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Report: Health Care Will Sap 20% of U.S. Spending MoneyNews
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Hold on to your checkbooks, America. Health-care costs are rising so fast that industry experts say that by 2015, one out of every five dollars spent in the U.S. economy will go toward health care. Right now, 20% of U.S. spending ends up in a more traditional sector - manufacturing. That's the conclusion drawn by the federally funded Centers for Medicare and Medicaid Services Project (MMSP).
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USA Today reports that: "Increased spending on hospital care, home health services, drugs and public health programs will help push total health-care spending from its current 16.2% of the economy to 20% in 2015, says the organization." And that extra spending could be a real drag on the American economy - especially over the long haul. "In the near term, it's a plus ... a steady source of jobs and income," says Mark Zandi, chief economist at Moody's Economy.com. "In the longer term, it's an increasing amount of economic resources going to a part of the economy that may not enhance underlying productivity." And some say that the rising costs of health care will force more Americans to remain uninsured. "The more expensive our system becomes, the bigger the gap between the health-care haves and have-nots," says economist Paul Ginsburg of the Center for Studying Health System Change. And don't rely on new government initiatives like health-savings counts to save the day. According to the MMSP report: "The net impact (of the accounts and disease-management programs) on cost containment is likely to be far smaller than that seen from the massive shift toward managed care during the mid-1990s." Overall, Americans will spend $4 trillion on health care - about $12,320 per person, the report adds. However, there is a silver lining in that private insurance premiums only climbed 6.8% in 2005. That's well under 2002's record 11.5% spike in premiums. Editor's Note:
2. Toyota to Surpass GM as Largest Car Maker? Earlier this month, President Bush got on the stump in front of the Energy Efficiency Forum in Washington and told audience members that when it comes to energy and technology, we've only seen the tip of the iceberg. It's an interesting page out of the former oilman's handbook. Bush isn't running for president anymore (although he'd like to maintain GOP control of Congress in the November elections), so he's relatively free to speak his mind about issues that are important to him. But few would have guessed that hybrid energy would be one of those issues. Maybe the president sees hybrid energy as inevitable, and perhaps he sees companies like Toyota and Ford (which is said to have a hybrid truck ready to roll) turning to hybrid cars and never looking back. A company that rolls the dice on hybrids – like Toyota – is really taking quite a risk. But according to Fortune magazine, the Japanese automaker is producing 50% more cars than in 2001, and this year it should overtake General Motors as the world's largest auto manufacturer. "Toyota alone earned more than all the rest of the world's 12 largest auto manufacturers combined - $11.4 billion," Forbes says in its March 6 issue. "And it is pioneering a new technology for the 21st century that will shrink gasoline consumption and limit greenhouse gases." Fortune reports extensively on Toyota's hybrid efforts, honing in specifically on the company's Prius hybrid auto, which has been successful (so far): "Toyota overcame punishing deadlines, skeptical dealers, finicky batteries and its own risk-averse culture to bring the hybrid to market.
While acknowledging that the Prius represents only a tiny fraction of the nine million cars and trucks the Japanese auto company will build in 2006, Fortune calls the hybrid sedan "Toyota's car of the future" and says that Toyota has switched management regimes, bidding "sayonara" to Hiroshi Okuda and Fujio Cho (Toyota's two previous presidents) and welcoming new president Katsuaki Watanabe. But the 64-year-old Watanabe shares the enthusiasm his predecessors showed for hybrid energy. "We need to improve the production engineering and develop better technology in batteries, motors and inverters," he told Fortune. "My quest is to produce a third-generation Prius quickly and cheaply." To that end, he has added a third division to Toyota's hybrid R&D effort, dedicated to working on advanced technology. But not everything is rosy with hybrid cards, critics point out. They can cost roughly $3,000 more than traditional autos and the added cost cannot be recouped with better gas performance. Says Carlos Ghosn, CEO of Japanese rival Nissan: "Some of our competitors say they are doing things for the benefit of humanity. Well, we are in a business, and the company has a mission of creating value."
Still, Toyota will press on with hybrid cars, and its success will determine whether the auto industry follows suit. By 2012, Toyota expects to sell one million hybrid autos every year, giving the company a big lead over its competition.
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3. Corporate Giants Stung by Overtime Lawsuits What do Fortune 500 heavyweights like Wal-Mart, IBM, Allstate and Electronic Arts – as well as many other leading U.S. companies – all have in common? Each may see considerably thinned-out profits as a result of repeated lawsuits accusing them of failing to pay overtime to thousands of workers. On Tuesday, The Washington Post reported that many of those lawsuits are being decided in favor of the disgruntled employees. "Earlier this month, Swiss financial giant UBS AG agreed to pay up to $89 million to settle several state and federal lawsuits filed by financial advisers who were improperly classified as exempt from overtime," says The Post. "Insurer Allstate Corp. agreed last fall to pay up to $120 million to nearly 3,000 claims adjusters in California. Janitors who cleaned stores for Southern California grocery chains Albertsons, Ralphs and Vons won a $22.4 million settlement in 2004." Most cases cite the Fair Labor Standards Act, which covers overtime statutes in the U.S. The number of lawsuits invoking the act skyrocketed 86% from 2000 through 2004, with 3,617 cases overall. The Post says that states with tough overtime compliance laws – like Illinois, California and New York – have seen the bulk of legal activity. Most lawsuits take on the trappings of the traditional "worker vs. employer" standoff. Employees claim that companies are making them work extra hours for no additional compensation, while company executives complain that they can't make sense of obtuse federal and state regulations dictating what constitutes overtime and what does not. Richard T. Seymour, a Washington lawyer representing employees in cases around the country, told The Post: "A lot of companies tried to drive up their short-term results by misclassifying employees, giving them fancy titles but no managerial responsibilities and not paying them overtime." "As people wake up to the fact that they are supposed to be paid overtime … there is tons and tons of litigation." And the U.S. Department of Labor has been diligent in its efforts to enforce current standards, raking in more than $119 million in overtime wages for 189,000 employees – a 26% increase from 2001 through 2005. The Labor Department is helped by a 2004 change in federal overtime laws that made millions of workers automatically eligible for time-and-a-half pay by raising the weekly salary limit for mandatory overtime from $155 to $455. Legal observers say that companies have only themselves to blame.
California attorney Brad Seligman, who argued a 2004 class-action overtime case against the Sav-On Drugs chain before the California Supreme Court, told The Post: "For many years, if not forever, there was not any rigorous enforcement of overtime standards, and a lot of employers got pretty lazy" about making sure workers were properly classified.
"Labor lawyers discovered that these cases were amenable to class-action treatment, and these employers were sitting ducks."
4. Leading Economic Index Signals Gains There was good news about the U.S. economy from the Conference Board, which announced yesterday that its leading indicators index for January rose 1.1%. That's the biggest gain since June 2005, and the index has gone up three months in a row. "The rise follows reports this month showing that the economy gained momentum going into 2006, rebounding from the slowest quarterly growth in three years and suggesting that the Federal Reserve will raise interest rates further to keep inflation under control," reports Bloomberg. "Economists raised forecasts for first-quarter growth after a report last week showed retail sales rose more than expected." Among the key indicators, claims for unemployment wages were on the decline, money supply and building permits were on the rise and American vendors were rushing to keep pace with factory orders.
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