Medicare Is Already Broke

Last week we noted that the Social Security system is going broke. Medicare, though, which provides for the health of America’s seniors is already broke.

With 77 million baby boomers retiring, and a $716 billion reduction in future funding of Medicare thanks to the Affordable Care Act (Obamacare), Medicare may be in an even more precarious financial condition than the Social Security system.

Trustees for the Social Security system are also trustees for Medicare and wrote in their recently released annual report that Medicare Part A, which helps pay for hospital care, home-health services following hospital stays, skilled nursing and hospice care for the aged and disabled “fails the test of short-range financial adequacy, as its trust fund ratio is already below 100% of annual costs, and is expected to stay about unchanged to 2021 before declining in a continuous fashion until reserve depletion in 2029.”

Medicare Part B, which pays for physician, outpatient hospital, home health and other services, and Part D, which subsidizes drug coverage, are financed from premiums and general revenues, so they are currently adequately funded, but their costs are expected to rise steadily. So higher taxes and higher premiums will be needed to support them.

The federal government spent $595 billion on Medicare, in the 2016 fiscal year, but adding on the cost of premiums and other funds collected brings the total cost to $699 billion.

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Socialism’s Promise: Medicaid for All

For an example of how government entitlements always expand and never contract, consider what’s been happening to Medicaid.

Designed to provide health coverage for low-income and disabled Americans, Medicaid was signed into law in 1965 during the Johnson Administration.

Today, Medicaid ranks second only to public school education as the largest budget item in most states. Nationally, Medicaid spending now exceeds a half trillion dollars a year ($574.2 billion in FY 2016).

The true cost is higher, though. Both Medicaid and Medicare pay providers significantly less than what they receive from private payers – and Medicaid pays about two thirds of what Medicare pays. That means less access to healthcare, since one in three physicians refuses to see Medicaid patients. It also means non-Medicaid healthcare costs need to be higher to subsidize Medicaid.

Initially, Medicaid covered 4 million Americans. This year, it’s projected to cover 73.5 million Americans. In spite of the more than $20 trillion spent on the War on Poverty over that period, Medicaid enrollment from year to year has almost always increased, regardless of the overall health of the economy. It has also increased even though the poverty level has remained about the same – about 15% of the population.

But the worst is yet to come.

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24 Million Losing Health Insurance? Not Really.

The Affordable Care Act (ACA), as The Washington Times noted, is “a public policy flop of epic proportions.”

It is costing much more and insuring far fewer Americans than projected, while adding a huge government bureaucracy to the healthcare system, which was heavily regulated even before the ACA. Even though every American must either purchase health insurance or pay a penalty, many are choosing to pay the penalty instead. In spite of heavy subsidies, the number of Americans insured under the ACA is millions short of the number projected.

The Congressional Budget Office (CBO) forecasted In February 2013 that 26 million Americans would be insured through the ACA by 2017. Instead, only 10 million Americans are insured through the ACA – in spite of government subsidies and penalties requiring enrollment.

Meanwhile, new research from the Health and Human Services Department shows that, on average, premiums in the individual market have more than doubled since 2013 in the 39 states where Obamacare exchanges are federally run.

In spite of sharply rising premiums, insurers are bailing on the ACA (aka Obamacare), because they are losing money on it. Blue CrossBlue Shield of Kansas City, for example, has just withdrawn its Obamacare plans for Kansas and Missouri, citing losses of $100 million. In many markets, Americans who use the federal exchanges to purchase insurance have only one insurer from which to purchase insurance. In some cases, insurers have withdrawn completely.

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Trump vs. the World

During the presidential campaign, President Trump often came off as a bully. Now that he’s president, the bullying is coming from others.

The “resistance,” the media, academics, celebrities and others have not accepted him as their president. On any given day, you’re likely to read more favorable reporting about North Korean leader Kim Jong-Un than you are about President Trump.

Granted, his statements often accentuate the negative and eliminate the positive. His tweets, at least the ones that catch the attention of journalists, are sometimes crude or unpresidential and many of his braggadocious claims, at best, exaggerate the truth.

But with 100 days gone, is the widespread criticism warranted? How is he really doing as president? And how does his presidency compare with previous presidents?

Before considering his performance to date, keep in mind that judging a president based on such a short period is like judging a corporation based on its performance for a quarter. A presidential term is 1,461 days, so the first 100 days account for about 7% of the president’s term.

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Obamacare Resuscitated

“If you don’t buy this magazine, we’ll kill this dog.”

So said a cover of National Lampoon back in 1973. We’re reminded of the infamous cover when we reflect on the ignoble fate of the American Health Care Act (AHCA), which was meant to replace the widely disliked Affordable Care Act (ACA), aka Obamacare.National Lampoon

Republicans in Congress were faced with a similar choice last week. While the Republicans gained a majority based largely on the promise of overturning Obamacare, polls showed the AHCA was also unpopular. A Quinnipiac University poll found that only 17% of American voters approved of the AHCA, while 56% opposed it.

About one in a thousand voters knows what’s in the American Health Care Act, but given media propaganda about Americans being left to die without government-subsidized health insurance, it’s understandable why the act was unpopular.

It didn’t help that the Congressional Budget Office predicted that the proposed legislation would result in 24 million Americans lacking health insurance by 2026 (note: the CBO also predicted that, thanks to Obamacare, the individual market would enroll 26 million by this year. Instead, enrollment is just 10 million).

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The White House as Animal House

Why has the stock market been going bonkers, even as interest rates have begun to rise?

CNBC sums it up in two words: “animal spirits.” Wall Street types aren’t talking about the ghosts of dead puppies when they use the term “animal spirits.” It’s a reference to human exuberance based on expectations.

The term was a concoction of John Maynard Keynes, the guy who has been revered by liberals everywhere because of his notion that government spending is good for the economy. Of course it’s not — when government spends, we pay — but politicians, journalists, academics and even many economists who should know better like to be called neo-Keynesians, so they follow along.

Coming up with the term “animal spirits” to describe human behavior is perhaps Mr. Keynes’ second worst offense.

Any time an alleged expert makes a reference to “animal spirits,” he or she gets quoted, since it sounds like deep thinking to most journalists and at least it’s more colorful than saying “consumers are feeling more confident about the economy, because their employers are no longer being regulated into bankruptcy.”

Used in a sentence: John Canally, chief economic str

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Fear Politicians, Not Clowns

Clowns have been on a rampage this year, with creepy clowns—sometimes armed—threatening victims not only throughout the U.S., but in other countries. According to a poll conducted by Chapman University, Americans are more afraid of clowns than they are of climate change.clown

Clowns? Don’t make me laugh. Even the “Killer Clowns from Outer Space” are sugar-and-spice-and-everything-nice compared with The Hillary and The Donald. This Halloween, trick-or-treaters have cast their votes in favor of both presidential candidates. They don’t need no stinkin’ clowns to scare people. They’re dressing as two of the scariest people in America.

What makes politicians so scary? Consider just a few examples:

Obamascare. Premiums are jumping an average of 25% for the benchmark plan on Healthcare.gov. But don’t worry about Americans losing their coverage. Most of the coverage is paid for by us taxpayers. Tell me again … why is it called the Affordable Care Act?hill-mask

Obamascare II. Hillary Clinton, if elected president, will seek to expand the Affordable Care Act. With also-very-scary U.S. Senators Bernie Sanders and Elizabeth Warren there to push things along, socialized medicine will likely be inevitable, just as retiring baby boomers are beginning to add to the strain on the system. Socialism, here we come! Americas will no longer have to cross into Cuba for real health care.

Donald Trump would like to repeal of the Affordable Care Act, although we’re not sure what he’d put in its place. Could it be any worse?

We’re all going to be poor. The federal debt doubled under President Obama. It’s approaching $20 trillion, but it’s projected to grow even more rapidly in the future.trump

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Obama’s Legacy: Adults Living with Their Parents

There’s a bright side to the upcoming presidential election, even if you dislike both candidates—it will bring an end to the Obama administration.

That may seem like a harsh assessment, but the past eight years have not been good to the U.S. economy, which has been weaker than instant coffee.  As POTUS, President Obama bears much of the responsibility.oecd-2_0

How bad has economic performance been? Today, about 66.6% of American youth aged 15 to 29 are living with their parents. That’s up from 62.8% before the Great Recession. Fifteen-year-olds should, of course, be living at home. But 29 year olds? Adults don’t typically live with mom and dad if they can afford to live away from home.

Talk all you want about the Great Recession, but that was eight years ago. And if you think tax cuts and insufficient spending by the Bush administration resulted in the economic malaise of the past eight years, you may want to consider reading economists other than Paul Krugman.

President Obama’s Forecasts vs. Reality

The Wall Street Journal may not be a fan of the president, but the recent review it published of the Obama economy by Lawrence Lindsey, a former Federal Reserve governor and assistant to President George W. Bush for economic policy, couldn’t have been fairer. It compares what President Obama said would happen with what actually happened.

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Obamacare in Massachusetts: $1 Billion Cost, Fewer Insured

The big news last week, if you believe it, is that the Affordable Care Act (aka, Obamacare) has reduced the number of Americans who do not have health insurance to only 8.6% of the population.

In other words, if you provide heavily subsidized insurance and tax those who fail to take it, you can reduce the number of uninsured Americans to 8.6%.  But, in spite of the penalties and giveaways, the number of uninsured is still high.  Even before Massachusetts initiated healthcare reform in 2006 under then-governor Mitt Romney, the uninsured rate in the state was only 7%.obamacare-2

Regardless, all but a small percentage of Americans are now insured, if you believe the estimates of a government agency–the Centers for Disease Control–talking about a government program–the Affordable Care Act (aka, Obamacare).  And it’s taken only five years!

As residents of Massachusetts, we can be proud that we’re number one. That is, we have the lowest percentage of uninsured residents in the country (although the stats we found put the number at anywhere from 2.5% to 3.5%).

Well, that’s great … but are Massachusetts rates low because of Obamacare or because of its predecessor, Romneycare?  And what has the cost of Obamacare compliance been for Massachusetts residents?

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The Neverending Story

Why change?

It’s been more than five years since The Federal Reserve Board began its quantitative easing program.  We’ve had QE, QE 2, Operation Twist and the never-ending QE 3.  The Fed’s portfolio of bonds exceeds $4 trillion and it now owns more than a third of all bonds issued by the U.S. government.

The net result of this never-before attempted experiment in easy money policy has been a still slumping job market, growth around 2% vs. a non-QE average of 3.3% and a drop in personal income of 4.7% since the “recovery” began.  At least there hasn’t been any deflation.

Yet new Fed Chair Janet Yellen announced this week that she’s “staying the course,” continuing QE maybe forever.  Although she said she plans to continue tapering, too, she added that the bond buying program is “not on a preset course,” so perhaps The Fed may taper its tapering, creating an untapering by buying even more bonds.

After all, $65 billion a month doesn’t buy what it used to, even with today’s low rate of inflation.

The market reacted positively, with the Dow Jones Industrial Average jumping nearly 200 points.  Once again, just as it looked like the market was reacting to real business conditions, the Queen of QE proved that the market is still firmly under the Fed’s control.

What Ceiling?

Remember “The Neverending Story?”  The book, which was made into a movie, takes place in a fantasyland, in which a dark entity called “The Nothing” threatens to consume everything.  In the neverending story of QE, “The Nothing” could be The Fed itself, consuming every bond in sight, or the federal government, consuming everything and casting a pall of new regulations that threaten job growth and recovery.

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