sure what your schtick is. I've watched your views swing over the years. Maybe you just like playing provocateur. Maybe you're on some kind of accelerationism kick. Maybe you just don't give a damn anymore. In truth, I keep up with the civil war allusions because it seems to get under your skin. It's an easy thought-terminating cliche to throw out in response to whatever you throw at me. You're very sharp and well-read. I've no doubt you've thought things through. And maybe I'm just a bit slow on the uptake and not following along. Or maybe I need to follow my own advice from the other day and just shut up about politics. It's a difficult thing to do when so much of the economics hinge on it, but I could try harder to avoid it. Or maybe it's all just trolls trolling tolls wasting time howling into the void; the whole reason for that old rant and rave section.

So we can play at armchair psychoanalysis from across the screen if you want. Who knows? Maybe I got some lingering suspicion that the Irish curse is real, and that's the real source of all the anger and envy that the tea leaves you read in the pixels are showing you. But as long as we're howling into the void, we could as well say what we mean and cut out the games. Or not. C'est la vie.

[dcarrigg]

Re: I fear for America

Anyways, the big new macro trends I'm seeing since 2016 are:
1. A return to suburbanization and shrinking of major urban areas,
2. A shockingly fast deterioration of the healthcare system,
3. The obvious China and Brexit issues.
Maybe I waste too much time clacking at keys about these things. But there's the reader's digest version. As usual, the press is slow on the uptake and stuck on the last trend.

[jk]

Re: I fear for America

Anyways, the big new macro trends I'm seeing since 2016 are:
1. A return to suburbanization and shrinking of major urban areas,
2. A shockingly fast deterioration of the healthcare system,
3. The obvious China and Brexit issues.
Maybe I waste too much time clacking at keys about these things. But there's the reader's digest version. As usual, the press is slow on the uptake and stuck on the last trend.

how are you measuring or tracking the deterioration of the healthcare system? i see it all the time, but wouldn't know how to do more than compile a bunch of anecdotes.

[Woodsman]

Re: I fear for America

Cool...

DC, it's a curious thing to call someone a provocateur and then admit to being deliberately provocative by deploying thought terminating cliches (with some virtuosity, I might add).

And if it happens that it's a challenge for some folks to put me into an ideological cubbyhole or deal with evolving and emergent points of view, we'll it's hardly my problem to work out, is it? I say what I mean as plain and respectfully as I can even when confronted by behavior that's less kind. Until I don't (thus the fate of my "free lifetime membership" gift from our forum's host). I've said I'm not your enemy but that doesn't necessarily require us to be friends or exempt us from mutual skepticism or disagreement.

Still, it would be a step in the right direction if we could cool down the civil war allusions, albeit not of the 19th Century variety as I'm happy to discuss and debate that to no end. It's the presumed and emerging 21st Century struggle that troubles me the most.

Ease your mind over the Hibernian curse. True or not, it's the motion of the ocean that does the job. Take it from an old surfer. Dude.

[dcarrigg]

Re: I fear for America

It probably is a bunch of anecdotes. But it's largely driven by the numbers. My thinking goes like this:

1. Hospital bankruptcies have been way up since 2016. It's an accelerating trend. 12 in Q1 2019 alone.

2. Consistent downgrades to big pharma players including GSK, Bristol-Meyers-Squib, and Pfizer just in the last month or two.

3. Over-leveraged and indebted M&A actions have led to "Healthcare investment-grade bonds with a composite rating in the 'BBB' category represent 58% of the total outstanding for the sector as of September 30 versus 18% as of YE 2009."

4. Percentage of uninsured hit a high water mark since 2014 simultaneously with full time employment hitting a high mark. If you look at the coverage:jobs ratios, the share of full-time jobs that offer health insurance is eroding fast. Put simply, US has 6 million more people working legal full time jobs than in 2016, but 7 million fewer people have health insurance despite that fact. Maybe think of it like this: even if 0 jobs created in the last 2 years came with health insurance, 7 million jobs that did come with health insurance back in 2016 must have dropped coverage by 2018. And that's not counting 2019,

5. At the same time, most of the job growth was in the healthcare sector. It's now the biggest sector for employment. It's all but certain that many of these new jobs working full-time in healthcare do not come with any healthcare coverage. There's about a million new healthcare jobs from 2016 through 2018. One out of six of every job coming out of this boom. Mostly non-clinical paper-pushing.

6. Despite all the new jobs, healthcare workers earnings are down, and average hours worked are up. The fastest growing clinical occupations are LPNs who do okay and Home Health Aides, who make just under $11 bucks an hour with no benefits at the median. There are now nearly a million of these.

7. This despite the all-payer profit margin being at a record high 6.8% for hospitals and other health companies.

8. So we're seeing record profits combined with credit quality deterioration coupled with bankruptcies, wage cuts, and job expansion. All in an environment where the rate of full-time jobs offering insurance is plunging and the total number of people covered is plunging, during the peak of an economic boom, in the good times. By 2017, New Mexico had the lowest share of employer-sponsored insurance coverage at 36% of the population. Utah had the highest at 60%. US Average was 49%. For the first time in living memory, a raw majority of Americans are NOT covered by employer-sponsored health insurance.

9. So obviously the uninsured, Medicaid and Medicare are making up the difference. Over 20 million will hit Medicare eligibility over the next decade. Employers are dropping coverage, inequality is pushing more and more into qualifying for Medicaid, the populous is aging, we gained 5 million more uninsured last year; it all adds up to that 49% figure dropping, and fast. It's now less than half. It'll all but certainly be less than a third by 2030. We lost a percentage point just last year.

10. 158 million people were covered by somebody's employer-sponsored health insurance in 2008. Figure was 156 million in 2018. Down 2 million. Meanwhile, population went from 304 million to 327 million. So from 52% covered to 48% covered. 4% less of the population is covered than a decade ago. And under much friendlier demographic circumstances with much lower prices and with much less corporate debt and many fewer employees. Put another way, there was a recession dip, then it improved, peaked in 2014, and really went to hell last year.

11. OK. If you're following me so far, maybe you can make the next leap: This population is disproportionately healthy, wealthy, and fine. So it's 48% of the US population as a whole. But private insurance is only 32% of the hospital population, and falling. Because most sick people are old, poor, or old and poor. That's it. Less than a third of the hospital volume now is private insurance. And that's where they have to make their money. And the proportion is shrinking. So guess what? Prices have to go up, right? I mean, they can't make more than the CMS rates on Medicare and Medicaid. So the only possible way a hospital can squeeze margin is to over-inflate costs for the 1/3 of hospital patients that have private insurance. What happens when that group is only 25% of the hospital population in a few years? You have to charge them even more individually because there's a shrinking pool of patients to profit from as a percentage of total patients. There's no other way. Redistribution will happen one way or the other, unless we let those who can't afford die on the ER curb, and we won't.

12. So what this all tells me is it's a system that Americans rely on overwhelmingly for new job creation, that's financially badly leveraged, that has a shrinking number of privately insured patients it can milk, who comprise an increasingly shrinking proportion of total patient volume, who despite all this are making record margins and leveraging themselves further while cutting overall median employee pay in the sector even in a hot labor market with equities near record highs.

13. Now add into this private equity. PE firms bought up about 700 healthcare delivery companies last year, double the annual rate of deals just in 2013. This has been ramping up fast too. Total healthcare assets under PE management doubled in the past few years to $1.5 trillion in 2018, and growing fast. The Tax Cuts & Jobs Act really kicked this into high gear, since now the for-profits are paying less in taxes and the increased standard deduction is reducing charitable contributions to non-profits. Put simply, the Trump tax law rebalanced the playing field in favor of for-profit hospitals, and PE firms smelled chum in the water. So as of 2016, 80% of hospitals were non-profit. But this is changing. PE firms also bought 102 physician practices in 2017. They're entering the sector at a remarkable rate. I mean, we're talking about going from tens of billions in assets held by PE firms in 2013 to over a trillion in 2018. Just in 5 years. How often does PE barge into a sector like this and not pick the bones clean?

14. So total debt is up ~400% in the last decade, Increasingly things are owned by networks/systems and Private Equity, There's a shrinking patient base you can pull higher revenues from, and despite all that costs have doubled in a decade. Private health insurance payments as a share of total sector revenue peaked in 2004. It was overtaken by Medicare/Medicaid in 2008. And right now it's dropping faster as out-of-pocket expenses are rising out of their 2010 low point.

15. So this has huge ramifications for the US Economy generally, right? I mean, it's the largest sector for employment growth. It's a quarter of GDP. It's increasingly leveraged at one notch over junk and/or owned by PE firms. Its cash cows (private insurance holders) are a smaller and smaller portion of total patients every year. The absolute number of jobs that offer private health insurance is down from a decade ago. The population is growing. The number of uninsured are growing. And just leaving this situation to inertia, I challenge anybody looking at the figures honestly to come way thinking that the sector is going to be just fine if we do nothing or even do some minor tinkering.

It might seem to some like I'm just tilting at windmills here because I'm part of the looney left that wants universal healthcare and therefore I hate the market and want it to die. But I don't actually want all the pain that is going to come with it. It's honestly my view that we're on the precipice of a systemic industry-wide contraction in US healthcare. A bubble burst. PE will pick the bones dry, lever them up, and liquidate them. They don't much care whether it's a hospital or a Toys'RUs they're putting six-feet under. And they've been going hog wild levering them for the past couple years, with no signs of slowing down. The M&A activity has been insane. The networks are bigger and bigger and much more prone to one single downgrade forcing state take-overs of several hospitals simultaneously. We've had 100 rural hospital closures in the last decade. We only have 1,800 left. We were down to 5,262 community hospitals in 2017. We just lost 12 in Q1. So we're losing them at a rate of about 1% per year even in good times when the hot PE money's flowing. There were 7,156 in 1975. But some of the networks are quite large now. HCA owns something like 180 of those 5,262. Look at their debt to equity ratio over time:



So there you go. 3.5% of all the hospitals in America are resting on that time-bomb.

You think maybe CYH with their 160 hospitals is any better? Not really:



There's some serious long-term debt issues and few patients who can pony up the revenue to address them. These two charts alone represent ~6-7% of the total hospitals in the United States. Stock peaked at $52 per share in June 2015. It's now worth $2.

HCA's stock somehow is still doing just fine, even though macroaxis puts its probability of bankruptcy up near a coin-flip. These are the suckers who got fined $1.7 billion for Medicaid fraud. They're totally leveraged to the gills. And 5% of all ER visits are to their shops. They were really the prototype for what's happening now on a larger scale. Bain bought it up in 2006. Loaded it full of debt. IPO'd it in 2011. Made $120 million in management fees in the process. Meanwhile they're loading up on the debt due in a decade like gangbusters.

This is essentially a big bet that they can beat the ~6% interest to their below-investment grade debt; basically a big bet that medical costs will double again over the coming decade. For these big hospital chains, they have to. Otherwise, kaplooey.

[jk]

Re: I fear for America

there was a big article in the nytimes recently about hahnemann hospital in phila going bankrupt. got taken over, sold the land underneath it to a separate entity, hosptial driven into bankruptcy, about to be shut down so the land can be privately developed, no doubt into luxury condos.

[dcarrigg]

Re: I fear for America

The multiple entity ownership is a huge problem. My own mother is a nurse, and got the land sold out from under her hospital to Kenyans loyal to Mwai Kibaki. I still have one of his election posters they put in the lobby. The payroll checks stopped cashing for the grounds and securities folk months before it went bankrupt. The hospital ended up bought by a university and turned into housing and admin offices. Similar story. It has been going on for a while. But massive PE plays mean we're looking at a much bigger scale. I'm not sure how much more convincing I can be here. But know that local state governments are scared shitless. The 2020s are going to be rough.