Crisis in US Healthcare

8-28-22

Opening Comments

In my last report, I mentioned my back and shoulder pain. The 6 shots I had in my back on Thursday afternoon clearly helped. Within hours, I could move without tears. A reader called to complain about the heat in NYC. I checked and the heat index in NYC was 91 degrees and at the same time, it was 108 in Boca Raton given 65% humidity. Please don’t call me from NY and tell me it is hot in August.

An avid reader sent me his son’s new word game which he developed called Anigrams. I love it as it is a fun word scramble. I blew through the first one until the very last word, and I had to call in assistance from my 14-year old niece who has an IQ approaching 200. Check it out. You start with a 4 letter word and then go to 5, 6, 7, 8, 9 by a new letter being added as you solve puzzles. I got stuck on the last word below until my niece solved it in 1 minute.

Today’s report is longer than normal despite editing it down by 30%. A lot of important topics discussed today. Remember that some email servers truncate the Rosen Report. At the end, you may need to hit “view entire message.” For some reason, today’s report took longer for me to put together than any of my prior issues. A lot of research, editing, conversations… to get this one done. Hope you find it helpful.

• Picture of the Day-Crazy High School Football Play

• Crisis in US Healthcare

• Quick Bites

  • Markets

  • Powell Comments

  • CA on EV Mandates

  • WFH Mandates Ending?

  • French Electricity Prices

  • Trump Affidavit

  • Djokovic Vaccine

• Other Headlines

  • Crime Headlines

• Virus/Vaccine

  • Data Improving

• Real Estate

  • General Markets (Miami High-End and NYC)

  • Toll Brothers Cut Forecasts

  • Blackstone Stops Buying in 38 Cities

  • Moody’s Home Price Valuations-YIKES

  • Millions of Evictions Coming?

Picture of the Day-Crazy High School Football Play

• Instead of a Hail Mary, the Loganville Red Devils in Georgia threw a "Loganville Lob" to break their tie score during overtime play. Check out this 30 second clip of a crazy play.

Crisis in US Healthcare

I think we have all become frustrated with the skyrocketing cost of health insurance, challenges of finding a doctor who takes said insurance and the overall cost of medicine. I was paying $4k/month for HORRIFIC coverage from Florida Blue for my family. Fortunately, when I became a Board Member of a company I was able to switch to their insurance which is slightly better and less expensive. I continue to struggle to find doctors who accept insurance and are taking new patients. Deductibles also play a large role. I never seem to meet them, and many Americans cannot afford surgeries as they have not met the deductible and cannot pay $15k out of pocket.

I spoke with a young man, whose wife just gave birth to twin girls. The identical twins (runs in the family) were born at 3lb 3 oz and 3lb 13oz. They were in the NICU for 30 and 42 days respectively. What was the bill for the babies? $1.5mm which included $9k/day for doctors. The mother had a C-Section, and with her pre-natal care, it was $250k for a total of $1.75mm. The insurance company has paid $246k thus far, and my friend believes they will pay another $250k to the hospital for a total of approximately $500k out of $1.75mm in total charges.

I was in the hospital for 4 nights with Dengue Fever three years ago. My total bill was $49k and I can tell you that my care was a 3 out of 10. The doctors were largely bush league. They went to medical schools I had never heard of, and I had my fancy doctors from NYC and LA coordinating my care. The cost of inedible food I refused to eat was insulting. I lost 18 lbs in 3 weeks.

My wife broke her wrist in Vail falling off a bike on the last day of vacation in July 2019. Mistakenly, I called an ambulance rather than an Uber. We were 1.1 miles from the famous Steadman Clinic in Vail. What was the charge for the ambulance? Almost $2k. I called the CEO of the ambulance company, and he told me they lost money on the trip. I said, “Bud, time to close down. If you are losing money charging me $2k to drive 1.1 miles with two young kids as paramedics who merely gave my wife a bag of ice, then you have no business being in business.” My insurance company refused payment. I begrudgingly paid the exorbitant fee. Point is, unless you are in medical trouble, call an Uber. The surgery was $71k, and it was outpatient. Jill may have been in the hospital for a total of 7 hours.

I was so upset with the fees and experience, I reached out to Jamie Dimon to work in his health insurance start up, Haven, with Bezos and Buffett which was founded in 2018. I interviewed and was interested in hopes of having an impact on society. The woman told me I needed to move to Boston. Despite my desire to actually impact society, I was unwilling to move to Boston. Unfortunately, the company disbanded in 2021. I never asked why, but presume the bureaucracy of red tape around the insurance industry proved too much even for the mightiest business men on the planet. It is a telling result for people who were committed to having an impact on a challenging problem in the US. This article discusses the closing of Haven.

I spoke with a reader who spent $2mm out of pocket on his child in an effort to take aggressive medical treatment. Thankfully, he had the means, but very few people do.

America’s healthcare system is so expensive — roughly twice the cost, per capita, of the average spending in other developed countries. Americans had fewer hospital admissions per capita and shorter stays per admission than people in other developed countries, they pointed out, but paid more per admission and per day. The same goes for pharmaceutical prices — the U.S. paid the highest prices, by far, for drugs. Where the U.S. is an outlier is in spending by the private sector, through commercial health insurance. There the U.S. spends an additional 8.6% of its GDP on healthcare, compared with only 2.4% by other countries.

We spend far more per capital than other countries, yet are ranked 21st out out 195 countries on the health index. How is that possible?

Look at how the US has grown in cost relative to the basket.

In 2019 (the latest year with internationally comparable data from the OECD), the U.S. spent $1,126 per capita on prescribed medicines, while comparable countries spent $552 on average. This includes spending from insurers and out-of-pocket costs from patients for prescription drugs filled at the pharmacy.

Houston, we have a problem. I went out to dinner this week with an orthopedic surgeon. He was telling me his reimbursement rates for surgeries. I was shocked. Basically, $1,200 for a hip replacement for surgery and 90-days post operative care. He has malpractice insurance and office overhead to pay out of that. I do not know the solution, but we clearly have a serious issue which needs fixing. With college and medical school costs soaring to a total of $500-600k for the 8 years and reimbursement rates dropping, the economic incentives to become a doctor are dropping fast, and despite spending more per capita than any other country, our care is subpar. Remember, after you finish medical school, you have years of being a resident at a very low salary and don’t start earning until mid-30s.

One final thought. I sent this note to 7 doctors and ALL contributed to the article. Thank you. One interesting point I had not considered was they told me how hard private practice is relative to working in a large hospital organization. I don’t have time to get into all the details, but I was surprised that the reimbursement rates were sharply different between private practice (lower) and large hospitals. I don’t know the solution to the healthcare mess, but the fact that three of the most powerful business people on the planet could not figure it out means the solution is not coming soon.

Quick Bites

• Markets sold off sharply Friday on Powell’s comments on the Fed’s updated stance on inflation with higher rates for longer (see next bullet). In my Response Time note last week, I suggested I was less constructive on stocks. I ran a new screen on stocks. Out of 1,129 stocks, 302 stocks were down more than 5% Friday. The Dow dropped 1,008.38 points, or 3.03%, to 32,283, after accelerating losses into the close. The S&P 500 fell 3.37% to 4,058, and the Nasdaq slid 3.94% to 12,142. The major averages declined for a second week. The Dow slid 4.2%. The S&P 500 and Nasdaq Composite lost roughly 4% and 4.4%, respectively. YTD, the Dow is -11.2%, S&P -14.9% and Nasdaq -22.4%. Crypto has been hit with BTC -6% to $20k and ETH -12% to $1.5k. Treasuries are discussed below, but they sold off, while stocks were slammed on the hawkish commentary from Powell. Generally, when stocks are -3 to 4%, Treasuries rally. Crazy 3 month chart of the Nasdaq below which started at 11.4k, fell to 10.6k, rallied to 13.2k and now is at 12.1k. Second chart is S&P sector performance Friday. This is the link if you want more detail.

  

  

• I do feel we must discuss the horrific call of the Fed/Powell and Yellen about “transitory” inflation. If you recall, I was pounding the table 18 months ago to end low rates and Quantitative Easing, yet the Fed missed it. Now, they are taking a very aggressive stance as we are seeing cracks in inflation. Federal Reserve Chairman Jerome Powell delivered a stern commitment Friday to halting inflation, warning that he expects the central bank to continue raising interest rates in a way that will cause “some pain” to the U.S. economy.

  In his much-anticipated annual policy speech at Jackson Hole, Wyoming, Powell affirmed that the Fed will “use our tools forcefully” to attack inflation that is still running near its highest level in more than 40 years. Even with a series of four consecutive interest rate increases totaling 2.25 percentage points, Powell said this is “no place to stop or pause” even though benchmark rates are probably around an area considered neither stimulative nor restrictive to growth. Check out the 2-Year-Treasury market chart below which is now yielding 3.38% up from .76% at the start of the year. The Personal Consumption Price Index fell by .1% in July largely due to tumbling gas prices. I did call for peak inflation approximately 6 weeks ago. Powell’s hawkish commentary sent most risky assets down sharply.

  

• California air regulators voted Thursday to approve stringent rules that would ban the sale of new gasoline cars by 2035 and set interim targets to phase the cars out. The measure is a historic one in the US, and would be one of the first such bans worldwide. It has major implications for the US car market, given how large California’s economy is and that several states are expected to implement similar rules. This is another example of something which looks good on paper. However, do they have the resources (to actually manufacture that many EVs, charging stations, electricity, people to afford the more expensive cars….)? Right now, CA has 13k charging stations with 36k ports. This report suggests CA will need 1.2mm charging stations by 2030 (does not include hundreds of thousands for trucks . Where will the electricity come from? What happens when there is a fire, earthquake.. which disrupts power? I love going green (owned a TSLA for 5 years), but let’s be sure the infrastructure is there to handle such a mandate. Where will all the cobalt, neodymium, lithium and copper come from to manufacture all the EVs? On pricing, today, the average EV costs $66k or over 50% more than gas cars. I presume this differential will come down with new entrants, but not everyone can afford a car of that price. Many companies have just announced SIGNIFICANT price hikes on EVs with Ford raising its Mustang by $8.5k due to “significant” battery cost increases. EVs are seeing substantially more price increases than gas powered cars with EVs +55% and gas just 10% year over year. This is from a CNBC story on the topic: John Bozzella, president and CEO of the Alliance for Automotive Innovation, which represents major automakers, said California’s mandate would be “extremely challenging” for automakers to meet. There is a power shortage in China and dozens of cars are in line to receive a charge. This is coming to a theater near you without a better plan. Second chart is Bloomberg’s estimates of global charges and investment needed over time. This WSJ opinion piece is concerning, “Net-Zero Emissions Policy Bankrupts Britain and it could do the same to the U.S., which is following a similar path.”

  

  

• I have mixed feelings about Work From Home (WFH). I believe WFH is a game changer and makes sense for many different jobs and people. The extra freedom helps with work life balance and improves people’s lives. I had multiple people who worked with me for years who commuted 2 hours each way. Think about 20 hours a week of saved time. I do worry about productivity, as some are abusing the privilege of WFH. But, my bigger concern is development of young talent. I am mentoring a young man who works at a firm which does not allow in person work. He is struggling to learn from his experienced colleagues given zero in-person interaction. He is considering other jobs in order to get more relevant experience. Jamie Dimon has grown increasingly aggressive behind the scenes with a clampdown on remote work — and insiders say a major reason is likely a certain skyscraper that’s under construction in Midtown Manhattan. JPMorgan’s hard-charging chief executive has been quietly telling senior managers he expects the mega-bank’s rank and file to be in their seats at the office five days a week – a more stringent standard than the bank’s official line of three days a week, according to sources close to the company. In a related note, this story is entitled, “Employers are doing “shocking” things to monitor your productivity. It suggests employees are being tracked, phones tapped, tattle-ware… to check up on remote employees. I think a hybrid model makes sense.

  

• I continue to write about the electricity and energy issues in Europe, because I want to be sure the US does not make the same mistakes. Russia is now flaring $10mm of natural gas/day creating 9,000 tons of carbon dioxide everyday which is the equivalent of 1,100 American homes for one year. Gas exports are -77% from Russia to Europe and appear to be sending a message to the Europeans by flaring the gas rather than sending it. French electricity prices for this winter are now 24 times the 10 year average and 10 times more than the US is projected to be. Protests are taking place in London over the 80% rise in energy prices. Yes, there are consequences for moronic policies. An important note. The US and Canadian natural gas reserves are almost infinite at 473 trillion cubic feet and 83 tcf respectively. The US/Canada can produce far more for Europe and the world with no subsidies, but policies need to change in order to do it. Note, natural gas in $5 in Canada, $9 in the US and $90 in Europe today. A UK farm said the natural gas bill will rise from $1.1mm to $17mm, which is triple his expected sales of $5.9mm. The scale of the European gas issues is massive.

  

• I am no lawyer, but to the unsealed affidavit seems concerning. Archives asked for records in 2021 after Trump lawyer agreed they should be returned, email says, but it was 18 months of back and fourth. There are many articles which suggest 'Trump should be indicted': Mar-a-Lago affidavit spells trouble for the former president and decimates his main defense. This article does not read well, but it is Newsweek, so take it with a grain of salt. Even Dershowitz sees enough to indict Trump, but does not think it will happen. He has an interesting take on it. He has an interesting take called the Nixon and Clinton test which you can see in the link. I do feel social media, media, FBI… has all been incredibly biased against Trump and Republicans. I feel many of the accusations were not valid. I would like to see exactly what Trump took and it seems his argument that he “declassified” everything may not be as valid as many thought. Now that the affidavit is out, it looks worse for Trump from my perspective. I do not want to see Trump, Biden, Harris or Sanders on the 2024 ballot.

• This story is frustrating for me. Djokovic withdrew from the US Open as he cannot travel to the US. What? Millions of illegal immigrants have come through the porous border in the past two years and countless of them did not require vaccinations. There was talk in the spring of 2022 of changing the rule to some immigrants over the age of 5 be required, but it is not clear to me how many are required to receive a vaccine. It just makes no sense to me. My solution is simple. Djoker should have been allowed in with DAILY testing. He is chasing history, and it is a shame that he has been banned from major events. I believe millions of illegal immigrants have come here unvaccinated. Also of note Joker has had COVID twice and natural immunity if far more effective than the vaccine. The rules are stupid and are preventing Novak from holding the most major titles of all-time.

Other Headlines

• University of Michigan Consumer Confidence was out (Improvement)

  

• Peloton reports big loss, decline in revenue as the company grinds through its turnaround plan

  • Stock off 20% on earnings. One year is -90% ($114/share to $10.6).

• Affirm Collapses As Investors Eye This This Key Metric In Its Guidance

  • Stock -21% on Friday. -74% YTD.

• Snowflake shares pop 20% following revenue beat

  • Stock peaked at $402/share 11/21 and was $114 1/22 and now is up to $198 share.

• Stanford engineers built fully autonomous restaurant in SF

  • LOVE this idea. This is the future for many industries as people no longer want to work. Food looks good and the recipes were from a Michelin Star chef. Prices are so cheap with labor and R/E savings.

    

• FBI warned agents off Hunter Biden laptop due to election

  • The FBI did not want to impact the election according to whistle blowers. Again, the inconsistency is the issue. If Don Jr. had a laptop exposed, do you think the FBI would have waited? I don’t. I just want “independent agencies” to act independent. I would want both exposed the same way. No favorites.

• Mark Zuckerberg tells Joe Rogan Facebook was wrong to ban The Post’s Hunter Biden laptop story

  • In a shocking confession, Zuck claimed the FBI WARNED FACEBOOK in advance. I am sorry, we all need to have issues with the way things have taken place. What if the FBI tipped off Facebook, Twitter, Google… about a damaging story to Trump or one of his sons? Both are wrong, but the latter would never happen.

    

• 79% say ‘truthful’ coverage of Hunter Biden’s laptop would have changed 2020 election

  • The FBI, Media and Social Media blocking the Hunter Biden Laptop story which had a substantial influence on the election is big news. I will say it again. What if it went the other way?

• Paul Pelosi DUI Video

  • Please watch this short video of Mr. Pelosi, who could not walk. He trades on inside info with no consequences and apparently drives blitzed and wrecks cars with no consequences. This is not a Right or Left statement. Could the cop have been any nicer to him?

• Ex-NYC Mayor de Blasio Goes to Harvard as Teaching Fellow

  • What class is he teaching? How to destroy a once great city? How to get zero percent of the vote while running for President? How to be the worst mayor ever? I honestly don’t know what else he could teach.

• Kathy Hochul’s call for 5.4M Republicans to leave New York is dangerous and disgusting

  • No one else has a problem with this from the Governor of NY? The state is in a dire financial situation with the wealthy leaving. Suggesting over 5mm people leave due to their political beliefs is not very gubernatorial. Sounds like something Trump would say. That is not a compliment.

• Biden's Job Rating Rises to 44%, Highest in a Year

  

• Biden’s Student Loan Forgiveness Could Test Legal Powers

  • Many are questioning the legality. I do feel it is inflationary and am not convinced it will have the desired outcome. I don’t care for the precedent it sets. I am not convinced that dementia ridden Biden has the authority to do this either.

• Missouri school district revives paddling to discipline students

  • I was paddled in public Middle School in Florida by a right wing, Christian principal named, Davidson. I was beaten up for defending a special needs girl, and I got paddled. My mom was livid. He later apologized. Welcome to crap public South Florida Schools in 1980.

• Nightclub bans STARING without getting ‘verbal consent’ – and hires ‘safety officers’ in pink vests to police revellers

  • Who is going to go to this nightclub? You need verbal consent to make eye contact? Seriously, the pendulum has swung too far. Do you ask a woman if she wants a drink or to dance looking the other way?

• People Who Do Strength Training Live Longer and Better

  • Everyone other than me. I am injured constantly and do strength training 5 days a week. I am the exception to this rule.

• World’s Most Popular Password Manager LastPass Says It Was Hacked

Crime-I literally had 35 crazy crime stories, but the piece was too long. I cut it to a handful, but that is not indicative of the current situation. There are so many troubling stories of random violence, kidnapping, murder, robbery. What is happening to society? I want to see more consequences and people held accountable.

• Wild video shows suspect rob man in wheelchair in brazen NYC bus attack

  • Truly disgusting. What will happen if they catch this idiot? If I were the DA, I can tell you it would be a very different outcome.

• Pervert arrested for series of sex attacks on Manhattan streets

• Suspected thief arrested for attempted rape of girl, 15, months after Bragg reduced charges

  • Make Bragg leave office ASAP. He is horrible.

• Security guards feel helpless as brazen thieves loot high-end NYC stores

• NYC crime: Man stabbed with pocket knife on subway after intervening in harassment, police say

  • Another good Samaritan injured trying to help others. The new Bernard Goetz is coming soon the way things are going.

• Man tortured and robbed in NYC after answering sex ad

• Another off-duty NYPD cop mugged in upper Manhattan

• Freed creep Anthony Ibanez accused of attempting to rape NYC teen has larceny charges dropped

• 5 people shot on Coney Island boardwalk, 1 dead

• Los Angeles County DA George Gascon declined to charge man months before he allegedly murdered off-duty cop

Virus/Vaccine

• Improvements continue.

  

• Latest Covid Boosters Are Set to Roll Out Before Human Testing Is Completed

• Georgetown University mandates masks for students during in-class instruction amid COVID-19 cases

• Fears grow over tomato flu outbreak as health officials give first warning over symptoms

  • Covid, monkeypox, polio, now tomato flu? What the hell is going on?

    

Real Estate

• Although most Florida markets are weaker, Miami and high-end Palm Beach remain hot. In Jupiter at Admirals Cove, there are now 28 homes for sale and there were only a handful 6 months ago. At Old Palm in Palm Beach Gardens, there are 8 homes for sale and there were zero 6 months ago. However, a private equity executive, Scott Collins, paid $25mm for a new non-waterfront spec mansion in Golden Beach, Florida (Miami). The 13,000 ft home was listed for $25mm in May and sold at the full asking price. High-end properties in Miami and Palm Beach have held up relatively well despite the broader market weakness. There is just so little inventory at the high-end. In NYC, things have slowed. Some is the summer-slow down. There have not been a ton of large price reductions as of yet, but the traffic is -30% from last August. However, the rental market remains “insane” according to Jared Halpern from Douglas Elliman.

  

• Toll Brothers Inc., the largest US luxury-home builder, cut its sales forecast and said it has increased buyer incentives to help navigate a slowdown in demand.  The company expects to deliver 10,000 to 10,300 homes in its full fiscal year, down from a previous estimate of 11,000 to 11,500 homes, according to a statement Tuesday. For the three months through July, Toll reported a 60% decline in purchase contracts from a year earlier to 1,266, surprising analysts who expected 2,568 deals on average. “As our third quarter progressed, we saw a significant decline in demand as the combined impact of sharply rising mortgage rates, higher home prices, stock market volatility and macroeconomic uncertainty caused many prospective buyers to step to the sidelines," said Yearley, Jr.

• Home Partners of America, the single-family landlord owned by Blackstone will stop buying homes in 38 US cities, becoming the latest institutional investor to back away from an overheated housing market. The company, acquired by Blackstone in June 2021 for $6 billion, told customers that as of Sept. 1, it is pausing applications and property submissions in Boise, Idaho; Fresno, California; Memphis, Tennessee, and 25 other areas. It will go on hiatus in 10 additional cities on Oct. 1.  Blackstone, in a statement, said it and Home Partners continue to actively buy homes in more than 20 of the country’s highest-growth markets. “We are pausing in markets that represent less than 5% of our recent activity,” the company said. With very few exceptions, the R/E markets are taking a much needed pause. Layoffs and rising rates will not help matters.

• Housing prices could dip by as much as 20% in more than 180 markets nationwide if the US economy falls deeper into a recession, according to a new study. Experts at the research firm Moody’s Analytics said that homes in 183 of the 413 largest regional housing markets in the country are “overvalued” by more than 25%. A map based on data from Moody’s was published by Fortune. It showed that home prices were poised to fall in so-called “bubbly” markets like Phoenix and Boise. The firm believes that the Boise market is overvalued by 72% while homes in Charlotte are overvalued by 66%. Moody’s analysts say that the Austin, Texas real estate market is 61% above its true value. The forecast is much more pessimistic than other reports, including those from the Mortgage Bankers Association, Fannie Mae, Freddie Mac, CoreLogic, and Zillow — all of which are predicting a single-digit rise in home prices.

• Census Bureau: 3.8 million renters will likely be evicted in the next two months — why the rental crisis keeps getting worse