Bob’s Journal

Medicare Advantage Plans Will Shrink in 2025

In the last few months, I passed along warnings that big changes in Medicare Advantage plans were likely in 2025. The first details of the changes have emerged.

Insurers who sponsor Advantage plans reported earlier this year that costs exceeded expectations in 2024, primarily because members needed more medical care than estimated.

In addition, the government announced policy changes for 2025 that would make the plans even less profitable. So, Advantage sponsors began reformulating their plans for 2025.

The most significant adjustment announced so far is that Humana, the second-largest provider of Advantage plans, will withdraw from 13 markets. About 560,000 Humana Advantage plan members, more than 10% of the company’s total, will have to look for new Medicare coverage for 2025.

A smaller Advantage plan provider, Centene, announced it would stop offering plans in six states in 2025. BlueCross BlueShield also announced it would withdraw from some markets.

In another series of changes that beneficiaries should be aware of, some health care providers announced they will not accept or participate in certain Advantage plans.

For example, Sanford Health, a major medical provider in the Midwest, said it would no longer accept Humana’s Advantage plan.

Essentia Health said it would stop participating in Advantage plans from UnitedHealthcare and Humana.

Other providers already stopped participating in Advantage plans in 2024. In a recent survey, about 16% of medical providers said they planned to stop accepting at least some Advantage plans in the next two years.

The medical providers say Advantage plans offer low reimbursement rates, deny coverage of recommended treatment too often, and are slow to pay providers.

Medicare beneficiaries who are in Advantage plans or considering one in 2025 need to carefully evaluate the offerings when Open Enrollment begins Oct. 15.

If your Advantage plan is available again in 2025, there might be significant differences, such as higher premiums, copayments and deductibles. A plan also might reduce the care and prescription drugs that are covered.

Perhaps more importantly, there could be a substantial reduction in the providers available through the plan.

Medical care is fully covered by the plan only when the provider is in the plan’s network. For out-of-network care, beneficiaries must pay all or most of the cost.

The doctors, hospitals and other providers you want to provide care to you might no longer participate in an Advantage plan. Check the list of plan providers during Open Enrollment to be sure key providers you want still are on the list for 2025.

Two More States Exempt Social Security Benefits from Their Income Taxes

Two fewer states now impose income taxes on Social Security benefits, and another will join them soon.

Missouri and Nebraska exempt benefits received on or after January 1, 2024 from their state income taxes.

In 2026, West Virginia will join the states in which benefits are tax free. Until then, residents with higher incomes owe state income taxes on their benefits.

Colorado taxes benefits received by those ages 55 to 64. Social Security benefits are exempt once the recipient reaches age 65.

Connecticut, Kansas, Montana, New Mexico, Rhode Island and Vermont exempt Social Security benefits from taxes when the beneficiary’s adjusted gross income is below certain levels.

Minnesota and Utah have complicated provisions under which many beneficiaries don’t owe taxes on their benefits.

The other 40 states and the District of Columbia exempt Social Security benefits from state income taxes.

The Mysteries of Double and Triple ETFs

Leveraged exchange-traded funds (ETFs) have been attracting more investors, but it’s important to understand how the ETFs work before investing. That’s especially true of the new, leveraged single-stock ETFs.

A leveraged ETF (or ETP for exchange-traded product) uses options or futures contracts and sometimes other forms of leverage to give the investor a multiple of the daily return of the underlying investment.

A triple S&P 500 Index ETF should give three times the return of the index. If the S&P 500 rises 1% one day, the ETF should rise 3%. The leverage works both ways. If the index declines 1%, the ETF drops 3%.

Historically, the leveraged ETFs do a good job of providing those leveraged returns daily.

What investors need to realize is the proportionate returns usually don’t happen over longer periods, especially for leveraged ETFs based on a single stock.

For example, on any particular day, GraniteShares 3x Long MicroStrategy Daily (LMI3) often gives the investor exactly the expected return of three times the day’s move in MicroStrategy’s stock price.

But longer-term returns are different.

Earlier this year, MicroStrategy’s year to date gain exceeded 100% while LMI3 was down almost 82%, according to a report from Bloomberg.

Longer-term returns of the funds work this way because of the effects of daily rebalancing of the options contracts and other assets held by the fund.

Since this outcome is not uncommon with leveraged ETFs, their written materials warn against investing in them for the long-term.

The disproportionate long-term results occur if the underlying investment has up-and-down volatility. If it steadily increases or decreases in price (which is unlikely to happen), then the long-term return of the fund should equal the target multiple over the long term.

Single-stock ETFs are only about two years old and have more than $13 billion invested in them. Fortunately, the data indicate many investors owning the ETFs understand they aren’t long-term investments and trade them frequently.

The Data

The Consumer Sentiment Index from the University of Michigan increased for the second consecutive month in September to 69.0, the highest level since May, from 67.9 in August.

Both the current conditions and expectations portions of the index improved.

The Empire State Manufacturing Index jumped to positive 11.5 in September from negative 4.7 in August. September marked the highest level for this index since April 2022 and the first positive reading since November 2023.

Retail sales increased 0.1% in August after rising 1.1% in July (which was revised higher from the 1.0% reported initially). Over 12 months, retail sales increased 2.1% through August, down from 2.9% through July.

After excluding autos and gasoline, retail sales increased 0.2% in August, down from a 0.4% increase in July.

Industrial production rose 0.8% in August after falling 0.9% in July. Over 12 months, industrial production was unchanged through August and down 0.7% through July.

Manufacturing production increased 0.9% in August, up from a 0.7% decline in July. Over 12 months, manufacturing production was 0.2% higher through August after being down 0.7% through July.

Home builders were a little more positive in September than August, according to the Housing Market Index from the National Association of Home Builders (NAHB). The index was 41 in September, rising from 39 in August. The index had declined each of the four previous months.

Housing starts jumped 9.6% in August, the biggest monthly increase in nine months, after declining 6.9% in July.

Starts of single-family homes increased 15.8% in August while multifamily home starts fell 6.7%.

The Producer Price Index (PPI) increased by 0.3% in August, the same amount as in July. Over 12 months, the PPI increased 1.7% through August and 2.1% through July.

The core PPI, which excludes prices for food and energy, increased 0.3% in August after falling 0.2% in July. Over 12 months, the core PPI was up 2.4% through August and 2.3% through July.

New unemployment claims increased by 2,000 to 230,000 in the latest week.

Continuing claims, which lag a week behind new claims, rose to 1.850 million from 1.845 million.

The Markets

The S&P 500 rose 2.60% for the week ended with Tuesday’s close. The Dow Jones Industrial Average gained 2.20%. The Russell 2000 increased 5.33%. The All-Country World Index (excluding U.S. stocks) added 2.17%. Emerging market equities advanced 2.50%.

Long-term treasuries gained 0.15% for the week. Investment-grade bonds increased 0.74%. Treasury Inflation-Protected Securities (TIPS) added 0.73%. High-yield bonds gained 0.85%.

In the currency arena, the U.S. dollar declined 0.46%.

Energy-based commodities increased 4.64%. Broader-based commodities rose 5.01%. Gold gained 2.06%.

Bob’s News & Updates

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My previous book, “Where’s My Money: Secrets to Getting the Most out of Your Social Security,” is receiving mostly five-star reviews on Amazon for telling you clearly what your benefit options are in different situations and how to determine the best choice for you. You can find it on amazon.com or Regnery.com.

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A recent five-star review of my book, “The New Rules of Retirement” on amazon.com, said, “A complete retirement guide! One of the best books on this topic!” Click for more details about the revised edition of “The New Rules of Retirement.”

If you’re interested in my books, check my amazon.com author’s page.

I’m a senior contributor to the Forbes.com blog. You can view my contributor page here.