Pension Risk Matters : Pension Risk News & Analysis : Investment Governance, Inc. : Pension Risk & Investment

My client conversations are mainly with financial professionals and attorneys. However, as someone who wants to stay informed about the economy, I likewise enjoy getting different perspectives from market participants, especially those who are directly impacted by changing rules and regulations. So it was with interest that I read the following note on my doctor's pay window:

"Dear patients -

As of October 1, 2010, I no longer accept Medicare insurance due to the harassment and cuts in payments by the federal government. My fees are very reasonable. Please feel free to discuss them with me personally. I would love to continue to care for my Medicare patients, just without the federal government telling me how to do my job or how much to get paid. This is just the beginning of the healthcare reform. Please thank your politicians. Remember, elections have consequences."

Whether you agree with him or not, the reality is that, like any regulation, there are unintended consequences. When you deny someone the opportunity to earn a risk-adjusted return, don't be surprised that some individuals exit the market and seek gainful work elsewhere. If true that large numbers of physicians are no longer "supplied" at the same time that health care mandates force demand upward, it's obvious that prices are going to spiral. To the extent that regulations keep prices in check, even more doctors will get discouraged, leave the industry and put more pressure on the demand-supply gap.

According to "The Coming Doctor Shortage" by Herbert Pardes (Wall Street Journal, January 19, 2011), "Health-care reform will add an estimated 32 million people to the ranks of the insured, driving them to seek medical attention that in the past they may have avoided due to expense." In addition, an aging populace adds to demand even as nearly a third of doctors in the United States are older than 55 years with plans for retirement at some point.

The math is straightforward.

• 250,000 doctors will retire within the next decade.
• Increased needs require "an additional 130,000 doctors, both general-practice physicians and specialists, 15 years from now."
• About 16,000 doctors are trained each year.

Besides those doctors who are throwing in the towel, I've talked to quite a few who are discouraging their relatives, friends and family members from studying medicine.

If things don't correct soon, fewer rational individuals will be willing to incur large personal debts and study long hours to become doctors. If that happens, "do no harm" may be the reality of too much legislative interference.

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Are you ready to celebrate National Nothing Day on January 16 of each year? Created by late newspaperman Harold Pullman Coffin, 1973 marked the debut of this unusual event. The stated goal is for Americans to relax without worrying about missing an observance or celebration of something.

Perhaps not surprisingly, there is mounting evidence that relaxation and good health go hand in hand. According to the Mayo Clinic website, yoga (a type of relaxation activity) reduces stress, enhances fitness, helps with the management of chronic health problems and can keep weight gain in check. Writer Gloria Charlier cites an interview with Dr. Herbert Benson by veteran broadcaster Diane Rehm about his 2010 book entitled The Relaxation Revolution. The central premise is that a mind-body connection exists and must be nurtured. He's in good company since numerous prominent medical experts share his view. For businesses, the introduction of wellness programs can lower health care costs and encourage happier, and logically more productive, employees. Click to read "The relaxation response is healing" (Cincinnati Examiner, August 26, 2010).

If you get antsy sitting around this Sunday doing nothing, check out Meeting Wizard. A colleague tipped me off about this free site that finally (!) gets a handle on email and telephone tag when trying to set up multiple-person meetings.

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New York Times reporter Nicholas Wade describes research by the Harvard Medical School and the National Institute of Aging that could be a boon for vintners worldwide. Using experimental mice, scientists allege possible benefits of a "natural substance found in red wine, known as resveratrol". One group of furry creatures, fed a high-fat diet, accompanied with daily doses of resveratrol, gained weight but did not experience signs of medical problems and, "even more striking, the substance sharply extended the mice's lifetimes."

Wade describes a second gateway to expanded years - put the cupcakes away. Research done since 1935 shows that "mice fed a calorically restricted diet - one with all necessary vitamins and nutrients but 40 percent fewer calories - live up to 50 percent longer than mice on ordinary diets."

Elsewhere, Medicinenet.com quotes Mark Mattson, Ph.D and chief of the Laboratory of Neurosciences at the National Institute on Aging as likewise extolling the benefits of this approach.

"First, it reduces free radical production, or the production of highly damaging forms of oxygen, and the second is that calorie restriction increases the resistance of cells to stress. We think that both of these are important in protecting against a number of different diseases that have a negative impact on life span, such as cardiovascular diseases and cancer."

If you're panting to try cold kale soup and other goodies (similar to what my husband eats), click here to visit the site of the Calorie Restricted Society for more information.

Lest you are asking what this has to do with benefits, many experts now describe pension "problems" as tiny compared to a looming health care crisis - one that could wreak financial havoc across companies, big and small. So while the prospect of living longer is an amazing gift for many, there is a real cost of providing medical services to retirees. In some cases, post-employment exceeds work span by a significant amount.

At my request, Mr. Robert James Cimasi, president of Health Capital Consultants and author of The U.S. Healthcare Certificate of Need Sourcebook and countless articles and speeches, describes the situation this way.

"The US Healthcare Delivery System is facing what is perhaps its greatest challenge in the expected demand for increased health services from the aging of the baby-boom generation, the fastest-growing segment of the population. With the over 65 years old portion of the US population expected to increase from 20 million in 1970 to 69.4 million in 2030, the entire system by which healthcare services are dispensed in the U.S. is subject to radical change in the next two decades. As healthcare costs continue to rise faster than inflation in the overall economy, driven by advances in technology and treatment (as well as the growing baby-boomer population), pressures to reduce costs will result in a changed paradigm for healthcare delivery, most likely leading to some form of healthcare rationing. The potential result is that the quality of care received will depend increasingly on the individual's ability to pay.

One example of this trend is the accelerating movement from the traditional U.S. health coverage system of 'defined benefits' (where employers provide a package of defined benefits to their employees) to a system of 'defined contributions' (where employers contribute a set amount and then require employees to decide how much of their health benefit dollars to spend by selecting from a range of benefit plans), which is being driven by employers seeking to limit their exposure to what has become double-digit health insurance premium rate increases. These arrangements represent a fundamental shifting of the financial risk of health coverage from the employer to employees, whereby employers can limit their contributions, while employees must contribute increasing amounts of their own money to pay for health insurance cost increases in attempting to maintain the same level and quality of health care for themselves and their families.

This 'sea-change' in the U.S. Healthcare Delivery System presents both challenges and opportunities for the investment community, based to a great degree on the scope of their understanding of the risks related to these fundamental underlying factors."

For additional information, visit the HCC website library.

Other online resources that may be of interest are listed below.

1. National Center for Policy Analysis Health Care Economics

2. About.com Health Care Economics

3. Council on Health Care Economics and Policy

4. U.S. National Library of Medicine Health Care Economics

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