Morningstar Advisor - Spring 2008 - 75

bad economic times. For example, out-ofpocket expenditures as a percentage of total health-care spending have declined steadily since 1965, when Medicare and Medicaid were signed into law. Government and private health insurers have been picking up more of the tab. Consequently, health-care spending is less dependent on the consumer, and the sector is less exposed to consumer cycles as a result. SM: How long can that continue? With rising AM: That’s a definite risk. So far, the system has relied on the deep pockets of the government and private insurers, but those pockets aren’t infinitely deep. Also, a number of factors could cause outof-pocket expenditures to increase. For example, employers have reduced coverage and pushed more health-care costs onto employees. Furthermore, the percentage of uninsured individuals has been rising, particularly among the middle class. Plus, if unemployment rises, out-of-work individuals could contribute to the increase in the uninsured. These consumers are often forced to pick up health-care costs on their own, and they may be more likely to cut back on health-care spending during lean times. One of the contributing factors to the sector’s past resilience is the decline in out-ofpocket expenditures. If that trend reverses, the sector could become more vulnerable to economic forces. SM: If health-care spending has outstripped economic growth for the past several decades, does that mean health care has in turn grown considerably over time? AM: That’s right. In real terms, spending costs, it seems like both government and private insurers won’t always be able to pick up the tab. Selected Health-Care ETFs Fund Name Inception Expense Ratio (%) YTD Return (%) Worst 3-Mo Return (%) % in Top 10 Holdings Avg Mkt Cap ($mil) Health Care Sel SPDR XLV iShares DJ Health IYH iShares SP Glb Hlth IXJ PowerShares Dyn Health PTH PowerShares FTSE Hth Care PRFH Vanguard HealthCar ETF VHT Data as of March 31, 2008 12-16-98 06-12-00 11-13-01 10-12-06 09-20-06 01-26-04 0.23 0.48 0.49 0.71 0.75 0.22 –11.66 –11.06 –9.63 –15.75 –13.24 –11.42 –20.27 –16.96 –12.56 –15.75 –13.24 –11.42 57.12 51.07 50.84 25.51 63.61 48.14 47,398 34,420 53,052 5,063 48,480 31,691 on health care exceeded economic growth by about 3% per year on average. As a result, health care increased from 5% of the economy in 1960 to 16% in 2006. That’s the highest level of any developed country. SM: How long can health care maintain that pace of growth? AM: Such growth has to slow at some point, GDP vs. Health-Care Spending Growth: Data from the past 40 years show that there has been no significant statistical relationship between growth in health-care spending and gross domestic product growth. 18% GDP Growth Healthcare Spending Growth although it’s anyone’s guess when that will happen. Economic, industry, and political factors come into play here, and it’s difficult to make a prediction as to when health-care spending will slow. SM: Do you think health care will continue to 15 be recession-proof? AM: Well, my research isn’t a forecast. Even 12 9 6 though the sector has proved relatively insensitive to economic downturns in the past, there’s no guarantee that it will continue to behave that way in the future. The system also faces some serious risks, including the few we discussed above. K Sonya Morris is editor of the monthly newsletter Morningstar ETFInvestor. Subscribe at: http://www. morningstar.com/goto/Adv37 3 1961 1965 1969 1973 1977 1981 1985 1989 1993 1997 2001 2005 MorningstarAdvisor.com 75
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Morningstar Advisor - Spring 2008

Table of Contents for the Digital Edition of Morningstar Advisor - Spring 2008

Morningstar Advisor - Spring 2008
Contents
Letter from the Editor
Inbox
Do You Use Annuities with Living Benefit Guarantees?
Managers Who Actively Enrich Shareholders
Staying Out of the Silos
Investment Briefs
Let’s Not All Become Fundamental Indexers Just Yet
Volatility Potential
Adding the Income Dimension
Do’s and Don’ts of RMDs
An Attractive Yield is Only Skin Deep
Mutual Funds Get in the Game
Beyond Target Date
The Last Holdout
A Bird of a Different Feather
First-Class Thinker
Sleep Like a Baby
Is Health Care Immune to a Recession?
Anatomy of a Mutual Fund Disaster
Embrace Your Inner Contrarian
Risks Worth Taking
Mutual Fund Analyst Picks
Undervalued Stocks
Most Popular Variable Annuities
New at Morningstar and on MorningstarAdvisor.com
Back to the Garden
Morningstar Advisor - Spring 2008 - Intro
Morningstar Advisor - Spring 2008 - Morningstar Advisor - Spring 2008
Morningstar Advisor - Spring 2008 - Cover2
Morningstar Advisor - Spring 2008 - 1
Morningstar Advisor - Spring 2008 - 2
Morningstar Advisor - Spring 2008 - Contents
Morningstar Advisor - Spring 2008 - 4
Morningstar Advisor - Spring 2008 - 5
Morningstar Advisor - Spring 2008 - 6
Morningstar Advisor - Spring 2008 - Letter from the Editor
Morningstar Advisor - Spring 2008 - 8
Morningstar Advisor - Spring 2008 - Inbox
Morningstar Advisor - Spring 2008 - Do You Use Annuities with Living Benefit Guarantees?
Morningstar Advisor - Spring 2008 - 11
Morningstar Advisor - Spring 2008 - Managers Who Actively Enrich Shareholders
Morningstar Advisor - Spring 2008 - 13
Morningstar Advisor - Spring 2008 - 14
Morningstar Advisor - Spring 2008 - Staying Out of the Silos
Morningstar Advisor - Spring 2008 - 16
Morningstar Advisor - Spring 2008 - 17
Morningstar Advisor - Spring 2008 - Investment Briefs
Morningstar Advisor - Spring 2008 - 19
Morningstar Advisor - Spring 2008 - 20
Morningstar Advisor - Spring 2008 - 21
Morningstar Advisor - Spring 2008 - Let’s Not All Become Fundamental Indexers Just Yet
Morningstar Advisor - Spring 2008 - 23
Morningstar Advisor - Spring 2008 - 24
Morningstar Advisor - Spring 2008 - 25
Morningstar Advisor - Spring 2008 - Volatility Potential
Morningstar Advisor - Spring 2008 - 27
Morningstar Advisor - Spring 2008 - 28
Morningstar Advisor - Spring 2008 - 29
Morningstar Advisor - Spring 2008 - 30
Morningstar Advisor - Spring 2008 - 31
Morningstar Advisor - Spring 2008 - Adding the Income Dimension
Morningstar Advisor - Spring 2008 - 33
Morningstar Advisor - Spring 2008 - 34
Morningstar Advisor - Spring 2008 - 35
Morningstar Advisor - Spring 2008 - Do’s and Don’ts of RMDs
Morningstar Advisor - Spring 2008 - 37
Morningstar Advisor - Spring 2008 - 38
Morningstar Advisor - Spring 2008 - 39
Morningstar Advisor - Spring 2008 - An Attractive Yield is Only Skin Deep
Morningstar Advisor - Spring 2008 - 41
Morningstar Advisor - Spring 2008 - Mutual Funds Get in the Game
Morningstar Advisor - Spring 2008 - 43
Morningstar Advisor - Spring 2008 - 44
Morningstar Advisor - Spring 2008 - 45
Morningstar Advisor - Spring 2008 - 46
Morningstar Advisor - Spring 2008 - Beyond Target Date
Morningstar Advisor - Spring 2008 - 48
Morningstar Advisor - Spring 2008 - 49
Morningstar Advisor - Spring 2008 - 50
Morningstar Advisor - Spring 2008 - 51
Morningstar Advisor - Spring 2008 - 52
Morningstar Advisor - Spring 2008 - The Last Holdout
Morningstar Advisor - Spring 2008 - 54
Morningstar Advisor - Spring 2008 - 55
Morningstar Advisor - Spring 2008 - 56
Morningstar Advisor - Spring 2008 - 57
Morningstar Advisor - Spring 2008 - 58
Morningstar Advisor - Spring 2008 - 59
Morningstar Advisor - Spring 2008 - A Bird of a Different Feather
Morningstar Advisor - Spring 2008 - 61
Morningstar Advisor - Spring 2008 - 62
Morningstar Advisor - Spring 2008 - 63
Morningstar Advisor - Spring 2008 - First-Class Thinker
Morningstar Advisor - Spring 2008 - 65
Morningstar Advisor - Spring 2008 - 66
Morningstar Advisor - Spring 2008 - 67
Morningstar Advisor - Spring 2008 - Sleep Like a Baby
Morningstar Advisor - Spring 2008 - 69
Morningstar Advisor - Spring 2008 - 70
Morningstar Advisor - Spring 2008 - 71
Morningstar Advisor - Spring 2008 - 72
Morningstar Advisor - Spring 2008 - 73
Morningstar Advisor - Spring 2008 - Is Health Care Immune to a Recession?
Morningstar Advisor - Spring 2008 - 75
Morningstar Advisor - Spring 2008 - Anatomy of a Mutual Fund Disaster
Morningstar Advisor - Spring 2008 - 77
Morningstar Advisor - Spring 2008 - Embrace Your Inner Contrarian
Morningstar Advisor - Spring 2008 - 79
Morningstar Advisor - Spring 2008 - Risks Worth Taking
Morningstar Advisor - Spring 2008 - 81
Morningstar Advisor - Spring 2008 - 82
Morningstar Advisor - Spring 2008 - Mutual Fund Analyst Picks
Morningstar Advisor - Spring 2008 - 84
Morningstar Advisor - Spring 2008 - 85
Morningstar Advisor - Spring 2008 - 86
Morningstar Advisor - Spring 2008 - 87
Morningstar Advisor - Spring 2008 - 88
Morningstar Advisor - Spring 2008 - Undervalued Stocks
Morningstar Advisor - Spring 2008 - 90
Morningstar Advisor - Spring 2008 - 91
Morningstar Advisor - Spring 2008 - Most Popular Variable Annuities
Morningstar Advisor - Spring 2008 - 93
Morningstar Advisor - Spring 2008 - 94
Morningstar Advisor - Spring 2008 - New at Morningstar and on MorningstarAdvisor.com
Morningstar Advisor - Spring 2008 - Back to the Garden
Morningstar Advisor - Spring 2008 - Cover3
Morningstar Advisor - Spring 2008 - Cover4
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