Bob’s Journal 8/28

Don’t Make This Medicare Advantage Mistake

A high percentage of Medicare Advantage plan members make a critical mistake, according to a study from Mass General Brigham, a major hospital system.

Medicare beneficiaries can choose between original Medicare and a Medicare Advantage plan.

Advantage plans are required to cover everything that original Medicare covers. Advantage plans also may offer additional benefits, which many do.

Most Advantage plans offer some level of dental, vision and hearing benefits that aren’t covered at all by original Medicare. Advantage plans also often pay for additional services, such as transportation to medical appointments, fitness club memberships and more.

The Advantage plans receive more money from Medicare per beneficiary than original Medicare pays on behalf of each of its beneficiaries.

The problem, according to the study, is that most Advantage plan enrollees aren’t using the additional benefits. That’s based on data from 2017 to 2021.

Many Advantage plan beneficiaries believe their coverage is free, because their plans don’t charge additional premiums. But each Advantage plan member pays the same Part B premium that original Medicare enrollees pay.

Another problem is that many people in Advantage plans aren’t aware of all their benefits. The study found that only about 54% of Advantage plan members were aware they had vision and dental coverage.

People in Advantage plans were no more likely to obtain care for vision, dental or hearing issues than original Medicare beneficiaries. Out-of-pocket costs for those services were a little lower for Advantage plan members than for those in original Medicare, but not a lot lower.

In general, Advantage plans cover about 25% of the total cost for dental, vision and hearing services.

The Advantage plan members who know about the benefits might have concluded they aren’t worth the additional out-of-pocket cost.

The World Responds to the GENIUS Act

Earlier this year, the GENIUS Act became law. People and institutions already are reacting to it.

The GENIUS Act sets rules for a type of digital currency known as a stablecoin. A stablecoin is a digital token that is backed by assets.

The GENIUS Act is supposed to reduce the ability of stablecoin issuers to commit fraud or issue tokens that lack sufficient asset backing.

The law also prohibits stablecoin issuers from offering interest or other payments to users. The coins are supposed to be used for payments, not as investments.

In the stereotypical stablecoin, an issuer takes money from users and buys U.S. Treasury bills with that money. The issuer receives and keeps any interest earned on the treasury bills. The bills are sold when users redeem the stablecoins or transfer them to someone else, such as to pay for goods or services.

Banks already are objecting that there are loopholes in the law.

They argue that it’s possible for stablecoin issuers to effectively pay interest or provide other benefits to users. That would allow stablecoins to compete with interest-bearing accounts from banks, something the law was supposed to prevent.

The banks are concerned stablecoins that pay income would cause depositors to shift from bank accounts to stablecoins.

Banks also are worried because major businesses, such as Walmart, have indicated they are exploring creating their own stablecoins.

If Walmart were to create it own stablecoin network, it could persuade many of its customers to use stablecoin when making purchases at Walmart or on its website.

That would be good for Walmart, because it would avoid the fees charged by payment card processors. Walmart also could earn interest on money deposited to buy its stablecoin. But it would be bad for the banks and other firms that now are earning those revenues.

The banks want the GENIUS Act to be amended and will try to influence the regulations written to implement the law.

The GENIUS Act also prohibits the U.S. Treasury from issuing a digital dollar or central bank digital currency (CBDC).

Across the ocean, European officials are reconsidering their options regarding a CBDC for the euro because of the GENIUS Act.

The European Central Bank (ECB) wasn’t a fan of CBDCs and was taking its time to study whether it should issue one at all.

The ECB seemed on a path to issue a limited CBDC that could be used only on a private, centrally controlled system. It viewed the CBDC as another private payment system.

But ECB officials now are worried the likely growth of stablecoins backed by U.S. dollar assets could cause more assets to flow from euro and euro-denominated accounts to dollar-denominated assets.

That would reduce the value of the euro and likely limit growth in Europe.

ECB officials now are thinking that an official CBDC euro token would diminish the attractiveness of the privately issued stablecoins backed by the U.S. dollar or other currencies.

European officials told the Financial Times they were caught off guard by how quickly the GENIUS Act became law and now think they have to accelerate their decisions.

The Long-Term and Short-Term Impacts of Tariffs on the Economy

Earlier this month, President Donald J. Trump appeared to suggest that Goldman Sachs replace its chief economist because of his forecasts about the effects of tariffs.

The administration has been chiding various economists and analysts, claiming they were wrong to forecast that the tariffs would cause a recession and higher inflation. The administration’s celebration might be premature.

Most of those forecasts were made in April after the President announced his massive Liberation Day tariffs. Most of those tariffs quickly were suspended. Lower tariffs have been imposed gradually over the following months.

The report that apparently triggered the President’s latest ire concluded through June that most of the tariffs hadn’t been passed through to consumers. It found that about 22% of tariff costs were paid by consumers through higher prices.

The rest of the tariffs were absorbed by retailers and their suppliers.

The Goldman Sachs report concluded that most businesses couldn’t absorb the tariffs indefinitely. After analyzing the effects of previous tariffs, the report concluded consumers eventually will pay 67% of the new tariffs.

If that happens, inflation is likely to rise.

The inflation increase should be a one-time event, though it won’t be packed into one month. Inflation will increase gradually as more tariffs are finalized, and more businesses opt to pass all or most of the cost to consumers as higher prices.

Once the tariffs are set and businesses determine how much to pass to consumers, prices should stabilize.

In its latest earnings report, Walmart (WMT) stated that its sales were higher in the latest quarter, but earnings were lower than forecast because the company is absorbing a significant portion of the tariffs to gain market share.

Walmart’s goal has been to keep its price increases below the national average. Amazon is following a similar strategy, and both are increasing market share at the expense of reducing profits.

But the retailer said as its inventory costs increase because of tariffs, it will boost prices. It also reported that consumers are reducing their spending because of higher prices.

Another report, this one from Barclays, concluded that inflation and economic growth haven’t been affected by tariffs as much as expected because the tariffs paid haven’t been as high as advertised.

The bank previously estimated, based on White House announcements, that the overall tariff rate in May would be 12%. After examining actual data from May, Barclays concluded the weighted-average tariff rate was only 9%.

JPMorgan reported that in June tariff rates were lower than expected because companies switched suppliers to those based in countries subject to lower tariffs or were able to find U.S.-based suppliers.

The ways to avoid or reduce tariffs are likely to be reduced over time. As that happens, businesses will have to pass on the costs through higher prices or accept lower profit margins. Most companies are likely to do a combination of both.

The Data

The Consumer Confidence Index from The Conference Board was down to 97.4 in August from 98.7 in July.

The Expectations Index fell 1.2 points to 74.8. The Conference Board states that a level below 80 typically precedes a recession, though the index has been below 80 for all of 2025.

Consumers’ assessments of their present situations also declined.

The Leading Economic Index (LEI) from The Conference Board declined by 0.1% in July to 98.7 after falling 0.3% in June.

The LEI continues to signal a recession. But The Conference Board said it is not projecting a recession. It expects slower growth. It estimates Gross Domestic Product will grow 1.6% in 2025 and 1.3% in 2026.

The PMI Flash Manufacturing Index rose to 53.3 in mid-August from 49.8 at the end of July.

The PMI Flash Services Index fell to 55.4 in mid-August from 55.7 at the end of July.

The PMI Flash Composite Index rose to 55.4 in mid-August from 55.1 at the end of July.

Durable goods orders fell 2.8% in July after a 9.4% decline in June.

But transportation, especially aircraft, was again a major reason for the decline. Excluding aircraft and defense orders, durable goods orders rose 1.1% in July after falling 0.6% in June.

The Philadelphia Fed Manufacturing Index plunged to -0.3 in August from 15.9 in July. August was the sixth time the index was negative in the last 12 months and the fourth negative reading in the last five months.

The Dallas Fed Manufacturing Index was -1.8 in August, down from 0.9 in July.

The Richmond Fed Manufacturing Index was -7 in August, an improvement from -20 in July. The index has been positive only one month in the last 12.

The S&P Corelogic Case-Shiller Home Price Index was unchanged in June following a 0.4% rise in May. Over 12 months, the index was 2.1% higher through July and 2.8% higher through June.

The House Price Index from the Federal Housing Finance Agency fell 0.2% in July and 0.1% in June. The 12-month increase in the index was 2.6% through July and 2.9% through June.

Existing home sales increased 2.0% in July after declining 2.7% in June. The increase in the number of existing homes sold in July compared to June was the highest since February.

The median sale price of an existing home increased 0.2% over 12 months to $422,400.

New home sales declined 0.6% in July after rising 4.1% in June.

New unemployment claims increased by 11,000 to 235,000 in the latest week.

Continuing claims, which lag a week behind new claims, increased to 1.972 million from 1.942 million.

The Markets

The S&P 500 rose 0.84% for the week ended with Tuesday’s close. The Dow Jones Industrial Average gained 1.16%. The Russell 2000 increased 3.57%. The All-Country World Index (excluding U.S. stocks) added 0.24%. Emerging market equities advanced 0.78%.

Long-term treasuries rose 0.12% for the week. Investment-grade bonds increased 0.26%. Treasury Inflation-Protected Securities (TIP) added 0.85%. High-yield bonds gained 0.61%.

In the currency sector, the U.S. dollar was unchanged for the week.

Energy-based commodities increased 2.09%. Broader-based commodities rose 2.14%. Gold gained 2.22%.

Bob’s News & Updates

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