Last time I talked about some of the problems with retirement calculators. These calculators are designed to help retirees plan for their future, based on their assets, saving, income and lifestyle. Based on these calculations, retirees are told how many financial assets they'll need to retire, and when they'll be able to do so. Unfortunately, these calculators also often give biased advice, distorted by projected retirement income needs, investment return averages and other variables that don't reflect reality for the vast majority of their users.
For many, deciding when to retire will be the most significant financial decision they'll make. Mistakes here sometimes lead to very negative consequences. Retiring too early means potentially outliving financial resources and a lower standard of life. Retiring too late can mean work, saving and sacrifice instead of relaxation. To help with this very important decision, scores of financial calculators have popped up to assist potential retirees. Although there are some benefits to many of these calculators – namely getting future retirees to think in concrete financial terms about retirement – they're far from perfect. They cannot account for the personal circumstances unique to retirees. Also, the assumptions they use and the output that results sometimes leads to more confusion and worse advice than none at all.
Last time I tried to explain some of the variation in health and longevity across countries using traditional health benchmarks of smoking, alcohol and obesity rates. Yet I showed last time, that those benchmarks are not particularly good at explaining health differences across countries. Obesity rates and smoking rates have very little correlation with higher longevity across countries, and only very high levels of alcohol consumption, and especially spirits, seem to negatively affect a population in aggregate. Most of the differences in longevity across countries (and within) are due to wealth differences (see graph below), but we still see relative overperformers and underperformers around that general trend.
As I noted last time, when looking at longevity, there is a very high correlation between a country's healthcare (or medical) spending and their average longevity (see graph below). The variation around that strong trend reflects relative weakness or strength. The overachieving group of countries in terms of longevity for their respective healthcare spending include poorer ones like Bangladesh, Vietnam, Jamaica and Cuba, as well as richer ones like South Korea, Singapore, Japan and Spain. On the other side, lower- and moderate-spending countries like Mongolia, Indonesia, Kazakhstan, and Russia do poorly on relative longevity, even compared to their lower spending levels, as do higher-spending countries like Kuwait, Saudi Arabia and the U.S., the latter of which is the largest healthcare spender in the world by a large margin (all these spending figures are per capita, and after adjusting for Purchasing Power Parity (PPP), or countries' respective cost of living).
Following up on my two previous discussions about medical and drug industry corruption, this time I would like to quantify the impact of the medical industry's corruption and enormous misallocation of resources has had on the healthcare and financial health of Americans and taxpayers.
Following up on my last conversation about medical and drug industry corruption, today I'd like to look at the impact that this misallocation of time and financial resources has upon the economy, and the healthcare of its citizens. As mentioned last time, total medical spending in the U.S. now exceeds $3.3 trillion a year, according to the Centers for Medicare and Medicaid Services (CMS). Estimates (including estimates from government agencies) of wasted medical and healthcare costs, exceed $750 billion a year to over a trillion dollars a year. Those wasted costs include losses to fraud, unnecessary medical tests or drugs, administrative inefficiency, inefficiently delivered services and “above-market” prices paid for services. So when the question arises how the U.S. can spend so much on healthcare and get comparably little in return, we can look at the quarter or third of total spending that is either simply wasted, or worse, leading to negative health for America.
"If the government controls your healthcare, the government controls you." - Monica Crowley
Following up on my last conversation about corruption in entertainment, government, big business and elsewhere, I want to focus a bit here on corruption in the area that is perhaps most personal to us, healthcare. Ever since the government began crowding out private healthcare in America with Medicare in the 1960s, if not before, corruption and collusion between government and healthcare providers has been steadily increasing. Today, as the bond between government and corporate lobbyists, CEOs and insiders grows ever stronger, and with extreme levels of regulation, insurance mandates, legal immunity for corporate wrongdoers, and the absence of a true marketplace in most healthcare areas, opportunities for corruption in healthcare have soared.
“Power tends to corrupt. Absolute power corrupts absolutely.” - Lord Acton
It has become increasingly obvious that morality is lacking at the heads of power in America and elsewhere. While unethical behavior has existed throughout history it perhaps has never been so rewarded as it has in recent decades, as individuals with low moral integrity, but with aggressive and charismatic personalities have climbed to the top in government, entertainment and big business. If we think of American government over the last couple hundred years, for example, we have seen the transition from leaders who were more concerned about serving the public than the power, money and influence that their positions would provide. In recent political elections, the outcome of elections seem to be more important for what they mean to the career of a particular candidate, rather that what he or she would do for the electorate.
We all want financial freedom, even if we sometimes have different definitions of what that means. For some, financial freedom is having a big bank account. For others, it's being able to retire when they want. For others it means having few debts. Our definition of financial freedom can include one or more of these areas, or others, and these aspects of financial freedom can in turn, impact our future security, comfort, confidence, and of course, freedom.
In the earlier two parts of this article I was trying to dispel the myth that the U.S. economy, in its current form, is a free market, or even particularly close to one. Whether in government, finance, healthcare, technology or industry as a whole, there is hardly a part of the marketplace that is not touched or controlled by the heavy hand of government. Government, in turn, is controlled by the tax system, the financial and banking industry (including central banks), and big business and their lobbyists. At one point its history the U.S. could rightly be called a free market or one that nearly defined capitalism, but over the last century the economy has turned – willingly or not – toward the arms of government control.
David A. Pace , CFP, CFA
Note: These comments and articles are for informational purposes only. Nothing in these articles are meant to provide specific investment advice and are not a substitute for professional advice from a qualified adviser. Since every investor's investment and personal circumstances are unique, he or she should always enlist the help of a competent and trustworthy professional in addressing their financial needs.