Articles

Retiree Budget-Buster: Big Price Hikes for Medicare
Premiums in 2016

Some Medicare beneficiaries could
see their rates jump by more than 50%.

By Martha Lynn Craver, August 2015

Retirees,
adjust your budget: Double-digit price hikes for Medicare Part B premiums
are coming next year
.

The actual rates for Part B (which
covers the costs of doctor visits and outpatient care) will be announced in
October and take effect Jan. 1. The boost may be 15% for all participants or a
whopping 52% for some, depending on whether Social Security recipients see a
cost-of-living raise for 2016.

If Social Security checks are
increased, everybody will pay more for Part B, bumping the
monthly premium from $104.90 to $120.70 to cover higher expenses. That’s the
scenario for a 15% increase in costs.

But without a raise in Social
Security benefits, higher Medicare fees couldn’t be charged to most folks. So
the larger increase would apply to about 30% of Medicare beneficiaries:

· 
those who enroll in Part B in 2016,

· 
people who don’t have their premiums deducted from Social Security
payments,

· 
individuals with annual incomes above $85,000,

· 
and people eligible for both Medicare and Medicaid.

For the last group, known as “dual
eligibles,” Part B premiums are paid by the state where they live.

Medicare beneficiaries in these
groups would see bills jump to $159.30 a month
unless the Obama administration took steps to lessen the
pain. That’s possible, but not certain.

__________________________________________________________________________________

The Size of the Derivatives Bubble Hanging Over the Global
Economy Hits a Record High

By Michael Snyder
Global Research, May 27, 2014
Economic Collapse

 

Bubble-Photo-by-Brocken-Inaglory-300x300The global derivatives
bubble is now 20 percent bigger than it was just before the last great
financial crisis struck in 2008. It is a financial bubble far larger than
anything the world has ever seen, and when it finally bursts it is going to
be a complete and utter nightmare for the financial system of the planet. According
to 
the Bank for
International Settlements
, the total notional value of derivatives
contracts around the world has ballooned to an astounding 710 trillion
dollars ($710,000,000,000,000). Other estimates put the grand total well over
a quadrillion dollars. [
Background.] If that sounds like a lot of money, that is because it is. For
example, U.S. GDP is projected to be in the neighborhood of around 17
trillion dollars for 2014. So 710 trillion dollars is an amount of money that
is almost incomprehensible. Instead of actually doing something about the
insanely reckless behavior of the big banks, our leaders have allowed the
derivatives bubble and these banks to get larger than ever. [
Background.] In fact, as I have written about
previously
, the big Wall Street
banks are collectively 37 percent larger than they were just prior to the
last recession. “Too big to fail” is a far more massive problem than it was
the last time around, and at some point this derivatives bubble is going to
burst and start taking those banks down. When that day arrives, we are going
to be facing a crisis that is going to make 2008 look like a Sunday picnic.
[For background on why derivatives are so dangerous, read 
thisthis and this.]

If you do not know what a derivative
is, Mayra Rodríguez Valladares, a managing principal at MRV Associates,
provided a pretty good definition in her recent article 
for the New York Times

A derivative, put simply, is
a contract between two parties whose value is determined by changes in the
value of an underlying asset. Those assets could be bonds, equities,
commodities or currencies. The majority of contracts are traded over the
counter, where details about pricing, risk measurement and collateral, if
any, are not available to the public.

In other words, a derivative does not have any
intrinsic value. It is essentially a side bet. Most commonly, derivative
contracts have to do with the movement of interest rates. But there are many,
many other kinds of derivatives as well. People are betting on just about
anything and everything that you can imagine, and Wall Street has been
transformed into the largest casino in the history of the planet. After the
last financial crisis, our politicians promised us that they would do
something to get derivatives trading under control. But instead, the size of
the derivatives bubble has reached a new record high. In 
the New York Times
article I mentioned above
, Goldman Sachs and Citibank were singled out as two players
that have experienced tremendous growth in this area in recent years…

Goldman Sachs has been increasing its
derivatives volumes since the crisis, and it had a portfolio of about 
$48 trillion at the end of 2013. Bloomberg
Businessweek 
recently reported that as part of its growth strategy, Goldman
plans to sell more derivatives to clients. Citibank, too, has been increasing
its derivatives portfolio, despite the numerous capital and regulatory
challenges, In fact, its portfolio has risen by 
over 65 percent since the crisis — the most of any of the four
banks — to 
$62 trillion.

According to official government
numbers
, the top 25 banks in
the United States now have a grand total of more than 236 trillion dollars of
exposure to derivatives. But there are four banks that dwarf everyone else.
The following are the latest numbers for those four banks…
JPMorgan Chase Total Assets: $1,945,467,000,000 (nearly 2
trillion dollars) Total Exposure To Derivatives: $70,088,625,000,000 (
more than 70 trillion
dollars
) Citibank Total Assets: $1,346,747,000,000 (a bit more
than 1.3 trillion dollars) Total Exposure To Derivatives: $62,247,698,000,000
(
more than 62 trillion dollars) Bank Of America Total Assets: $1,433,716,000,000 (a bit more than 1.4 trillion
dollars) Total Exposure To Derivatives: $38,850,900,000,000 (
more than 38 trillion
dollars
) Goldman Sachs Total Assets: $105,616,000,000 (just a shade
over 105 billion dollars – yes, you read that correctly) Total Exposure To
Derivatives: $48,611,684,000,000 (
more than 48 trillion dollars) If the stock market keeps going up, interest
rates stay fairly stable and the global economy does not experience a major
downturn, this bubble will probably not burst for a while. But if there is a
major shock to the system, we could easily experience a major derivatives
crisis very rapidly and several of those banks could fail simultaneously.
There are many out there that would welcome the collapse of the big banks,
but that would also be very bad news for the rest of us. You see, the truth
is that the U.S. economy is like a very sick patient with an extremely
advanced case of cancer.  You can try to kill the cancer (the banks),
but in the process you will inevitably kill the patient as well. Right now,
the five largest banks account for 
42 percent of all loans in the entire country, and the six largest
banks control 
67 percent of all banking assets. If they go down, we go down too.
That is why the fact that they have been so reckless is so infuriating. Just
look at the numbers for Goldman Sachs again. At this point, the total
exposure that Goldman Sachs has to derivatives contracts is more than 
460 times greater than their total assets. And this kind
of thing is not just happening in the United States. German banking giant
Deutsche Bank has 
more than 75 trillion
dollars
 of exposure to
derivatives. That is even more than any single U.S. bank has. This
derivatives bubble is a “
sword of Damocles” that is hanging over the global economy by a thread day after
day, month after month, year after year. At some point that thread is going
to break, the bubble is going to burst, and then all hell is going to break
loose. You see, the truth is that virtually none of the underlying problems
that caused the last financial crisis have been fixed. Instead, our problems
have just gotten even bigger and the financial bubbles have gotten even
larger. Never before in the history of the United States have we been faced
with the threat of such a great financial catastrophe. Sadly, most Americans
are totally oblivious to all of this. They just have faith that our leaders
know what they are doing, and they have been lulled into complacency by the
bubble of false stability that we have been enjoying for the last couple of
years. Unfortunately for them, this bubble of false stability is not going to
last much longer. A financial crisis far greater than what we experienced in
2008 is coming, and it is going to shock the world. ———- A former Washington,
D.C., attorney, Michael Snyder runs a
number of websites, including:

________________________________________________________________________

The Decline of ObamaCare

Fewer enrollees and
rising loss ratios will force a rewrite in 2017.

 updated Oct. 25, 2015 9:52 p.m. ET

ObamaCare’s image of invincibility
is increasingly being exposed as a political illusion, at least for those with
permission to be honest about the evidence. Witness the heretofore unknown
phenomenon of a “free” entitlement that its beneficiaries can’t afford or don’t
want.

This month the Health and Human
Services Department dramatically discounted its internal estimate of how many
people will join the state insurance exchanges in 2016. There are about 9.1
million enrollees today, and the consensus estimate—by the Congressional Budget
Office, the Medicare actuary and independent analysts like Rand Corp.—was that
participation would surge to some 20 million. But HHS now expects enrollment to
grow to between merely 9.4 million and 11.4 million.

Editorial Board Member Joe Rago
explains why the president’s signature healthcare law is failing to meet its
enrollment projections. Photo credit: Getty Images.

Recruitment for 2015 is roughly 70%
of the original projection, but ObamaCare will be running at less than half its
goal in 2016. HHS believes some 19 million Americans earn too much for Medicaid
but qualify for ObamaCare subsidies and haven’t signed up. Some 8.5 million of
that 19 million purchase off-exchange private coverage with their own money,
while the other 10.5 million are still uninsured. In other words, for every
person who’s allowed to join and has, two people haven’t.

Among this population of the
uninsured, HHS reports that half are between the ages of 18 and 34 and nearly
two-thirds are in excellent or very good health. The exchanges won’t survive
actuarially unless they attract this prime demographic: ObamaCare’s individual
mandate penalty and social-justice redistribution are supposed to force these
low-cost consumers to buy overpriced policies to cross-subsidize everybody
else. No wonder HHS Secretary Sylvia Mathews Burwell said meeting even the
downgraded target is “probably pretty challenging.”

The HHS survey shows three of four
ObamaCare-eligible uninsured people think having coverage is important—but four
of five say they couldn’t fit their share of the premiums into their budgets
even after the subsidies. They’re not poor; they tend to have jobs in
industries like construction, retail and hospitality but feel insecure financially;
and they prioritize items like paying down debt, car repairs or saving to buy a
home over insurance.

The law’s failure to appeal to the
young and rising middle class is already cascading through the insurance
markets. Researchers at the Robert Wood Johnson Foundation and Urban Institute
recently published a remarkable study of the industry barometer called medical
loss ratios, or MLRs, and the pressure is building fast.

MLRs measure the share of premium
revenue that flows to reimbursing medical claims. ObamaCare sets an MLR floor
of 80% for patient care, with one-fifth left over for overhead like
administration and profits, and the pre-ObamaCare 2010-13 historical trend for
the individual market ranged from 79% to 86%.

The researchers found that in 2014—the
first full year of claims experience in ObamaCare—average MLRs across all
health plans sold on 16 state exchanges roamed from 90% to 99%. Average MLRs in
11 states climbed to 100% or more, reaching as high as 121% in Massachusetts. A
business can’t stay solvent for long spending $1.21 for every $1 that comes in.

The 2014 MLRs are used to set rates
for 2016 premiums, which are still under regulatory review. But the researchers
estimate that to rebound to an MLR of 85%, premiums in the 11 money-losing
states need to rise by 10% to 36% in the best estimate and 23% to 52% in the
worst scenario. The familiar danger is that as rates rise, more people drop
out, and thus rates must rise still higher, as the states that attempted
ObamaCare-like regulatory schemes in the 1980s and 1990s discovered.

ObamaCare liberals pose as
what-works-and-what-doesn’t technocrats. So perhaps they’d care to explain what
it says about their creation that so many rational adults are willing to pay a
fine of $695 or 2.5% of their earnings, whichever is higher, for the privilege
of not buying an ObamaCare-compliant health plan.

***

ObamaCare will almost inevitably be
reopened in 2017, whoever wins the election. The good news is the emerging
consensus among Republican candidates about a credible, pragmatic and
optimistic alternative. Jeb Bush was the latest to release a plan two
weeks ago—and this is a debate that has always deserved to be litigated at the
presidential level to create a mandate for reform.

The basic approach is to deregulate
insurance and medical practice while replacing ObamaCare’s complex subsidy
schedule with a refundable tax credit for individuals who lack job-based
coverage. Unchained from benefit and redistribution mandates, insurance
products and prices would come to reflect what consumers want. The credit would
be sufficient to buy at least coverage for catastrophic expenses if people get
sick, and the trade-offs of such skinnier plans might look better to voters
priced out of ObamaCare.

GOP reformers also recognize that
the Cadillac tax on high-cost employer-sponsored health plans is a heat shield
that might let them solve some of the problems of the pre-2010 health finance
status quo. Substituting a cap on the tax-code subsidy that helps drive medical
inflation is more politically plausible with the Cadillac tax in place than
without.

Mr. Bush was shrewd to frame his
proposal with the vocabulary of innovation and aspiration. ObamaCare is built
on a 20th-century chassis that is ever less relevant to modern medicine and
consumer finance. If the law continues to underperform, voters may be open to a
new model that puts their choices and needs ahead of the political class’s.


Disclaimer: The contents of this article are
of sole responsibility of the author(s). The Centre for Research on
Globalization will not be responsible for any inaccurate or incorrect
statement in this article.