Commentary

There are constant releases of relevant economic data on the US economy.  I try to sort out the most important and give summaries for readers who want to understand what might be happening.  And there is a lot conflicting data.  Last week there was a very good 30 year Treasury bond auction, smaller in size than the shorter term debt issuance, which helps the sale.  Today, there was an outstanding 20 year Treasury bond auction, with a lower than expected interest rate on the final bid and excellent coverage in terms of amount of bids versus amount to be sold.  But it was a small auction, only $13 billion.  I am sure that a significantly larger auction, of the size similar to the 3 year auctions, for example, would encounter more difficulties.  I am puzzled to some extent by the Treasury’s strategy, focusing on selling massive amounts of new and rollover short term debt, which right now tends to have high rates and which will need to be replaced in the relative near term.  The Treasury seems to be praying that somehow the Federal Reserve or some other mechanism will lower rates substantially.  I don’t see how that can happen given the supply needs.  (ZH Post)

And the supply will be simply unprecedently enormous given the ongoing deficits.  Another release this week was the Congressional Budget Office’s update of the federal deficit for the current fiscal year, which ends in October.  (why we don’t use the calendar year for the federal government is a mystery, but it likely helps keep the public befuddled about our financial state).  The report finds that Bidementia is actually running a $2 trillion federal deficit this year, up 27% from the CBO estimate just in February.  Here’s how you get a deficit that big–you collect $324 billion in taxes in May, but you spend $670 billion.  Yes, you read that right, the federal government spent twice as much as it collected in May.  And don’t think it is because taxes are only paid in April–withholding and estimated taxes are due all year long.  The deficit just for May is $100 billion more than expected.  I remember when $100 billion was a huge deficit for a year.  (CBO Report)

Worse yet, the CBO projects that deficits over the next ten years will be over $22 trillion. That means total debt would be over $50 trillion.  That is unthinkable and unsustainable.  Interest payments would be over half of all federal expenses.  The spending has to stop now.  We need to eliminate all the insane “green” and “renewable energy” subsidies and spending, except for grid improvement.  That will save trillions.  Then we need serious reform of all the programs that have millions of slackers getting free food, free health care, free housing, and so on.  That will save trillions more.  A courageous Congress could balance the budget next year and stop piling on debt and interest costs.

And the real economy is suffering more than appears to be the case in “official” statistics like the job numbers put our by the BLS or any number of other garbage data releases by Bidementia.  We are in deep, deep shit and drastic action has to be taken now.

Okay to some extent this is a puff piece put out by a group supported by those who offer Medicare Advantage plans, but the data is real.  Medicare Advantage now covers over half of all beneficiaries.   The plans generally have better benefits at a lower cost, so have been attractive particularly to lower income persons.  In addition, over the last few decades most adults have had some form of health plan coverage from their employer, so continuing to be in one for Medicare does not feel like a big change.  Congress and CMS have been intently reviewing the program, particularly in regard to payment, which likely will result in downward adjustments, and enrollment growth will slow just because of the size of the MA population.  CMS and Congress are going to have to make a decision soon about what to do with traditional Medicare, which is essentially unmanaged and has poorer quality outcomes than MA.  A number of MA-lite initiatives have been launched in recent years including accountable care organizations, but they don’t have the same results.  The right thing to do is put every beneficiary in an MA plan, with an out-of-network option similar to traditional Medicare today.

In any event, the report focuses on the relative out-of-pocket spending by those in traditional Medicare versus MA enrollees.  The average MA member paid a little over $2500 less out of pocket than did a fee-for-service Medicare beneficiary, or around 40%.  Since MA members are on average lower-income, this is particularly meaningful for them.  And the gap in out-of-pocket spending has grown in recent years.  The results are true for both dual-eligible beneficiaries (those with Medicare and Medicaid) or Medicare-only.  The same level of savings is present when accounting for MA plan premium portion paid by beneficiaries and comparing to persons who have a Medicare Supplement.    (MA Report)