Medicare’s Latest Raw Deal

Posted On Nov 29, 2016 By Dave Gonigam

  • For Medicare’s unlucky 30% of enrollees, another double-digit rate increase
  • “State social security” — a new source of steady retirement income
  • “Reality intrudes” on the market’s Trump bump
  • Rickards identifies the players jockeying for power on Team Trump
  • Student debt and the college football playoffs
  • The most shocking thing about the mainstream’s blacklist of alternative news sites

Gee, how generous: For “high-income” Medicare beneficiaries, Part B premiums for 2017 will rise “only” 10%.

As we explained last month, the measly 0.3% cost-of-living adjustment (COLA) for Social Security next year would likely translate to substantial increases in Part B premiums for about 30% of Medicare recipients. But at the time, we didn’t know how much. We figured the feds would wait until after Election Day to drop the news. We were right.

The 10% increase is roughly half of what the experts who follow these matters were counting on. Hooray?

In case you’re new to all of this — and wonder whether it applies to you — here’s a refresher.

Congress passed and President Reagan signed a law in 1987 affecting Social Security and Medicare. If there was no Social Security COLA in a given year — because the government reckoned there was no inflation, heh — then about 70% of people enrolled in Medicare Part B would be “held harmless” and not have to fork over the usual premium increase.

But there was a flip side: In those years, Medicare’s ever-rising costs would have to be shouldered by the other 30% who aren’t “held harmless.” Thus, their premiums would skyrocket. In 2010, 2011 and 2016, this unlucky group faced premium increases of about 16%.

And so the teensy 2017 COLA of 0.3% means a 10% Part B premium increase.

It’s not only “high-income” Medicare enrollees who fall into this unlucky 30%.

If you’re old enough for Medicare but you haven’t started collecting Social Security, you’re stuck. Ditto if you were a teacher or other government worker who didn’t pay into the Social Security system.

And what constitutes high-income, you wonder? For couples, the jacked-up premiums start at $170,000 a year. And they increase steadily up to $428,000. And those income thresholds are not adjusted upward for inflation each year.

These premium increases are insult added to injury for American retirees.

They come on top of Social Security COLAs that don’t cover the rising cost of living… and pitifully low interest rates that make it impossible to pull down a respectable income, even with a seven-figure net worth.

That’s what made me perk up when publisher Doug Hill of our Laissez Faire unit tipped me off to “state social security.” You’ve probably never heard of it. Doug wasn’t even familiar with it until earlier this year. But it could be the key to saving your retirement.

“After a lengthy investigation that spanned most of 2016,” Doug says, “we discovered this relatively unknown state-sponsored program. It’s an investing strategy that can pay you as much as 28 times more than FDR’s broken and soon to be bankrupt federal Social Security.”

It’s not a welfare program. You’re not forced to pay into it in any way. But thanks to this state-sponsored plan, a fellow named Brett earned $92,000. Click here and Doug will show you how you could too.

To the markets, where all eyes are on OPEC. Again.

Yesterday, rumors heated up that the OPEC nations would come to terms on a deal to freeze or cut oil production. A barrel of West Texas Intermediate soared past $47. Today, the rumors are cooling again and WTI has shed $2. We’ll know something for sure tomorrow.

In the meantime, the major U.S. stock indexes are drifting higher, the Dow back above 19,100. Treasuries are selling off, the yield on a 10-year note now 2.34%. Ditto for gold, which has been set back to $1,187. The dollar is flat relative to major foreign currencies.

The big economic number today is the Commerce Department’s latest guess at third-quarter GDP — up an annualized 3.2%, compared with the previous guess of 2.9%. Consumer spending was the big driver; growth in business investment is next to nil. To the mainstream, a strong consumer is the only thing that matters… but to us, the numbers look like another sign of an economic expansion in its very late stages before the inevitable contraction.

“After the initial market euphoria from the Trump election victory, reality is beginning to intrude,” says Jim Rickards. “Many of Trump’s individual policies are pro-growth, but collectively, they don’t add up.

“The Trump economic team is a mass of contradictory forces. This is not to blame Trump. He’s a successful businessman, not an economist. He has other priorities (Cabinet picks, immigration, ISIS, Supreme Court appointments, etc.) before he even turns to economic policy.

“Trump advisers such as David Malpass and Steve Bannon favor renegotiating or tearing up trade deals. Other advisers, such as VP Mike Pence and Larry Kudlow, favor free trade.

“Advisers such as Steve Moore and Art Laffer want tax cuts. Still other advisers, such as Judy Shelton, want to take a look at a gold standard, which implies higher gold prices. Malpass and Moore also like a strong dollar, which implies lower gold prices. And so it goes. These contradictions will take months to sort out.”

[Just in: Trump has named a transportation secretary. It’s GOP apparatchik Elaine Chao — labor secretary under Bush 43 and wife of Senate Majority Leader Mitch McConnell. So much for draining the swamp…]

“Meanwhile,” Jim goes on, “Steve Bannon is pushing hard for a $1 trillion infrastructure spending plan at the same time that others want tax cuts. Art Laffer argues that the tax cuts are self-financing (the famous ‘Laffer curve’).

“Tax cuts may be a good idea for growth, but there is little evidence that they are self-financing. Big spending and tax cuts are a recipe for huge deficits on top of the $20 trillion in U.S. debt already outstanding.

“Will the Fed accommodate these big deficits with ‘helicopter money’? Again, no one knows for sure. But my early estimate is that Yellen will lean against inflation with preemptive rate hikes starting in December and continuing in 2017. Yet this rate hike path could throw the U.S. into a recession.

“On balance, markets look stretched. Stocks ran too high, too fast. Gold, bonds and the euro are probably oversold. We are watching carefully for these trends to reverse.

“This may not be the time to place big bets. Cash is a better alternative when there’s this much uncertainty. But there may be a chance to make contrarian bets on stocks, bonds, gold and euros from these levels. That’s what we’ll be watching in the weeks ahead.”

With the college football playoff race heating up… we see that students at Big Ten universities carry the heaviest debt burden among college football’s “Power Five” conferences.

We glean this random fact from the researchers at Student Loan News, who’ve crunched the numbers for the Class of 2015 from the test-prep and financial-aid outfit Peterson’s.

The average debt per borrower at a Big Ten (or is that “B1G”?) school amounts to $26,976. That compares with $23,168 in the Pac-12 — which is the lowest average.

Drill down to individual schools within the five conferences and the numbers diverge further. The highest average debt among all 64 schools is the University of Pittsburgh, in the ACC — $38,045. On the low end, there’s UCLA, in the Pac-12, at $16,402.

The widest range with a conference is found in the ACC, with Pitt on the high end and Miami’s average only half that of Pitt’s. The most parity lies within the SEC — barely $8,000 separates Florida on the low end and Mississippi State on the high end.

Other takeaways: Debt levels tend to be low at the California state schools… and very high at Pennsylvania’s hybrid public-private schools, which include both Pitt and the Big Ten’s Penn State.

To the mailbag, where we naturally got much response to yesterday’s episode about “fake news” and The Washington Post’s sloppy attempt to smear 200 websites, including David Stockman’s Contra Corner, as Russian propaganda.

“What do you really expect?” says a representative entry. “The news media that for decades have told us they are the only sources of news that can be trusted to provide the public with accurate, unbiased information have shown themselves to be the opposite of what they say they are. It was totally in the tank for Hillary this election, so incredibly biased that even its strongest supporters were aware of it.

“And now that the credibility of major news media is totally shot, they have to come up with a boogeyman to present before the public to show that they were only doing it to prevent the Russians from electing Trump, who by their standards is a Russian stooge.

“It’s interesting that they never bother to mention that Hillary arranged for a company called Uranium One to be sold to those very Russians. The uranium that they bought accounts for some 20% of the U.S. potential stockpile. Can’t let patriotism get in the way of making a buck or two.”

“Don’t feel bad that Agora Financial and The Daily Reckoning didn’t make the list while Contra Corner did,” writes another reader.

“As contrarian and libertarian as you guys are, most people don’t know how to rank and categorize Agora, Stockman and The 5. It just means you confuse the leftists as much as you do your readers!

“Frankly, there’s so much to criticize about our government and its system and leaders, the two Daves have no worry about running out of contrarian material. I’m surprised you haven’t mentioned much about Castro’s death, although it’s merely a bump (or pothole) in the road to financial crisis we all drive on. Keep up the good work keeping up us on our toes. If you guys started writing like the elites, I’d drop you like a lead weight.”

The 5: If we had something interesting to say about Castro, we would. Drawing on our fine command of the English language, however, we shall say nothing. (Apologies to Robert Benchley.)

“Fake news?” muses one of our regulars.

“As in: ‘Our job is to give people not what they want, but what we decide they ought to have,’ as former CBS News president Richard Salant pontificated to us poor unwashed masses here in flyover country?

“As in NY Times Pulitzer winner Walter ‘I don’t see no stinkin’, starvin’ gulags in Stalin’s 1930s Ukraine’ Duranty?

“Whenever I did something wrong in junior high, I, too, was quick to resort to the tu quoque argument as well – or, better, as here with the lamestream media, deny culpability completely and put whole blame for what I did on someone else. Truth is now that the Fourth Estate has been outed as no better than the National Enquirer. It is just using the same old Clinton three-step shuffle of deny, delay and divert (attention). Sorry, ain’t buyin’ it.

“The Gray Lady and all her other journalistic harridans in the wicked witch’s castle just had water thrown on them. I, for one, will be glad to see them melt away.”

The 5: For whatever it’s worth… as a recovering TV news pro steeped in the history of the biz, I’m fairly sure the Salant quotation has a more innocuous explanation: He was saying what the people “ought to have” was exclusively hard news delivered in a dreary style, as opposed to the razzle-dazzle entertainment values encroaching on the trade in his era.

It was during Salant’s tenure that the CBS Evening News of Aug. 16, 1977, passed over the death of Elvis Presley as the lead story — opting instead for a tedious procedural update on the Panama Canal treaty’s status in the Senate.

That said… we also know from Carl Bernstein’s famous Rolling Stone article of the same year that Salant was a key player in the CIA’s Operation Mockingbird — in which CBS, the Times and other major media outlets colluded with the agency to steer coverage and suppress embarrassing disclosures.

The shocking thing about the Post story — to your editor, anyway — is how it chucked aside conventional journalistic norms in pursuit of its obsession.

The lack of transparency about PropOrNot’s membership and funding? The lack of hard evidence linking the websites to the Russian government? “Any halfway decent editor would have been scared to death by any of these factors,” writes Matt Taibbi in Rolling Stone. “Moreover the vast majority of reporters would have needed to see something a lot more concrete than a half-assed theoretical paper from such a dicey source before denouncing 200 news organizations as traitors.

“But if that same source also demanded anonymity on the preposterous grounds that it feared being ‘targeted by Russia’s legions of skilled hackers’? Any sane reporter would have booted them out the door. You want to blacklist hundreds of people, but you won’t put your name to your claims? Take a hike.”

Never mind the Post’s apparent failure to seek out “the other side of the story” and, you know, ask someone on PropOrNot’s list for reaction.

The story is such a disgrace, and such a threat to free expression, that it offsets any of the good that Post editor Marty Baron did in helping expose the pedophile-priest scandal when he was at The Boston Globe 15 years ago…

Best regards,

Dave Gonigam
The 5 Min. Forecast

P.S. It’s no secret that worldwide government “elites” have got their knives out for the new president…

But what if we told you they’ve already cooked up the “plot” that could doom him and America to four years (or more) of financial hell?

Exactly 19 days BEFORE he takes the oath of office, a “time bomb” will go off… that decimates the dollar, markets, U.S. jobs and worse.

And here’s how it will go down…


Other Articles In 5 Min. Forecast