Bob’s Journal 7/3

Changes in Prior Approval Coming to Traditional Medicare, Medicare Advantage

There were two major announcements recently regarding prior approval of treatments and services for Medicare beneficiaries.

Original Medicare hasn’t required prior authorization of treatments and services, with a few exceptions. For most care, providers and patients agree on a treatment. Then, the treatment paperwork for approval and payment is submitted.

But a voluntary model program will test pre-approval for some services and treatments, according to a recent announcement from the Center for Innovation of the Centers for Medicare and Medicaid Services (CMS).

The model program is seeking medical providers to volunteer for the program from January 1, 2026, through December 31, 2031. The model will be restricted to New Jersey, Ohio, Oklahoma, Texas, Arizona, and Washington.

Providers who volunteer and are accepted will agree to seek prior authorization for 17 items and services, including skin substitutes, deep brain stimulation for Parkinson’s Disease, impotence treatment, and arthroscopy for knee osteoarthritis.

A provider can choose not to seek prior approval for a case. In that case, there will be a post-treatment review, and the provider will risk not being paid by Medicare for the treatment.

CMS initiated the program and selected the services because of a series of reports showing waste, fraud or abuse in certain areas. For example, Medicare spent up to $5.8 billion in 2022 on unnecessary or inappropriate services that had no clinical benefit, according to the Medicare Payment Advisory Commission.

Under the model, providers will submit the same information they currently do for payment approval after a service is provided to a beneficiary. The difference is that under the model, the information will be submitted earlier and the provider will wait for an approval before performing the services.

CMS will select companies to handle the prior authorizations and expect that they will use artificial intelligence and other tools in addition to medical professionals to review the submissions.

The companies will be paid based on the extent to which they saved the government money by stopping unnecessary services.

CMS said it will manage the program to avoid adverse impact on beneficiaries and providers.

In other news, more than 50 major insurers who sponsor many types of insurance plans announced that they will voluntarily streamline prior authorization of treatments and services in all insurance markets, including Medicare Advantage plans.

The announcement was in response to a number of recent reports and studies that found the authorization process was delaying treatment or causing patients to abandon treatment plans. Other reports indicated that a high percentage of treatments that were denied coverage eventually were approved if the patients or their providers appealed the decisions.

The insurers say they plan to have the new process in place by January. 1, 2027.

The Real Reason Dividends are Good

Investors, academics and financial advisors have debated the pros and cons of stock dividends for decades.

When a company pays a dividend, the company’s stock price adjusts automatically. Some academics and advisors believe dividends should be irrelevant. They believe total return is all an investor should consider.

But many individuals are more comfortable spending income than principal. They don’t want to sell stocks to pay for their needs. They saved for many years to accumulate the capital and don’t want to see it decline.

Other investors believe that dividend-paying stocks are less volatile than others. They’re safer investments but still appreciate during bull markets.

In fact, stocks that pay dividends have higher long-term returns, and investors seem to realize that, according to a recent study described in The Wall Street Journal.

The study found that dividend-paying stocks in the S&P 500 Index not only had higher returns than non-dividend-paying stocks, but the margin was significant.

Dividend payers had an average annual return of 9.2% over 50 years while non-dividend-payers rose only 4.3% annually.

The dividend-payers also had a lower standard deviation, meaning they were less volatile than the others.

There are exceptions, of course. Some long-term winning stocks, such as Berkshire-Hathaway, either never paid a dividend or didn’t pay dividends for a long time.

The article concluded that there’s nothing special about dividends, but there’s something special about companies that pay dividends.

How to Enhance Privacy and Security

More and more people want to make it difficult for electronic snoopers and marketers to find them. But that’s harder than ever because of all the records stored on each of us and the reach of technology. But it’s not impossible.

There are experts who help people go “off the grid” without retreating to remote locations and disengaging from the modern world.

There was an entertaining, informative account of the experts and their methods in a recent issue of The Atlantic.

You can learn a lot about how to become less well-known to the people and firms that try to gather as much information about people as possible. You’ll learn some of the extreme measures that celebrities and other take to protect their privacy and their wealth.

One expert had a false obituary published in the hope that it would confuse those trying to gather information about him.

Instead of using a driver’s license to prove your identity, you can obtain a passport card from the U.S. government. The advantage is the passport card doesn’t list your home address.

The article also discusses some remarkable tools that governments are using or testing. For example, some governments have technology that can identify a person by his or her gait. That and other tools are well beyond facial recognition software.

You might decide to take a few of the actions described in the article. Or you might decide it’s entertaining to read about but the work and expense aren’t for you.

The Data

The Consumer Sentiment Index from the University of Michigan was 60.7 at the end of June, up from 52.2 at the end of May and 60.5 in mid-May.

June is the first month the index increased since December 2024, when it was 74.0.

There were substantial improvements in consumers’ assessments of both their expectations and current conditions.

Personal income fell 0.4% in May, the first decrease since September 2021, following a 0.7% increase in April.

Employee compensation increased 0.4% in May. But there were decreases in government transfers, proprietors’ income and dividend income.

Personal consumption expenditures (PCE) fell 0.1% in May after rising 0.2% in April. Spending for services increased only 0.1% while spending on goods fell 0.1%.

The PCE Price Index increased 0.1% in May, the same rate as in April. Over 12 months, the PCE Price Index rose 2.3% through May and 2.2% through April.

The core PCE Price Index (which excludes food and energy prices and is the Fed’s preferred measure of inflation) was 0.2% higher in May after rising 0.1% in April.

Over 12 months, the core PCE Price Index was up 2.7% through May and 2.6% through April.

Durable goods orders jumped 16.4% higher in May after falling 6.6% in April. But a good part of the increase was in volatile transportation orders.

After excluding transportation and defense orders, which is considered a good proxy of business investment, durable goods orders increased 1.7% in May after declining 1.4% in April.

Pending home sales increased 1.8% in May and 1.1% for the 12 months ending with May. Those numbers compare to a 6.3% fall in April and a 2.5% decline for the 12 months ending with April.

The ISM Manufacturing Index improved to 49.0 in June from 48.5 in May. June was the fourth consecutive month that the index was below 50.0, which indicates the sector is contracting.

The PMI Manufacturing Index improved to 52.9 in June, its highest level in more than three years, from 52.0 in May.

The Kansas City Fed Manufacturing Index was 5 in June, an increase from -10 in May.

The Dallas Fed Manufacturing Index improved to -12.7 in June from -15.3 in May. June is the fifth consecutive month the index was below 0.0, indicating the sector is contracting.

Gross domestic product (GDP) declined at an annualized 0.5% rate in the first quarter, according to the final estimate for the quarter.

That’s down from the 0.2% decline in the second estimate and is the first quarterly decline in three years. GDP increased at an annualized 2.4% rate in the fourth quarter of 2024.

There were 33,000 fewer private sector jobs in June than in May, according to the ADP Employment Report. In May, the number of jobs increased by 29,000. The last month in which private sector employment declined was May 2023.

The number of job openings increased in May by 374,000 to 7.769 million, the highest number since November 2024.

New unemployment claims declined by 10,000 to 236,000.

Continuing claims, which lag a week behind new claims, increased to 1.974 million, the highest level since November 2021, from 1.937 million.

The Markets

The S&P 500 rose 1.79% for the week ended with Tuesday’s close. The Dow Jones Industrial Average gained 3.27%. The Russell 2000 increased 1.65%. The All-Country World Index (excluding U.S. stocks) added 1.23%. Emerging market equities advanced 0.86%.

Long-term treasuries gained 1.22% for the week. Investment-grade bonds increased 0.75%. Treasury Inflation-Protected Securities (TIPS) added 0.42%. High-yield bonds gained 0.47%.

In the currency sector, the U.S. dollar declined 1.03%.

Energy-based commodities fell 0.23%. Broader-based commodities dropped 0.64%. Gold rose 0.38%.

Bob’s News & Updates

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