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CMS’ 2024 Health Spending Report: Key Insights

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CMS’ 2024 Health Spending Report: Key Insights

As media attention focused on Minneapolis, Greenland and Venezuela last week, the Center for Medicaid and Medicare Services (CMS) released its 2024 Health Expenditures report Thursday: the headline was “Health care spending in the US reached $5.3 trillion and increased 7.2% in 2024, similar to growth of 7.4% in 2023, as increased demand for health care influenced this two-year trend. “

Less media attention was given two Labor Department reports released the Tuesday before:

  • Prices: The consumer-price index (CPI) for December came in somewhat higher than expected with an increase of 0.3% and 2.7% over the past 12 months. Overall inflation isn’t rising, but it also isn’t coming down.
  • Wages: The Labor Department reported average hourly earnings after inflation in the last year rose 0.7% during the first five months of this year, but real hourly earnings have declined 0.2% since May. They’re stuck.

Prices are increasing but wages for most hourly workers aren’t keeping pace. That’s why affordability is the top concern for voters.

Meanwhile, the health economy continues to grow—no surprise.  It’s a concern to voters only to the extent it’s impacting their ability to pay their household bills. They don’t care or comprehend a health economy that’s complex and global; they care about their out-of-pocket obligations and surprise bills that could wipe them out.

As Michael Chernow, MedPAC chair and respected Harvard Health Policy professor wrote:

“The headline number, 7.2% growth in 2024, is concerning but hardly a surprise. It follows 7.4% growth in 2023. This rate of NHE growth is not sustainable. It exceeds general inflation and growth in the gross domestic product (GDP), pushing the share if GDP devoted to health care spending to 18%  in 2024; the share of GDP devoted to health care is projected to rise to 20.3% by 2033. In fact, these figures may be an underestimate of the fiscal burden of the health care system because spending on some things, such as employer administrative costs, are not captured… Given all the attention to prices and insurer profits, it is important to note that those factors are not the main drivers of spending growth—this time, it’s not the prices, stupid. There was virtually no excess medical inflation (medical inflation above general inflation) for 2023 or 2024. In fact, prices for retail drugs (net of rebates) rose at a rate below inflation. There will certainly be cases of rising prices driving spending, but on average, price growth is not the problem. This does not mean high-priced products and services are not an important component of spending growth, but instead it implies that their contribution to spending growth on average stems from their greater use, not rising prices. The main driver of spending growth is greater volume and intensity of care…”

My take:

Since 2000 to 2024, total healthcare spending in the U.S. has been volatile:

  • 2000–2007: High growth, typically 6–8% per year (driven by rising utilization and prices).
  • 2008–2013: Growth slowed to 3–4% during and after the Great Recession.
  • 2014–2016: Growth ticked up to 4.5–5.8% with ACA coverage expansion.
  • 2017–2019: Moderation around 4.5%.
  • 2020: COVID‑19 shock—growth slowed to ~2% due to deferred care.
  • 2021: Rebound to ~4%.
  • 2022: 4.8%, close to pre‑pandemic norms.
  • 2023: 7.4%, fastest since 1991–92.
  • 2024: 7.2%, reaching $5.3 trillion (18% of GDP)

Between 2000 and 2024, total health spending in the U.S. increased $3.9 trillion (279%) while the U.S. population grew by 58 million (20.4%). 2025 spending is expected to follow suit. The underlying reason for the disconnect between health spending and population growth is more complicated than placing blame on any one sector or trend: it’s true in the U.S. and every other developed system in the world. Healthcare is expensive and it’s costing more.

This is good news if you’ve made smart bets as an investor in the health industry but it’s problematic for just about everyone else including many in the industry who’ve benefited from its aversion to spending controls and cost cutting.

The current environment for the healthcare economy is increasingly hostile to the status quo. Voters think the system is wasteful, needlessly complicated and profitable. Lawmakers think it’s no man’s land for substantive change, defaulting to price transparency, increased competition and state regulation in response. Private employers, who’ve bear the brunt of the system’s ineffectiveness, are timid and reformers are impractical about the role of private capital in the health economy’s financing.

The healthcare economy will be an issue in Campaign 2026 not because aggregate spending increased 7-8% in 2025 per CMS, but because it’s no longer justifiable to a majority of Americans for whom it’s simply not affordable. Regrettably, as noted in Corporate Board Member’s director surveys, only one in five healthcare Boards is doing scenario planning with this possibility in mind.

Paul

P.S. The President released his Great Healthcare Plan last Thursday featuring his familiar themes—price transparency for hospitals and insurers, most favored pricing and elimination of PBMs to reduce prescription drug costs—along with health savings accounts for consumers in lieu of insurance subsidies. The 2-page White House release provided no additional details.

TPAs: The Goodfellas Running Employers’ Health Plans

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https://healthcareuncovered.substack.com/p/tpas-the-goodfellas-running-employers?utm_source=post-email-title&publication_id=255152&post_id=184265576&utm_campaign=email-post-title&isFreemail=true&token=eyJ1c2VyX2lkIjo4ODU1Nzg5LCJwb3N0X2lkIjoxODQyNjU1NzYsImlhdCI6MTc2ODIzMTEwOCwiZXhwIjoxNzcwODIzMTA4LCJpc3MiOiJwdWItMjU1MTUyIiwic3ViIjoicG9zdC1yZWFjdGlvbiJ9.38iBwgGXDkuikxfawUQEj2j0lU0JOO2lrvQscJhORWk&r=59t65&triedRedirect=true&utm_medium=email

The 119th Congress headed into the holidays no doubt looking forward to quality time with their loved ones and a fat goose on the dinner table—or whatever the privileged stewards of the People eat at Christmas—with what seemed like little concern for the mess and panic they left behind. Messy panic like what the nearly 25 million Americans getting their health insurance through the ACA are facing as their monthly premiums increase at astronomical rates. (Assuming they stick with the devil they know.) Now they’re back, surely refreshed with all engines blazing on their New Year’s resolution to make health care more affordable. It is, after all, what the People want.

But while what to do with the ACA gets fought over like an unloved middle child in a divorce, another form of health care dupery will continue to operate like a mob-run casino.

Many of us navigate our health care thinking that if we can land a full-time job at a company offering benefits, we—and our families—will be covered for most physical and mental health issues without complete disruption to our financial health. And in many cases, sure, that tracks. What we’re not seeing is the financial fleecing that those companies are experiencing at the hands of third-party administrators (TPAs). What’s more is that the companies aren’t seeing it either. And that’s not a bug. It’s a feature.

An employer has options when deciding how to provide health benefits to its employees. One is to contract directly with an insurance company and pay fixed premiums. Another is to self-insure. Self-insured employers pay for all enrolled member benefits and claims directly from their own funds instead of paying those aforementioned fixed premiums. It’s an attractive option for employers because even though the company assumes the financial risk, it offers control over costs, plan design and claims-related data, all of which can help the company run more efficiently and with greater fiduciary understanding. They’re popular, too, with approximately 57% of private sector workers enrolled in these self-funded plans, according to KFF. To facilitate the company’s coverage, employers contract with a TPA to broker plan details, manage claims, pay providers, assist plan members and ensure the benefit program remains compliant with state and federal regulations.

This is theoretical.

TPAs say they’re looking after the company, but they don’t. They’re looking after themselves and their parent companies. And just who are these parents? Blue Cross Blue Shield, UnitedHealthcare, Cigna, and Aetna. Or, as they’re collectively called, the BUCAs. The usual suspects in the web of health care greed and deception.

It’s like taking a pregnancy test then being told the results can’t be shared with you because the results belong to the stick with the pee on it.

Skimming the till the TPA way

The Employee Retirement Income Security Act (ERISA) was passed in 1974 to protect patients by requiring transparency, fiduciary standards and fair claims processes for employer-sponsored health (and retirement) plans. TPAs have found clever ways to avoid ERISA accountability in the way they structure the administrative services agreements (ASAs) they sign with employers. One is by enlisting gag clauses in the ASAs to protect TPAs from showing their work to the employer, which obviously defeats the whole purpose of choosing to self-fund and have more oversight of how their money is being spent. The Consolidated Appropriation Act of 2021 prevented these gag clauses. But TPAs are nimble and clever, and when pressed to offer up information, such as any of the data related to claims managed and paid, TPAs argue they don’t have to because the data is proprietary. It’s an odd argument to make. It’s the employer’s money being spent and their employees being treated. It’s like taking a pregnancy test then being told the results can’t be shared with you because the results belong to the stick with the pee on it.

Not sharing crucial plan information with the employer is one thing, tacking on fees under the guise of good stewardship is another. Like the overpayment recoupment fee. Here’s how this could play out:

  • The TPA discovers a provider was overpaid due to an error made by duplicating payments, incorrect coding, or any other administrative whoopsie
  • The TPA recoups the overpaid amount, say, $5,000, then takes a percentage of the recouped money—typically 30% — as a fee for cleaning up the mess they made
  • They recover the extra $5,000 the employer paid, the employer gets back $3,500 while the TPA banks $1,500
  • This means that the employer paid a total of $6,500 on a $5,000 claim, making carelessness an incentive for TPAs

Shared savings fees are put in play when someone enrolled in a health plan uses an out-of-network (OON) provider. As we know, OON claims are often hefty bills. Seemingly, in good faith, the TPA will negotiate a discounted rate with the provider. It could look like this:

  • The OON provider bills the employer $50,000
  • The TPA negotiates the provider down to $20,000 then takes their shared savings fee out of the $30,000 savings
  • Again, this fee rate is often around 30%. That puts $9,000 in the TPA’s pocket

The TPA is incentivized here to push members to go OON, and why not? A $30,000 savings sounds real good. But employers aren’t getting the opportunity to weigh in on these negotiations because they are, you know, “proprietary.”

Putting it honestly, TPAs are the neighborhood mafioso.

TPAs also have skip lists, which are providers they do not apply oversight to when looking for billing errors, which they rarely do anyway, but these lists make it more, um, official. In May 2024, W.W. Grainger, Inc., a product distribution company with 20,000-plus employees (and their family members) filed a lawsuit against Aetna claiming Aetna took money paid by Grainger intended to pay for claims, paying providers only a portion of the money, keeping the rest for itself. The suit claims, “Aetna did not use the fraud prevention techniques it regularly employs when administrating claims for its own fully insured plans. Aetna never refunded or credited the difference to the Plans.” The suit further states, “Aetna also engaged in active deception to conceal its breaches of its duties to the Plans. Aetna prevented Grainger from discovering Aetna’s improper conduct, including by limiting audit rights, providing false or inaccurate claims reports, and preventing Grainger from obtaining or accessing data about the actual financial transactions between Aetna and the health care providers.”

Many other similar suits have been filed against TPAs but are either dismissed or held up in the court’s web of confusion and legal ballet.

The uphill battle for Capitol Hill

Putting it kindly, TPAs are middlemen sold as a way to lighten the administrative load for a company. Putting it honestly, TPAs are the neighborhood mafioso. Imagine with me, a neighborhood dry cleaner… One day, a wise guy walks in and tells the owner that he needs to pay 30% of the profits each week in exchange for protection. “Protection from what?” the dry cleaner asks. “From, you know, trouble. And you don’t want any trouble. Not at a nice establishment such as this.” There’s no way the dry cleaner can win. Either pay the guy or risk going to open the door one morning only to discover the door is the only thing left standing after the place mysteriously burned down overnight.

A bill introduced last year by Senators John Hickenlooper (D-Colo.) and Roger Marshall (R-Kan.) called the Patients Deserve Price Tags Act (PDPTA) is designed to make health costs more transparent and provide employers with better tools to hold TPAs accountable as well as to strengthen and expand existing transparency measures like requiring TPAs to disclose compensation practices truthfully, completely and upfront instead of leaving the burden to employers. The bill would make void any provisions in ASAs that support limiting access to employers. Furthermore, it would empower the Department of Labor (DOL) to fine TPAs $10,000 for each day a violation continues. TPAs would also be required to make quarterly reports detailing pricing and compensation practices and report the total they have been paid in rebates, fees, discounts and other forms of payment. Failure to provide this information would be a violation of ERISA, and the DOL could fine the TPA $100,000 per day until the report is provided.

But will it pass? And if so, how much of it will get hacked away thanks to BUCA lobbying efforts? And is another bill even the answer? Legislation has been passed to defend against these practices, and yet, they persist. Apparently, doing the same thing over and over again and expecting a different result is not insanity, but progress for Congress. Another bill may just add to the complexity of things. And the big question remains: Will it save self-insured employers money? Doubtful. TPAs can simply raise the price of doing business. That’s BUCA forecasting 101—everything can always be more expensive.

Perhaps Washington needs to begin thinking of TPAs and BUCAs like the organized criminals they are and bring a RICO case against them.

The year the U.S. economy bent but didn’t break

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https://www.axios.com/2025/12/30/economy-trump-jobs-inflation

The U.S. economy was beaten and battered in 2025, and powered ahead despite it all.

The big picture: 

The question for 2026 is whether the underlying sources of weakness that are already evident will broaden out into something that threatens to undermine its overall resilience.

Threat level: 

Beneath buoyant growth in GDP and asset prices are serious worries.

  • The labor market is looking softer by the month.
  • Elevated inflation is pinching family budgets.
  • And fears are rising that the AI-fueled boom could leave ordinary workers worse off.

The big picture: 

Those pain points have already caused public opinion on the economy to turn sharply negative.

  • At the same time, one lesson of 2025 is that the U.S. economy is awfully adaptable and can withstand more challenges than you might expect.

Zoom in: 

In April, President Trump’s “Liberation Day” tariffs sent the stock market swooning and economists upgrading their recession odds.

  • It wasn’t the only sign of trouble. Job growth came to a near-halt over the summer. Deportations and restrictionist immigration are part of the story, along with the aging of the native-born workforce. But part of it is that companies are trying to get leaner.
  • Inflation, meanwhile, has become the fire that will not be fully doused. While the sky-high inflation of 2022 is a thing of the past, inflation has been above the Federal Reserve’s target 2% target every single month since March 2021.
  • Affordability is top of mind in public opinion.

Reality check: 

It’s important to remember, though, that the $30 trillion U.S. economy, for all its flaws, can weather a lot, at least at the macro level. It is, as RSM chief economist Joe Brusuelas puts it, a “dynamic and resilient beast.”

By the numbers: 

The headline data numbers have held up just fine, a trend punctuated by Tuesday’s report that GDP rose at a 4.3% annual rate in Q3, amid strong consumer spending and the AI-investment surge.

  • The S&P 500 is up more than 17% so far this year.
  • The unemployment rate edged up over the course of the year, to 4.6% in November. But that’s still lower than it has been in 69% of months dating back to 1948.

Yes, but: 

You can’t eat GDP, or points of the S&P. And the biggest issues for the U.S. economy — and the things that look like pre-eminent risks for 2026, are in what you might call the peripheral data.

  • While layoffs are still few, employers have slowed their hiring rates, which means those who do lose their jobs face hard sledding.
  • Job creation has been overwhelmingly driven by health care, with usual cyclical sectors like manufacturing and transportation and warehousing shedding jobs.
  • Consumer demand is displaying “K-shaped” trends, being highly concentrated among the affluent Americans enjoying surging stock wealth — while the household finances of lower earners are increasingly on a razor’s edge.

What they’re saying: 

The fact that strong third-quarter GDP growth coincided with weak job creation, Brusuelas writes in a note, “implies a decoupling between robust topline growth and soft jobs creation which in our estimation is likely to be the major economic narrative looking forward into 2026.”

What we’re watching: 

The 2026 economy is set to receive a boost from Washington, as the signature tax law passed in July — the One Big, Beautiful Bill Act — acts as a fiscal stimulus alongside the delayed impact of the Federal Reserve three interest-rate cuts since September.

  • It’s hard for companies to experience the kind of robust demand for goods and services they’ve seen in 2025 and not eventually have to hire more workers to help fulfill it.

The bottom line: 

There are plenty of risks on the horizon for 2026, but the economy’s striking resilience in 2025 is a reminder that doom-and-gloom predictions for the U.S. economy often prove wrong.

The 5 economic themes we’re watching in 2026

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https://www.axios.com/2026/01/05/economy-tariffs-ai

Tariff drama and tax cuts! AI spending and AI-spurred job losses! New Federal Reserve leadership! It is on track to be a big year across all the key policy areas of interest to economy-watchers.

The big picture: 

Seismic changes have been set in motion by the Trump administration’s sweeping policy agenda and a mega-wave of investment in artificial intelligence — likely to determine the fate of the economy in 2026.

1. The AI economy

The biggest macro questions are whether the alarm bells about AI and the labor market will start to ring true — and whether the productivity effects move from just anecdotes to the economic data.

  • Last year, much evidence pointed to AI as a marginal part of the labor market slowdown. Some economists (and officials inside the White House) argue that broader adoption of the technology would boost the labor market, at least in the short term.

Of note: 

AI spending buoyed economic growth, at least in the first nine months of 2025. It is also lifting the stock market, which might help support spending among wealthier consumers.

  • Whether this turns out to be a bubble that pops — and the extent such a risk poses to the broader financial system as the Fed rolls back regulations — is the related theme to watch.
  • That said, any correction in AI investment looks more likely to be a down-the-road story than a 2026 issue.

2. Tax cut boost

The One Big, Beautiful Bill Act, signed into law in July, is set to have its maximum economic punch in the early months of 2026, a likely tailwind for overall economic growth.

  • But how large, how broad-based and how sustained that boost will turn out to be remains to be seen.

Zoom in: 

Fiscal policy is on track to add about 2.3 percentage points to first-quarter GDP growth, per data from the Hutchins Center Fiscal Impact Measure from the Brookings Institution.

  • On the individual tax side, beneficiaries of policies like a deduction for tip income, Social Security payments and expanded deductibility of state and local tax are on track to generate super-sized tax refunds this spring,
  • On the corporate side, businesses are enjoying new tax incentives for capital spending, especially on factories.
  • Federal spending on immigration enforcement, meanwhile, is ramping up due to the legislation.

3. Trade uncertainty (maybe) resolving

Any day now, the Supreme Court will hand down a decision that might scramble the centerpiece of President Trump’s economic agenda: the ability to impose huge tariffs unilaterally.

  • If the court strikes down the bulk of Trump’s tariffs, fiscal revenues could be put at risk, resulting in a chaotic refund process.
  • That said, the ruling will help create some guardrails on what kinds of legal authority the president has to impose unilateral tariffs. That, in turn, could lead to a more stable tariff picture (albeit with much higher rates than pre-2025).
  • While there are other authorities the president can use to enact tariffs besides the sweeping authority under the International Emergency Economic Powers Act he has claimed, they require a more deliberative process than the kind of whipsawing that importers faced last year.

4. Future of the Fed

Fed chair Jerome Powell’s term is up in May, and Trump’s selection of his successor is imminent, with Kevin Hassett and Kevin Warsh the leading job candidates.

Zoom out: 

Whoever takes the reins will face immense pressure from Trump to lower interest rates to rock-bottom levels — amid continued high inflation — and how they handle that pressure may determine the future of the central bank’s independence from the White House.

  • Trump expects the future Fed chair to consult with him on rates, while casting the intention to lower rates as a key qualification for the next leader.
  • The question is whether the next Fed chair can resist that political pressure and whether financial markets believe that is the case. If bond markets lose confidence that the Fed will raise short-term rates if necessary to combat an inflation surge, it could paradoxically drive up long-term rates.
  • Another huge question: the makeup of the influential Fed board, with the Supreme Court also set to decide whether Trump can fire governor Lisa Cook and, by extension, other Biden-appointed governors.

5. Affordability and the midterms

With voters going to the polls in November, the cost of living is emerging as a core battleground.

  • Democrats seeking to take control of Congress are making political hay about the affordability crisis.
  • Trump has called the term affordability a “con job,” but said recently that he believes “pricing” will be a major election issue.

Flashback: 

The Consumer Price Index is up a moderate 2.7% over the last 12 months, but that increase came on top of the Biden-era inflation surge.

  • The index is up 23.7% since January 2021, even more for some often-purchased subcategories, including groceries (up 24.6%).

Over the holiday break, the administration quietly shelved plans to impose levies on imported pasta and furniture.

  • It’s a hint that the White House is eager to avoid trade levies that might flow directly to prices consumers pay, as opposed to affecting input costs for businesses.

Unemployment rate hit 4-year high in November even as economy added jobs

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https://finance.yahoo.com/news/unemployment-rate-hit-4-year-high-in-november-even-as-economy-added-jobs-133749371.html?.tsrc=1340&ncid=crm_-1285232-20251216-582–A&bt_user_id=JPZxZ2%2B2950iiQYymBeM6e1wGYjroGnMtjT%2BFo%2BrAtWqAaQtJrAZ0t1kdrjs5V4loa6YUhaN%2BwL2XwxZ%2B0uHvppM1JerRSaVzcBcQFPrD9iD79KdozrKbcgnzdTwMpMM&bt_ts=1765895430253

The US economy added 64,000 jobs in November, according to the Bureau of Labor Statistics.

The US economy added 64,000 jobs in November as the unemployment rate crept up to 4.6%, according to Labor Department data published Tuesday.

The unemployment rate is now at its highest level since September 2021.

The November jobs report, originally scheduled to be published Dec. 5 before the 43-day government shutdown delayed multiple economic data releases, comes as Americans stress over rising layoffs and a frozen job market that can feel impossible to break into. Tuesday’s report suggested those conditions persisted toward the end of the year.

Economists surveyed by Bloomberg had expected a gain of 50,000 jobs. The healthcare sector, which has fueled job growth this year, added 46,000 positions for the month.

November’s data additionally showed that the number of people employed part-time for economic reasons rose to 5.5 million in November, an increase of 909,000 over September. Meanwhile, the long-term unemployment rate, or the share of unemployed people who have been without jobs for 27 weeks or more, was 24.3% in November, down from August’s high of 25.7% but higher than the rate of 23.1% seen a year ago.

“The US economy is in a hiring recession,” Heather Long, chief economist at the Navy Federal Credit Union, wrote in a post on X.

“Almost no jobs have been added since April,” Long added. “Wage gains are slowing. 710,000 more people are unemployed now versus November 2024.”

Nancy Vanden Houten, lead US Economist at Oxford Economics, said in a statement that the government shutdown appears to have contributed to the increase in the unemployment rate.

“The number of permanent job losers, which had been ticking higher, declined. Labor force growth also contributed to the increase,” she said.

Partial data for October, also published Tuesday, showed a loss of 105,000 positions. The unemployment rate for the month will not be released. Bank of America economist Shruti Mishra had noted that October’s payroll numbers would be affected by the delayed impact of DOGE-led government job cuts, since many federal employees who opted for the “deferred resignation program” officially left their positions Sept. 30.

The federal government lost 162,000 jobs in October and 6,000 in November, according to the Labor Department.

The last official reading of the labor market, published in November, was pushed back by several weeks and had only offered data for September, showing an unexpected uptick in jobs after the economy actually lost jobs in August and June, marking the first negative employment months since 2020.

Consensus-driven leadership prevails

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https://www.axios.com/newsletters/axios-macro-84b90ab0-d76a-11f0-a70c-4151dfbacb1d.html?utm_source=newsletter&utm_medium=email&utm_campaign=newsletter_axiosmacro&stream=business

A striking thing about this week’s flow of news out of the Federal Reserve is how normal it was — at least compared to some of the possibilities that appeared in play last month for a breakdown in the institution’s longstanding norms.

Why it matters: 

In the Fed’s decision to cut interest rates on Wednesday, and the unanimous reappointment of 11 of 12 reserve bank presidents announced yesterday, it was clear that Powell has retained his ability to steer a seemingly fractious organization toward consensus.

  • The next chair may yet shift the institution toward a process with more open dissent and count-the-votes proceduralism, as is seen at the Bank of England and as some Trump associates have advocated.
  • But for now, Powell looks clearly in charge despite lame-duck status (his term is up in May).

State of play: 

Just a few weeks ago, it looked plausible that there would be the most open dissent from the Fed’s December interest rate decision in decades. Five officials of 12 Federal Open Market Committee voting members had expressed significant reservations about a rate cut.

  • Three officials who were publicly skeptical of cutting rates further — reserve bank presidents Susan Collins (Boston) and Alberto Musalem (St. Louis), and governor Michael Barr — elected to follow the leader when it was time to cast their vote.
  • While there were three dissents — two opposing the cut, one favoring going further — that’s not terribly abnormal. There were three dissents in September 2019, for example, also in opposite directions.

What they’re saying: 

“After the high drama/psychodrama from the October press conference onwards, the end result was more business-as-usual on the part of the Powell Fed,” wrote Krishna Guha and colleagues at Evercore ISI in a note.

  • In his news conference, “Powell was calm and poised, not on the ropes as in October, with a governance crisis averted,” they wrote.

The big picture: 

Fed watchers were braced for the possibility that the every-five-years process of reappointing reserve bank presidents would generate fireworks, an opportunity for Trump-appointed governors to try to create some upheaval at the Fed (or at least make some noise).

  • It came and went yesterday without signs of public dissent, as the board announced that 11 of 12 reserve bank presidents had been reappointed with “unanimous concurrence” by members of the Board of Governors.
  • Not only were the 11 officials re-upped, the three Trump-appointed governors did not object.
  • The odd man out, Atlanta Fed president Raphael Bostic, had previously announced his retirement at the end of his term in February. But one bank president stepping down at the end of a term is not unheard of; it last happened at the end of 2015 with Minneapolis Fed president Narayana Kocherlakota.

Between the lines: 

On paper, the Fed chair holds only one vote out of seven on the Board of Governors and one of 12 on the FOMC. Their ability to lead the institution depends on a mix of hard and soft power.

  • In the hard power department, the chair oversees the staff and sets meeting agendas. In the soft power department, they must persuade their colleagues to line up with the policy path they believe is correct.
  • Powell has been skilled at using both — and displayed those skills this week.

CEO sentiment improves, but hiring outlook is gloomy

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https://www.axios.com/newsletters/axios-macro-c74d84c0-d533-11f0-89d1-ad2b72267b52.html?utm_source=newsletter&utm_medium=email&utm_campaign=newsletter_axiosmacro&stream=business

CEO sentiment increased for the third consecutive quarter, even as America’s most prominent executives expect underlying job market conditions to remain weak.

Why it matters: 

The economic outlook among CEOs has steadily improved since plunging in the aftermath of President Trump’s initiation of the global trade war.

  • Under the hood, however, there is evidence that structural economic changes — including the proliferation of AI — are weighing on hiring intentions, a warning sign for the labor market.

By the numbers: 

The Business Roundtable’s CEO Economic Outlook Index rose by 4 points in its fourth-quarter survey, which was fielded from the final weeks of November through earlier this month.

  • The index is still shy of the highest level of the Trump 2.0 era and slightly below the historical average of 83.

Zoom in: 

The increase reflects a more upbeat view of company revenue in the next six months: Expectations for sales rose 6 points, though the survey does not ask respondents to adjust for the prospect of higher prices.

  • Plans for capital expenditures — investments in equipment, buildings or software — ticked up 2 points, following a 10-point surge in the previous quarter.
  • Hiring plans also improved relative to last quarter — up 4 points — though it is the survey’s lone indicator below the level that signals growth.

What they’re saying: 

“Notably this quarter, more CEOs plan to reduce employment than increase it for the third quarter in a row – the lowest three-quarter average since the Great Recession,” Business Roundtable CEO Joshua Bolten said in a statement.

  • About one-quarter of CEOs say they will increase hiring, while 35% say employment will shrink at their respective firms. The remaining 40% plan to keep hiring steady.
  • A smaller share of CEOs plan to slash workers relative to last quarter, but the figures still show a notable shift among top executives.
  • Consider the results from this time last year: A similar share of CEOs expected no change in employment levels, but just 21% said they anticipated cutting jobs, while 38% planned to increase hiring.

“CEOs’ softening hiring plans reflect an uncertain economic environment in which AI is driving sizeable [capital expenditures] growth and productivity gains while tariff volatility is increasing costs, particularly for tariff-exposed companies, including small businesses,” Bolten said today.

The big picture: 

The in-the-dumps hiring plans signaled by big firm CEOs — alongside a string of layoff announcements in recent months — signal a possible shift for the steady-state labor market that has persisted in recent years.

  • Powell raised the possibility that the labor market might be even weaker than government data suggests.
  • The economy has added a monthly average of 40,000 payroll jobs since April. But “we think there’s an overstatement in these numbers, by about 60,000, so that would be negative 20,000 per month,” Powell said at yesterday’s press conference.
  • “The labor market has continued to cool gradually, maybe just a touch more gradually than we thought,” he added.

The bottom line: 

CEOs feel more optimistic, though that confidence boost is not expected to translate into more hiring — an unusual dynamic for the economy.

  • “Although the results signal that CEOs are approaching the first half of 2026 with some caution, they are starting to see opportunities for growth,” Cisco CEO Chuck Robbins, who chairs the Business Roundtable, said in a statement.
  • “With the Index near its average, it reflects the resilience of the U.S. economy,” he added, citing pro-growth tax policies and fewer regulations.

America’s Three Economies: Vibes Sinking, Data Treading Water, Elites Sailing Away

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Roosevelt Forward bar chart showing the share of jobs added in Health Care and Social Assistance from 2015 to 2025. 2024 has a large spike near 90%, while other years, except 2020-2021, are below 30%. 2020 and 2021 data are missing.

As we approach the end of 2025, it’s a good time to take stock of the US economy. There’s justifiable concern that this year has entrenched a K-shaped economy, where the have-mores leave the haves and have-nots behind. But there are more than two stories going on right now.

First, the vibes are bad (just ask anyone coming out of a grocery store). Second, the real economy—prices, jobs, and consumer and business spending, among other factors—is worse than it was a year ago, but holding up OK (4.4 percent unemployment, GDP growth over 2 percent, and inflation around 3 percent is hardly the stuff of recession). Third, a small number of people and companies are doing extremely well.

Depending on where you stand, you’re hearing very different things about the economy, but a pretty consistent theme is an administration that has not delivered on promises made to voters—while delivering to the president’s family and friends.

Under the Hood, the Story Gets More Complicated

It’s been a predictably rough year for the US economy. Tariffs have raised goods prices and hit manufacturing jobs, immigration crackdowns have crippled the labor force, and reversing energy policies dramatically has unwound an energy investment boom. As a result, the job market is softer, prices are still high, and inflation is up and apparently rising based on the data flow that has (finally) started to trickle back in.

That said, if the data are weaker, the economic mood of the country is, in a word, awful. Consumer sentiment in October was only exceeded by lows from the worst of the early 1980s recession, the peak of the 2022 inflation, and the months following the “Liberation Day” tariff announcement this year. Since January, consumer sentiment has plunged, giving up essentially all gains from a steady rise after the inflation peak of 2022.

That pessimism isn’t purely emotional—it reflects months of higher grocery and utility bills. In fact, across both the major household expectations surveys, families expect inflation to keep going up next year—which most economists expect as well. And roughly twice as many consumers surveyed by the Conference Board expect the jobs picture to be weaker rather than stronger in the next six months.

This view is both pessimistic and realistic given the data we’ve seen so far this year. It’s unmistakably true that the labor market and the inflation picture are weaker than last fall. What’s worrying to the wonkier economy watchers, however, is that the pressures on both inflation and unemployment are in the wrong direction. There are real risks that both inflation and the jobs picture could get worse, but (short of policy reversals) few predictable shocks are likely to make either improve in the near term.

Job growth has stayed positive but slowed dramatically, from an average 167,000 jobs a month in January to just 109,000 in September (and will likely be revised down further with annual revisions early next year). Over 87 percent of all jobs added this year are in health care and social assistance (a given in an aging country), while the rest of the economy has added just 71,000 jobs all year. And there’s little sign that tariffs are about to bring down prices, nor are there signs that the demand side of the economy is about to pick up.

It’s Not Great, but There’s Plenty of Time to Panic Later

The closer you are to the data, the less pessimistic you probably are right now. But, as we can see in recent Fed meeting minutes, the debate is largely between two camps: The first is those who think the labor market is middling and the risks of rising inflation are serious. The second is those who think the risks of rising inflation are less worrisome than the chances the labor market deteriorates further.

It’s clearly too soon to panic about a recession, and the best labor market data we have say things are holding up well by historical standards—September’s 4.4 percent unemployment is better than about 80 percent of months since 2000—it’s just that there’s little to suggest things are about to improve significantly.

That said, the economy continues to chug along on the strength of spending by resilient, yet quite frustrated, consumers. The final reading on second quarter GDP shows US consumer spending keeping the economy going, even as savings deplete.

Early holiday spending numbers look strong, so it seems like US consumers are going to muddle through tariffs. The distribution of consumer spending remains pretty narrow—high earners are doing much more of the broad-based spending in the economy

However, if you get your news from stock markets, or even from retirement statements, the world is different entirely, and much more optimistic—at least from a high level. After a massive swoon in April, the US stock market has had a great year, powered by tax cuts for corporations and the wealthy and an AI investment boom that looks bubble-like to some inside it.

Yet, like in the real economy, the more you dig into the data the farther from the extremes your views can go. Job and corporate earnings growth are concentrated in increasingly narrow slices of the economy. Corporate earnings are notoriously concentrated at this point, with the top 1.4 percent of S&P 500 companies accounting for almost all of stock market gains this year—just seven companies are now one-third of the value of S&P 500.

How Do We Square These Takes?

Overall, the data are on a more even keel than either the awful vibes most Americans are feeling from an affordability crisis or the anxiously warm vibes of investors. We’re not living through the economic boom tech investors see everywhere, nor the near-term dystopia consumers are feeling. The economy is weaker than last year and likely to continue to soften a bit more over the first part of next year, but the good news is at least for now things are not as bad in the data as in the headlines. The bad news is . . . that’s the good news.

Why Main Street’s pain matters

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Illustration of a hanging sign that reads "Main St." swinging and hanging from one chain

The economic fortunes of mom-and-pop businesses are diverging from those of their larger counterparts — a pre-existing gap that now appears to be getting bigger, faster.

Why it matters: 

The evidence is in the private-sector labor market, that in recent months, has been propped up by large companies as smaller firms — typically responsible for 40% of U.S. employment — shed workers.

The big picture: 

Larger businesses have been able to adapt to a tough economic backdrop — historic tariffs, high interest rates and a more cautious consumer — in ways far more challenging for small companies with fewer resources.

  • “It’s evident that medium and large firms are better positioned to weather what’s going on,” said ADP chief economist Nela Richardson.
  • “They can set prices, they can change suppliers. They can hire contractors instead of permanent employees in a more sophisticated way. They can hire globally, not just in their local region. They have more tools in the toolbox,” Richardson said.

By the numbers: 

The hiring gap between small and big businesses is getting worse, a fresh sign that small business firings are holding down jobs growth across the economy.

  • As we mentioned yesterday, the private sector shed 32,000 jobs in November, according to payroll processor ADP. Small firms — those with fewer than 50 employees — accounted for all of the losses.
  • Those businesses reported a net loss of 120,000 jobs, the most small businesses have cut since the pandemic’s onset. Larger businesses grew, but not enough to offset the cuts elsewhere.

“Small business hiring really started to slow in April and I attribute some of this to tariffs and the higher cost of doing business that small companies are much less able to absorb,” Peter Boockvar, chief investment officer at One Point BFG Wealth Partners, wrote in a note.

  • “The natural reaction is to cut costs elsewhere and we know that labor is their biggest cost,” Boockvar added.

The intrigue: 

Bloomberg recently reported that there are more small businesses filing for bankruptcy under a special federal program this year than at any point in the program’s six-year history.

  • Subchapter V filings, which allow firms to shed debt faster and cheaper, are up 8% from last year, according to data from Epiq Bankruptcy Analytics.
  • Chapter 11 filings — a process used by larger businesses — are up roughly 1% over the same time frame.

Threat level: 

Main Street is bearing the brunt of an economic slowdown in ways that might make it even harder for small shops to compete with larger companies.

  • One bright spot: Despite that pain, applications to start new businesses — ones likely to employ other people — remain notably higher than in pre-pandemic times, according to the latest data available from the Census Bureau.

What to watch: 

The Trump administration shrugged off the ADP data that indicated a hiring bust. Commerce Secretary Howard Lutnick told CNBC that the cuts were due to factors unrelated to tariffs, like immigration crackdowns.

  • That hints at a debate among monetary policymakers, who are trying to gauge how much weak jobs growth is a byproduct of fewer available workers.
  • But ADP had earlier told reporters that small businesses generally had less demand for workers — not that staff weren’t available for hire.

New Study Reveals UnitedHealth’s Hidden Hand

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Research suggests UnitedHealth may be running a shell game — one that lets insurers flout regulations and obscure the harmful consequences of their vertical integration strategies.

A new Health Affairs study has confirmed that UnitedHealth Group — the nation’s largest health care conglomerate — is doing more than dominating the market; it’s playing by a different set of rules.

Researchers Daniel Arnold of Brown University and Brent Fulton of UC Berkeley analyzed new federal “Transparency in Coverage” data and found that UnitedHealth’s insurance arm, UnitedHealthcare, pays its own Optum physicians 17% more on average than it pays other doctors for the same services. And in markets where UnitedHealthcare holds a large share — 25% or more — that gap explodes to 61%.

Research published by Health Affairs titled UnitedHealthcare Pays Optum Providers More Than Non-Optum Providers.

The Affordable Care Act’s medical loss ratio (MLR) rule requires insurers to spend at least 80–85% of premium revenue on patient care, rather than on administrative expenses and profits, but if an insurer can funnel “medical spending” to its own subsidiaries — in this case, the thousands of subsidiaries that now comprise Optum — it can appear to comply with the law while actually shifting massive amounts of revenue from one pocket to another.

Under the MLR rule, insurers are required to send rebate checks to their customers if they don’t comply with the MLR requirement. The Health Affairs research suggests that UnitedHealth may be flouting that rule by deliberately overpaying the health care delivery operations it owns to comply with the letter of the law if not the intent. Because physician practices and other provider entities are exempt from the MLR rule, regardless of ownership, UnitedHealth can avoid sending its customers the rebates they otherwise would get and pad the conglomerate’s bottom line.

As the researchers put it:

“The results suggest that intercompany transactions within health care conglomerates may warrant scrutiny, as they may be signals of regulatory gaming or attempted foreclosure.”

Another way to game the system

This study also highlights another consequence: independent physician practices are being squeezed out. When UnitedHealth pays Optum doctors more — and non-Optum doctors less — it creates an uneven playing field that could drive small and mid-sized practices out of business.

The authors warn that this pattern “could lead to independent practices closing or joining larger groups such as Optum”. Over the past decade, Optum has quietly amassed more than 90,000 doctors under its control — more than any other private organization in the country.

And it’s not just doctors – UnitedHealth owns nearly 2,700 entities – a pharmacy benefit manager, a data analytics firm, home health companies and even surgery centers. The study notes that in 2024, Optum reported $253 billion in revenue, but 60% of that was simply money moving internally from UnitedHealthcare. In other words, UnitedHealth’s empire is built on being able to feed itself by self-dealing.

The point

This research provides some of the strongest evidence yet that UnitedHealth’s “vertical integration” strategy is distorting the market — not to improve care but to maximize profits under the guise of “compliance.”

For regulators at the Department of Justice, the Department of Labor (which has jurisdiction over employer-sponsored plans administered by UnitedHealth and other insurers) and the Centers for Medicare and Medicaid Services, this should be a wake-up call. As the authors conclude, even a 1% artificial price increase through these internal transfers could significantly reduce the rebates insurers owe consumers under the medical loss ratio rule. That’s billions of dollars that patients, taxpayers and employers are entitled to but that never leave the company’s bank account – except to reward shareholders and top executives. During just the first nine months of this year, UnitedHealth reported making nearly $19 billion in profits on revenues of more than $334 billion. Both revenues and profits likely would have been considerably less if not for the apparent gaming the Health Affairs researchers uncovered.