The recent agreement between UPMC and Highmark was extremely important to all people in Western Pennsylvania. It was a long time coming and the conflict should have never happened in the first place. Often court cases are settled on the court house steps and this is what happened in this case. The people won this time.
While this is important, it does not solve all of the issues about the cost of health care. This outcome only addresses access. Health care costs are the main reason a couple in their early 60s may not be able to retire. If they are not old enough to receive Medicare, monthly premiums can be more than $500 per month.
Medicare is a program that workers pay into their entire working lives. Upon starting Medicare, they often must pay for a supplement to cover all of the cost that Medicare does not cover. There have been some suggestions that everyone should be able to receive Medicare. That is not a financial possibility because the Medicare trust fund is already strained with all of the baby boomers entering the system. When you hear Medicare for all, it is just a softer sounding way to say national health care.
Government actions can have a big impact on our financial lives. We are seeing this now with the tariffs being applied to Chinese imports. China has not always been fair with their trade deals with the United States. They have infringed on many of our patents, subsidized industries to gain an unfair trade balance and limited access to American goods to many of their consumers. Will the tariff war work? Time will tell. It could be brilliant or it could lead to a recession. Prices will go up and company profits will be hurt. Usually free trade is preferable. Make sure your investments account for this increased risk.
There has been a lot of discussion about whether or not the Federal Reserve should lower interest rates. If they did, the stock market would go up. However, it is important to remember the two important jobs that the FED has is when the economy is slow to stimulate it and when the economy is overheating, to slow it down. It is not their responsibility to support the stock market. The economy certainly has some issues and some strength. On the plus side, the unemployment rate is at a 50-year low and inflation has been low. Negatively, the deficit is growing, retirement savings are low, we have a reverse yield curve and there is gridlock in Washington.
Recently Morgan Stanley and UBS have both come out saying the FED should not lower interest rates. I agree with them. If the FED starts trying to micro manage everything, they will not have the tools necessary to deal with their mission when there is a crisis. The stock market has a rate reduction priced into it at this time. If rates do not go down, there will be some increased volatility. We need to get interest rates back to a more normal level. Lower interest rates have been the number one driver of this bull market and there will be a correction someday. Make sure your financial plan is ready for whatever happens.
Your Financial Future is written by certified financial planner Gary W. Boatman, MBA and CFP, who also wrote the book, “Your Financial Compass: Safe Passage Through The Turbulent Waters of Taxes, Income Planning and Market Volatility.” If there is an area that you would like to see discussed in the column, send your suggestions to gary@BoatmanWealthManagement.com.