Breakpoints are sudden changes in markets. Here’s a notable example.
In the 1980s, the cost of Medicare was rising rapidly, and, at the same time, the Federal government was worried about resources to fund Medicare. (That was a time when federal deficits mattered, but I digress.) The two opposing trends—each getting stronger as time passed, neither giving way to the other—created a forced sudden change. In this case, the federal government rapidly changed Medicare reimbursement from “cost-plus” reimbursement to prospective payments, a set amount per clinical procedure code.
The change was not just rapid but highly disruptive. Hospitals did not have cost-accounting systems yet, so imagine their plight with no insight into where their gross margins were being made or lost. Lengths of stay dropped dramatically, and medical supplies and product providers needed to deliver “better” offerings (translated into better financial results for the hospital payers) for new products to be adopted.
The COVID-19 virus will produce similar breakpoints.
I think it’s possible that we have reached a healthcare insurance breakpoint, and that one of the breakpoint changes will be having health insurance no longer tied to the employer, a.k.a. Medicare for all. Why? Many employed workers are suddenly unemployed – with more than 3 million people applying for unemployment benefits last week alone, and that was before most of the “shelter in place” orders took place. We’re likely to see a far higher percentage of the workforce unemployed than we saw in 2008. With the loss of a job comes a loss of employer-paid health insurance. While COBRA is technically available to all who lose a job that carried insurance, not many people without a job can afford to pay the full (employer and employee) healthcare premium that COBRA coverage demands. The alternative is the ACA, which typically has narrower networks, higher deductibles, and total out-of-pocket limits that could bankrupt many families. A much bigger national problem demands a bigger solution.
Another breakpoint comes from our growing share of employment in gig work, a workforce among the most vulnerable in our nation. Some of the industries hardest-hit by the COVID-19 crisis – entertainment, travel, and transport – are full of gig workers yet have thriving stock values. Watch more states than California declare gig workers to be employees who should receive benefits, including unemployment compensation. The new Federal bill sets precedence.
Beyond breakpoints, events like COVID-19 cause markets to experience reversals or accelerations of trends. With so many people off the road or no longer in the air, air pollution levels have plummeted. Virtual work, already growing, will become a norm as companies find they can be as productive as before, and workers find the extra hours saved by not commuting are a godsend. Business travel has almost completely disappeared at the moment and may never reach the pre-COVID levels. At last, a faster lever to reverse climate change.
Judging by the failure of school referendums, protests against salary increases, and a move to build more charter schools, it seems Americans have been angry at K-12 teachers. Watch that change suddenly after parents discover how hard it is to teach! Could we see more investment in public education systems?
People are finally listening to national news! Our political discourse would be significantly improved if we were back to the days where a few respected journalists gave us the facts, not the spin.
Entertainers are flocking to Instagram and YouTube to help soothe troubled souls. Instagram Live was floundering. Now it’s essential. Watch other new media channels grow in strength and reach to better support artists financially.
Across the board, companies will be looking to add redundancy to their supply chains by adding alternative suppliers. This need will lead to more American-made goods than Trump’s trade tariffs created.
Online gambling will get a boost, while the cruise ship industry will shrink. More education at the college level will be online, lowering its cost, which is something desperately needed by our nation. Home delivery of food (groceries and restaurant meals) may see a permanent boost. The tsunami crushing big box retail as the baby boom ages will be even stronger.
Medical care will shift to the home, with home monitoring and video-based visits in broad usage. Keeping so many ill seniors in close quarters may no longer make sense.
And companies born of the last recession, such as Airbnb, will give rise to new companies about which we have yet to hear. My bet is on solutions to loneliness among the elderly.
Potential breakpoints and trend reversals and accelerations are already here. Early adopters – like MIT in digital learning – will attach their preparation to arising opportunities, producing market leadership.
Surprising changes, born of necessity, are coming. Get ready.