Kiplinger Connection
Health • Going Green • The Economy

Health: States encouraging wellness programs.
Going Green: U.S.-backed bonds finance green projects.
The Economy: Office and warehouse vacancy rates up.

Health
Catching on: State efforts to make health coverage affordable for lower income workers. Nine states already have programs, with Calif., Ga., Idaho, Iowa, Kan., Ky., Maine, N.C., Pa., S.D., and Va. bidding to join them. Most state plans would partly offset premiums with revenues from higher tobacco taxes or federal Medicaid monies.
Another trend: Revising laws to foster health promotion efforts. Kan. and N.Y. will soon take up bills to let insurers offer incentives, including rebates, to encourage beneficiaries to join wellness programs. That's on top of six states that passed similar legislation last year.
But state initiatives on universal coverage will hit a wall. Strained state budgets aren't the only hurdle. Political consensus remains elusive, mostly because of the hefty expenditures involved.

Can so-called medical homes improve patient care and cut costs?
GE, IBM, Verizon, and other firms are spending money to find out. Through a coalition, Bridges to Excellence, they’re paying modest bonuses to family doctors who provide a "home" for a patient’s overall care, meaning they coordinate visits to specialists, tests, follow-ups, etc. The projected savings are about $250 per patient per year. The concept is likely to spread as more health insurers and Medicare sign on.

Going Green
The EPA is back to square one on regulating mercury emissions after the D.C. Circuit Court of Appeals overturned a Bush reg capping and reducing mercury produced by coal-fired power plants. Critics blasted the rule as weak and too accommodating to power firms. Senate legislation requiring the agency to propose a new mercury rule by Oct. 1 is a nonstarter. It will take the EPA years to revise the reg.
The move likely spells higher costs for power companies. A mercury rule formulated under a Clinton, Obama, or McCain administration would probably impose stricter and more expensive emissions standards for both new plant construction and retrofitting of existing facilities.

U.S.-backed bonds will help finance scores of green projects by cities, school districts, and electric co-ops throughout the country. They’ll use Clean Renewable Energy Bonds (CREBs) to tap renewable power, reducing their use of electricity purchased from utilities. The bonds, bought mainly by life insurance companies to get tax credits in return, pay for heating, cooling, and other energy systems at low interest rates.
Although the application process for green bonds is closed ...
Look for Congress to expand the scope of the program next year, probably hiking green bond authorization to as much as $5 billion.

The Economy
Motor fuel prices will ease in coming months. Many Americans will vacation close to home this summer. Among conservation efforts: More carpooling and use of public transit.

Other fundamentals will also play a role in trimming gas prices by June by about 8% and diesel by 4% or so from today’s levels.
Inventories of crude oil are relatively flush and will stay that way as demand decreases not only in the U.S., but globally as well. Moreover, OPEC does not plan to curb output anytime soon. So barring a major disruption, spooking oil markets, we expect oil to drop to about $75 a barrel later this year.

A decline in shoppers is sending many retailers into a tailspin. Shrunken profit margins will make many store owners throw in the towel. Store closings this year will near 6,000, the highest number since 2004. Even many big national names, including Talbots, Starbucks, Ethan Allen, Eddie Bauer, Ann Taylor and Pacific Sunwear, are scaling back.
Foreign investors see good buying opportunities. In particular, they’ll focus on specialty apparel stores, which are in the worst shape and can be acquired on the cheap, though they’ll also consider others.

Office vacancy rates are climbing in many areas: In Miami and Ventura County, Calif., they’ll zoom about five percentage points this year. Markets bucking the squeeze include Atlanta, Dallas, and Minneapolis. The national rate will rise to 14% from 12.5% in 2007.
More warehouse vacancies, too. Overbuilding will hurt Las Vegas, Phoenix, plus Miami and Tampa, Fla. Industrial cities such as Cleveland and Pittsburgh will fare better, thanks to strong manufacturing exports. Warehouse space nationally will see vacancies rise a bit to about 10%.