The Effects of Rising Health Care Costs

EXECUTIVE SUMMARY

Health care costs, including costs for long-term services and supports, are a growing burden for middle-class families across all age groups. Wages have not kept up with increases in health care costs, and more middle-class families are struggling to cope with higher health insurance premiums and higher out-of-pocket expenses when they have an illness. Rising health care costs are crowding out other important priorities for workers, such as saving for their own retirement or for their children’s college education.

Employers have responded to higher health care costs by scaling back wage increases, shifting cost increases to their employees, or changing the type of insurance they offer. If these trends continue, many people who had been middle-class throughout their working years will be at risk of not having enough financial resources to maintain a middle-class lifestyle during their retirement years. Increased out-of-pocket costs to Medicare beneficiaries and the often catastrophic costs of long-term services and supports are major threats to middle-class security for retirees and family members, who often end up in caregiving roles.

Read More at: 

http://www.aarp.org/content/dam/aarp/research/
public_policy_institute/security/
2013/impact-of-rising-healthcare-costs-AARP-ppi-sec.pdf

How Does Inflation Impact My Life?

By Kimberly Amadeo

Inflation usually hurts your buying power. That's because rising prices means you have to pay more for the same goods and services. Inflation can help you if you are the lucky recipient of income inflation. You can also benefit from asset inflation, such as in housing or stocks, if you own that asset before the price rises. However, if your income increases at a slower rate than general inflation, your buying power declines even if you are making more. Furthermore, many people can get hurt by an asset bubble if they try to time it, and buy right when the bubble is about to burst. In general, inflation's main consequence is a subtle reduction in your standard of living.

Inflation doesn't affect everything equally. Gas pricescan double while your home loses value. This is exactly what happened during the financial crisis of 2008. There was deflation in home prices, which fell 31.8%. Meanwhile, inflation in oil prices, which reached an all-time high of $148 a barrel. Since oil prices drive gas prices, this made the cost of gas head for $5 a gallon. Driving to work became even more expensive, and stressful, at a time when many workers were worried about even keeping their job.

Once the Federal Reserve started quantitative easing and the Federal government enacted theeconomic stimulus plan to end the recession, investors grew worried about inflation. As a result, they bought gold. This eventually drove the price of gold to an all-time record of $1,895 an ounce on September 5, 2011. In this instance, there was inflation in gold and oil prices, with deflation in housing prices and personal income.

Inflation has another bad side-effect...once people start to expect inflation, they will spend now rather than later. That's because they know things will only cost more later. This consumer spending heats up the economy even more, leading to more and more inflation. This situation is known as spiraling inflation because it spirals out of control.

If inflation reaches the double-digits, it's known as hyperinflation. If this happens, you will need a wheelbarrow to buy a loaf of bread. Fortunately, it happens very rarely, and only when the government is so irresponsible that it prints money without regard to the inflation rate. It happened inGermany in the 1920s, and in Zimbabwe in the 2000s. If inflation ever approaches the double-digits, your best defense is to buy gold or any currency that isn't pegged to the dollar. (Or become a baker!)

Effect of Inflation on Retirement Planning

The combination of inflation in some asset classes, and deflation in others, makes financial planning more difficult. Rules of thumb no longer apply. One of the reasons government economists didn't do more to head off the recession was because no one could believe that housing prices could really fall.

Inflation is really bad for your retirement planningbecause your target has to keep getting higher and higher to pay for the same quality of life. In other words, your savings will buy less. As a result, you will need to save more today to pay for higher priced goods and services in the future. Since everything you buy today costs more, so you have less left-over income available to save.

Impact of Inflation on Treasury Bonds

Inflation is important if you are holding bonds or Treasury notes. These fixed price assets only give a fixed interest each year. As inflation spirals faster than the return on these assets, they become less valuable. As they become less valuable, people rush to sell them, further depreciating their value. As their value becomes lower, the U.S. government is forced to offer higher Treasury yields to sell them at all. This increases most mortgage interest rates.

This lowers the value of your investments. It also increases the cost to the Federal government of financing the U.S. debt by raising the interest payments each year. The additional budget expense needs to be offset by a cut in the discretionary budget, an increase in taxes, or further deficit spending. All of those are contractionary fiscal policies, and will slow economic growth. That translates into a lower standard of living for you. 

Rising costs of essential goods take a toll

By GHO CHEE YUAN and USHAR DANIEL

KUALA LUMPUR, Jan 20 — Following the price increases in a number of essential commodities, The Malay Mail team observed that their cost varied from place to place.

Random checks at four markets in the Klang Valley — the Jalan Othman market in Petaling Jaya, Taman Tun Dr Ismail market, Selayang wet market and Raja Bot market Chow Kit — revealed the following:

Chicken costs RM7.70/kg at the Raja Bot market Chow Kit but RM9/kg at the Taman Tun Dr Ismail wet market.

Prawns cost between RM12 and RM30 per kg at the Jalan Othman market.

However, consumers were being charged RM68-RM88/kg at the Taman Tun Dr Ismail market.

The checks also revealed the prices of vegetables had increased but there was no change for poultry and seafood.

The prices of vegetables fluctuated because of poor supply and weather conditions, while seafood prices varied according to the demand of consumers.

The rising cost of logistics had also contributed to the increase in the prices of goods.

The market stallholders said they were forced to charge consumers more because wholesale prices had gone up.

They also voiced concerns about hypermarkets and other one-stop centres offering competitive prices with more comfortable shopping environment.

As a result of the increases, consumers preferred to look around before buying.

They were aware that prices vary at different locations, leaving them to make the smarter choice when buying their provisions.

Traders forced to charge more

Market traders feel like they are caught in the middle between the consumer and the supplier as the prices of goods fluctuate, forcing them to charge customers accordingly.

A trader from Selayang, who declined to be named, said the prices of seafood and poultry were stable but the prices of vegetables depended on available stock.

“I have no choice but to charge RM10/kg for red chillis and RM5.50/kg for tomatoes,” she said.

“Customers don’t usually feel the pinch, because I do not charge them too much.

“I absorb as much as I can because it is not fair to sell goods at higher prices.”

Thirty-year veteran Chow Kit trader Tan Kim Sui said: “The price of kangkung has gone up to RM3.50/kg from RM2.50/kg after the announcement of its price reduction a few days ago.”

A “Mr Chang” said prawn prices had gone up tremendously in the past two years because many fishermen had opted to export them to China.

“This has affected supply, which caused the prices to go up,” he said.

He said he expected prawns to cost a few ringgit more next week because of Chinese New Year.

Fishmonger Tang Ah Teck said the price hikes would not drive people away from buying seafood.

“It is normal for Chinese to buy seafood for Chinese New Year. The king prawn (meng har) will still the first choice.”

Butcher Zambri Shahbhari said the price of beef had risen by RM2-RM4/kg, from RM14 to between RM16 and RM18.

He said his business had seen a 20 per cent drop, adding that most of the customers shopped around several markets before making their purchases.

Grocer Mustajzun Rahman said the prices of vegetables were stable compared to seafood and other food items, noting that cucumber prices had dropped by 50 sen.

Consumers have to shop around

Consumers said they were left with no choice but to pay higher prices for their provisions.

Security guard Zainal Abdul Hamid, 54, of Kuala Lumpur, said: “Prices do fluctuate but even so, what choice do I have? I still have to buy the necessary for my family.”

However, Zainal said his expenditure had increased only by a small margin.

N. Ramesh, 48, a father of three, said: “Certain goods are cheaper while prices of other goods have increased.

“I can afford to pay a little bit extra but what about the lower income group?

“I live in Pantai Dalam but I have been coming to Raja Bot market for the past 14 years because it is cheaper here compared to everywhere else.”

Ramesh hoped prices would not increase for Chinese New Year.

In Petaling Jaya, Richard Teoh said: “Prices for every necessity item have gone up drastically in the last few weeks.

“This has forced me and my wife to visit several markets before making purchases.”

He noted that silver pomfret would cost RM80/kg at the SS2 market, while it was RM65/kg at TTDI market.

“We are forced to fork out RM300 a week to buy these food items,” Teoh said, where previously he only spent RM150-RM200 a week.

Salmia Beddu, 31, a lecturer, said she and her family would prefer go to the pasar tani to buy vegetables and meat, where they are cheaper and fresher than at the market.

She said her expenditure had increased by RM50 to RM100 in the past two weeks

- See more at: http://www.themalaymailonline.com/malaysia/article/what-price-the-market#sthash.J1bmDnZJ.dpuf

Malaysians went frustration on rising cost of living

Malaysians struggling to cope with the hike in the prices of goods and services vented their frustrations and anger in complaints and New Year wishes posted on Prime Minister Datuk Seri Najib Razak's Facebook page.

Netizens appear unconvinced by Putrajaya’s attempt to justify price hikes and subsidy rationalisation with the argument that it was necessary to protect the economy and investor confidence.

Their Facebook postings range from attacks to pleas, with one user, Mumtaz Haris, suggesting that Najib and the entire Cabinet should step down if they could not resolve the issues plaguing the people "since they were useless and inefficient".

In his Visit Malaysia Year 2014 message, Najib had said that preparations were being made for the year ahead and he called on Malaysians to welcome tourists with a smile.

His message attracted various responses. One user, Joseph Gasis, said he is not sure whether he can smile because he has spent RM600 on school uniforms, bags and stationery for his children. He said he would also have to fork out another RM300 for the school bus fare. Joseph also said he has been unemployed since June and lamented that his savings will not last very long.

Shahrul Bahaman said the new year will be a sad one.

Meanwhile, a posting by Norie Noriah which attracted 5,108 likes, warned the government to tackle the cost of living issue before the people shifted their support.

Another user, Ahmad, wrote that before the 13th general election, Putrajaya had promised there would be no price hike, but it was a different story now.

Sharing the sentiment was Atiqa Ali who asked Najib why the public was burdened with increase after increase in the prices of services and goods when they were already struggling to eke out a living.

She asked Najib what had happened to all the promises made by Barisan Nasional before the 13th general election.

Imran James Dio said even with the Bantuan Rakyat 1Malaysia handouts, the people were still struggling. He added that Malaysia should not achieve developed nation status by 2020 at the expense of the public.

User KY Kheng posted a unique calendar of 12 price increases for every month of the year – sugar, petrol, Astro, assessment rate, bus fares, electricity tariffs, LRT fares, water rates, toll rates, vegetables, basic essentials and the soon-to-be introduced Goods and Services Tax.

Victor Luke slammed Barisan Nasional, calling it a Mickey Mouse entity.

While announcements of price hikes have been met with anger by the public, what irked them further were the wastages and leakages revealed in the 2012 Auditor General's Report. The report revealed that public funds amounting to billions of ringgit had been wasted.

The public's mood was not improved when a pro-Umno consumer group told Malaysians feeling the pinch to work harder. The Muslim Consumers Association of Malaysia (PPIM) said consumers had to bite the bullet instead of sitting at home and fearing the worst.

University students had a different solution to the price hikes, forming the Reduce Cost of Living Movement, or Turun. A rally to protest the price hikes is scheduled to be held at Dataran Merdeka on New Year's Eve, despite attempts by authorities to paint a negative impression of Turun. 

Impact of rising prices

BY CLYDE MASCOLL

LAST WEEK, I stated that Barbados  is a victim of failed economic policies, not a global recession. The economic policies caused prices to rise faster than in the rest of Caribbean economies, which contributed to the tourism sector being less competitive.

They reduced the spending power  of Barbadians, thus compromising potential growth in the economy. Furthermore, the policies increased  the national debt and put the country’s fiscal position in its worst ever condition.

Barbados is known to be a country with a high cost of living, largely because of its relatively high standard of living. However, it is not known to be a country with high rates of growth of prices, otherwise called inflation.

The cost of living may be likened  to a level such as a water level in the kitchen sink. While inflation may be likened to the rate at which the water level rises in the sink. In essence, inflation is the rate of growth of prices.

Therefore as inflation increases, it takes prices to a higher level. This has negative effects on workers with fixed salaries. It has negative effects on pensioners. And it has negative effects on investors.

In an environment like 2010, it was not sensible to put policies in place that fuelled domestic inflation, simply because the latter compromised everyone’s quality of life.

Furthermore, in an economy where workers, especially those in the public sector, have not received an increase in salary since 2008, the impact of rising prices needs no further explanation. The reality is that the standard of living in Barbados has been set back by at least seven years.

Historically, the rate of the rise in local prices is strongly influenced by the rate of growth of international prices, especially oil and food prices. However in 2010, when the VAT rate was increased to 17.5 per cent, along with the 50 per cent rise in excise taxes, the recipe for domestic policies being the major cause of local price increases was created.  By 2011, the evidence was real not imagined as Barbados’ inflation rose three times as fast as the average  among regional economies.

While the taxation policies were unwise, the damage done to the Government’s financial position is the most unwise of all. The strategy of borrowing in excess of $40 million per month to pay civil servants is irreversible in less than seven years, especially in the absence of growth  in the economy.

The inability of the Barbados Government to invest in infrastructural development is precipitated by having  to finance a shortfall of over $550 million before a penny could be spent on capital projects. This is similar to the position  in which Guyana and Jamaica found themselves in the past, which stifled economic growth in both countries, with the latter having not yet recovered.

Notwithstanding the absence of government investment, Jamaica attracted high levels of private sector investment relative to national income, yet the economy grew by an average of just over 1 per cent for the last 30 years.

This partly explains the importance of public sector investment in building out infrastructure in health, education and physical infrastructure as a prerequisite for sustainable economic growth.

Both countries have seen more foreign direct investment than Barbados, however measured, and Guyana, with its agriculture and forestry, mining, and potential in oil and gas production, is experiencing high levels of foreign investment. Once this kind of investment is accompanied by its public sector counterpart, then the conditions for economic growth and development  are in place.

Alternatively, since 2009 Barbados has embarked on an economic path that compromises growth, which has exacerbated its fiscal misery, encouraged more crippling national debt and reduced the country’s standard of living.

Foreign direct investment is a much preferred way to access foreign exchange than through borrowing on the international market, especially at cost associated with junk bond status.

However, if the country’s economic fundamentals are poor, then encouraging foreign investment is not going  to be easy, particularly when the  rates of return on investment are not  the most attractive.

Notwithstanding Jamaica’s poor economic fundamentals, its exchange rate made it attractive to foreign investors. Barbados does not have  or want such a luxury. But the notion that the Government is preparing  a home-grown fiscal strategy  adjustment programme, which still  has to be approved by the international Monetary Fund, is farcical.

Barbadians had become accustomed  to decision-making governments but now have to settle for “when I ready” Government in the face of serious crisis. 

Why is the cost of food rising so rapidly? by Robert Lamb

In much of the developed world, it's all too easy to take a day's meals for granted. Breakfast is something you grab going out the door, lunch is a diversion, and dinner is an evening's entertainment. And while a trip to the grocery store may be a bit of a chore, it's far from a life-and-death situation. However, the rising cost of food threatens to change much of this.

This customer buys food at a grocery store near Frankfurt, Germany. Germany's consumer price index jumped 3.1 percent from March 2007 to March 2008, due to rising food and energy costs.In the United States, even the poorest households spend only 16 percent of their income on food [source:The New York Times]. In other countries, especially developing nations, that figure reaches 75 percent and higher. Rising food prices may be inconvenient for some households, but in parts of southern Asia and Africa, a 25 percent rise in food costs can lead to starvation, riots and political upheaval.

According to the World Bank, food prices have risen by 83 percent in just three years and will likely continue to rise [source: Cowen]. Governments have imposed tariffs and trade restrictions in an attempt to stabilize prices. In parts of Asia and Africa, food costs are already leading to social unrest. Global organizations like the World Bank and the United Nations World Food Programme are trying to alleviate the suffering. But why are food prices rising so rapidly?

While economists and critics place a great deal of blame on the growing biofuel market, experts identify a number of other contributing factors, ranging from global weather patterns to changing dietary trends.

So will people start pouring water in their cereal because they can't afford the cost of milk? In this article, we'll examine the many factors that are contributing to the rapid rise in food costs.

http://recipes.howstuffworks.com/food-cost-rising.htm

The Rising Price of Higher Education

State spending for public colleges and universities dropped sharply last year, as the state-by-state numbers contained in this special report from the National Center for Public Policy and Higher Education demonstrate. At the same time, tuition and required fee charges rose significantly in many states, and some states reduced their student financial aid programs.

The result was the worst fiscal news for public higher education institutions and their students in at least a decade, as the economic recession struck almost every state. So far this year, the picture looks even bleaker, with states continuing to cut higher education appropriations and campuses responding by raising tuition even higher, imposing new fees and reducing student financial assistance.

he report's numbers come from the U.S. Bureau of Economic Analysis; the U.S. Bureau of the Census; the National Association of State Budget Officers; the National Center for Higher Education Management Systems; the Washington (state) Higher Education Coordinating Board; and the annual "Grapevine" report published by the Center for the Study of Education Policy, at Illinois State University.

They show that state support for higher education, measured in current dollars, increased only 1.2 percent, a sharp decline from last year's 3.5 percent and the smallest increase in a decade. Appropriations dropped in 14 states, with the largest decline-11 percent-in Oregon.

Tuition and mandatory fee charges at four-year public institutions rose in every state, startlingly so in some cases. In Massachusetts, for instance, tuition jumped from $3,295 to $4,075, an increase of 24 percent, largest in the nation. Iowa, Missouri and Texas increased tuition and required fees by 20 percent, North Carolina by 19 percent, Ohio by 17 percent. Sixteen states increased tuition and fees by more than 10 percent.

Tuition increased by just two percent in New York State last year, but Governor George Pataki, after cutting the State University of New York's 2003-2004 budget by $184 million, proposed a 35 percent increase in SUNY undergraduate tuition. The governor trimmed the City University of New York budget by $83 million, but left it up to the system's governing board to determine tuition charges.

Community college tuition and mandatory fees rose in all but two states (California and Maine), with 10 states registering increases of more than 10 percent. The biggest increases were in Massachusetts and South Carolina, where charges jumped 26 percent.

By William Trombley

Read more at: http://www.highereducation.org/reports/affordability_

supplement/affordability_1.shtml

Safety Needs is abandoned....

When cost of everything is in a rising, consumers need to know how spend their money and consumers always have a list of hierarchy. Based on Maslow’s Pyramid, basic needs come first, safety needs is the second, the third one is social needs, followed by esteem needs and the last one is self-actualisation.

Rising in cost living has resulted in consumers have to make choices among all the needs and they are unable to fulfilled everything. Of course, consumers will still choose to fulfil the basic needs first. Basic needs include food, shelter, clothes and transportation.

In Maslow’s hierarchy, the second level should be safety needs. In today’s society, safety needs include insurance purchasing.

The president National Association of Malaysia Life Insurance Fieldforce and Advisers (NAMLIFA), Sethu Karuppan pointed out that consumers tend to cancel their insurance when they are having problem in their financial.

From here, we can see that consumers tend to skip the second needs in Maslow’s hierarchy. They are willing to spend their money on other needs such as entertainment and socialisation needs. An experienced insurance manager, Tan King Guok (translated) pointed out that, consumers should be aware of the importance of insurance.

As a conclusion, rising in living cost resulted in impacts such as consumers have to make choices between their needs. As a consumer, we should be smart in making choices and bear in mind, everyone has different hierarchy of needs.