Month: December 2009

Health Care & Medicaid

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Dr. Miller, dean and CEO of Johns Hopkins, wrote an op-ed piece in the WSJ 12/4/09 citing a CMS actuary that the House bill will increase Medicaid rolls by 18 million. The Senate version will increase eligibility for Medicaid to 133% of Federal poverty level. Miller cites the Kaiser Family Foundation that an additional 308,000 people will meet that eligibility in Maryland alone so the Senate version appears to have a similar impact as the House bill.

Dr. Miller is concerned about the costs. JH has already struggled handling the Medicaid patients it has and has lost a good deal of money in unreimbursed costs from the state.

From 1990 to 2004, Federal and state Medicaid spending increased yearly by about 10%, more than triple the average 3% CPI rate of inflation. For the three year period 2004-7, annual increases slowed considerably to 3.6%. States are reporting 2009 Medicaid spending increases averaging 7.9% because of the recession.

Gold ETFs

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The rise in gold prices has prompted a growing popularity in the SPDR Gold Trust ETF (GLD), which buys and holds gold bullion. The IRS regards ownership in this trust as an ownership in a collectible and taxes profits in the trust accordingly.

An investor who holds GLD for a year or more and sells for a profit might expect to pay the 15% long terms capital gains rate. However, the profit is taxed at the 28% collectibles rate. For this reason, an investment in gold bullion is more appropriate in an IRA or other tax advantaged plan.

Another way to play the gold market is to buy Market Vectors Gold Miners (GDX), an ETF that owns shares in gold mining companies. The average cost to produce an ounce of gold is about $850 – $900, so that a gold price above that amount is profit to the mining companies. Because of this leverage, mining company stocks are more volatile than the bullion itself. Long term profits in an ETF like this one would be taxed at the usual 15% long term capital gains rate.

Employed Not

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The often quoted unemployment rate of 10.2%, dire though it is, is only half of the unemployment rate in the construction industry, which stands at 19.1%. The lack of jobs in a predominately male work force has lowered the percentage of men in the work force so that women now make up 50% of workers, a first in the American economy.

Neither of these unemployment rates accounts for the number of people working part time jobs because they could not find full time work or those discouraged people who have stopped looking for work in the past month. That U6 rate is over 17%. In the construction field, it may be over 25%.

Smaller road building projects which received stimulus funds earlier this year have about run their course. Although housing sales have shown improvement, there remains a glut of pending foreclosures that will continue to amply supply the demand for houses in 2010. This steady influx of supply will only dampen new housing construction and continue to put pressure on construction related jobs.

For those who built their working careers in construction during the last 15 years of steady job prospects, this will be a life crisis requiring many to rethink their career path and develop new job skills.