Lower Cost Health Care in Sight?

While there is ongoing debate over whether The Patient Protection and Affordable Care Act can mandate that every American must purchase health insurance, just about everyone from insurers to employers to health care providers to patients can agree that the health care system in the U.S. needs major reform.


Fortunately, reform is already underway. Even if the Supreme Court declares the insurance mandate unconstitutional, the times – they are a-changing. Our traditional one-size-fits-all manner of delivering health care and fee-for-service model of paying for it just isn’t getting the job done anymore.


The new concept for reform is called value-based insurance design (VBID). VBID seeks to remove barriers to quality care, such as paying high fees for doctor visits or prescription drugs. As for payment, VBID pays a bundled fee to the provider based on the health outcome of the patient, not for each individual service rendered to achieve it. Thus, patients receive top quality care at a lower price. Ideally, if the care is appropriate and effective the first time, cost savings are realized when there are no repeat visits or ongoing care expenses.


[CLICK HERE to read the article, “Health reform at 2: Why American health care will never be the same,” at, March 24, 2012.]


The first goal of the VBID concept is to improve health outcomes for patients, while the secondary goal is to reduce the cost of providing that medical care. Even before health reform legislation was passed, the health-care industry was moving toward a more value-based system. But the Patient Protection and Affordable Care Act (PPACA) has played an important role in advancing the VBID concept by soliciting volunteers to be paid via bundled fees, creating certain related mandates, and spurring a flurry of innovative programs currently being tested for their effectiveness.


Unnecessary Care

Another aspect of the VBID strategy is to cut costs by discouraging doctors from ordering tests and treatments that are either unnecessary or low-value relative to the health outcome of patients. It is believed that the volume of unnecessary services constitutes about 30% of health care expenditures.1


1 [CLICK HERE to view the video news story, “U.S. Health Care: The Good News,” at, February 2012.]


In the spirit of cutting costs and health care reform, nine medical societies representing approximately 375,000 physicians have published tests and treatments they believe should no longer be automatically ordered for patients. A sampling of these services is listed below; you can check the full lists at


·         Repeat colonoscopies within 10 years of a first test

·         Early imaging for most back pain

·         Brain scans for patients who fainted but didn’t have seizures

·         Antibiotics for mild- to-moderate sinusitis unless symptoms worsen or last for seven or more days

·         Bone scan screening for osteoporosis in women younger than 65 or men younger than 70 with no risk factors


[CLICK HERE to read the article, “Are You Choosing Tests Wisely?” at Medscape Today, May 16, 2012.]


Medical Loss Ratio

The industry term “medical loss ratio” refers to how much of your premium dollar is considered a loss to the insurance company because it must be used to pay your medical benefits. The rest of your premium goes to the insurance company’s “overhead.” Industry experts project that “overhead” amounts represent approximately 25 to 30 percent of the nation’s expenditures on health care.2 


However, thanks PPACA, starting in 2011 insurance companies were required to reduce their overhead in order to lower the premiums charged to consumers. The companies that did not meet their overhead target are now required to compensate their members via a rebate. The Kaiser Family Foundation estimates that $1.3 billion will be rebated to both employers and consumers this year.2


2 [CLICK HERE to read the article,What is a Medical Loss Ratio?” at, May 15, 2012.]


It seems that if we scaled back unnecessary care and “overhead” charges by insurers, we could save up to 60% on health care costs as a nation. Which is kind of what we do in our own lives when we need to tighten the belt – lower our “overhead” and cut out any unnecessary expenses.


Please give us a call if you could use some help reviewing your insurance and/or financial situation to help trim the fat and save money.




Newton’s Law of Economics: The Power of Sentimental Investors

Newton’s Third Law of Motion (for every action there is an equal and opposite reaction) may well apply to the correlation between investments and investor sentiment.


For example, the nation’s largest bank, JPMorgan Chase, recently announced that instead of posting $200 million in profit, as it had previously estimated, it had actually lost $2 billion. In a conference call to analysts and investors, CEO Jamie Dimon blamed the losses on a complex hedging strategy the firm had engaged in over the past six weeks and warned that the company could lose more.


[CLICK HERE to read the article,JPMorgan suffers big loss,” at, May 11, 2012.]


On the day of the announcement, the company’s stock plunged 9.3%, as you might expect. But the interesting thing is that other investment banks also took a hit – Morgan Stanley fell 3.7 %, Goldman Sachs fell 3.3%, and Citigroup dropped 3.8%. Why? Because investors are concerned that other large banks may have made the same mistake. When pressed as to whether the losses were due to flawed execution or if broader market forces may have played a hand (that could impact other firms), Dimon responded, “Just because we’re stupid doesn’t mean everyone else was.”


[CLICK HERE to hear the audio, “Miss Jamie Dimon’s conference call? Hear it here,” at, May 11, 2012.]


[CLICK HERE to view the video discussion, “JPMorgan discloses $2B in losses in ‘flawed’ hedging strategy,” at, May 11, 2012.]


If you apply Newton’s Third Law toward economics, investors ran in the opposite direction. It happens all the time.


In fact, new research from the Wharton School reveals that investor influence has a whole lot more impact on stock market pricing – and mispricing – than previously believed. The paper purports that investor sentiment influences stock prices up or down to a degree that cannot be explained by fundamentals like earnings and revenues. Furthermore, stocks are more likely to be overpriced when enthusiasm is high than underpriced when it is low – meaning that “irrational exuberance” has a more powerful impact than pessimism. Or, bulls can move market prices higher than bears can lower them.


[CLICK HERE to read the article, “Investor Sentiment and Stock Prices: Explaining the Ups and Downs,” at Knowledge@Wharton, May 9, 2012.]


[CLICK HERE to read the research paper, “The Short of It: Investor Sentiment and Anomalies,” from University of Pennsylvania – The Wharton School; National Bureau of Economic Research, March 12, 2012.]


Isn’t it interesting how investors as a group can have so much impact on market performance when investors as individuals have so little? If you could use some help devising a plan for the financial matters that you can control, please give us a call.




Financial Infidelity

Are you cheating on your spouse? Financial infidelity is another way of saying you spend household money without telling your other half about it. It happens all the time. In fact, according to a new survey by The American Institute of CPAs (AICPA)1, three in 10 adults who are either married or living with a partner admit to buying big-ticket items without discussing it first and stashing away purchases so their significant other doesn’t realize they’ve been shopping.

It’s understandable to want to go out and splurge without permission – particularly after operating under a tight budget in recent years. But spending an inordinate amount of money without your partner’s knowledge is not a great idea. Part of the reason is because household finances may continue to be tight and, even if they’re not, budgetary discipline is important for long-term financial security. But another reason it’s not a good idea is because of the damage it can do to your marriage.


About 27% of couples have outright arguments over money. According to the AICPA, money is the most volatile topic in a marriage, beating out other heated arguments over child rearing, division of chores, and time spent with and/or choice of friends. More than half (58%) of financial arguments are over how one partner’s definition of “needs” and “wants” differs from the other’s2. For example, some women can’t live without a new pair of shoes, while some men need to buy the newest cell phone the day it hits the market. Are these needs or wants?


The answer to that will vary in every relationship. Part of being in a relationship is negotiating what is acceptable and what is not – like flirting with a waitress or bartender. The same goes for money. As a couple, it’s important to sit down and define necessary versus discretionary spending. Be prepared to negotiate these points. Even set aside a specific amount of discretionary spending for each spouse to cover individual preferences like tickets to sporting events or a day at the spa. 3


1[CLICK HERE to read the article, “Lying to your spouse about money? Join the club,” at, May 4, 2012.]

2 [CLICK HERE to read the news release, “AICPA Survey: Finances Causing Rifts for American Couples,” from The American Institute of CPAs, May 4, 2012.]


3 [CLICK HERE to read the article, “Marriage Maintenance When Money Is Tight,” at The New York Times, March 30, 2012.]


Work Woes

Whether staying home by choice or not, nearly one in five (18%) Americans between the ages of 35 and 54 are not participating in the workforce. If a couple decides together that one spouse should stay home while the other one works, it can put a strain on the marriage but at least it’s a mutual choice. However, when this scenario is not by choice it can wreak havoc on the relationship.


According to the Brookings Institute, there is a strong correlation between changes in earnings and changes in marriage. In fact, men that experience the most adverse economic changes also experience the largest declines in marriage. The economy has not only increased stress and arguments among married couples, it’s contributed to many singles simply putting off marriage altogether until they are more financially secure.


No matter how you look at it, managing money when you’re in a relationship can be a difficult proposition. The AICPA recommends working with an advisor as a neutral third party to help you establish and reinforce financial goals, pay bills, monitor accounts and bring up the topic of unusual spending patterns. This might work better than a spouse having to broach the topic of excess spending – or worse yet – not bringing it up at all and stifling any feelings this scenario may ignite.


If we can help you in any way manage the financial situation in your household, please contact us.


[CLICK HERE to read the article, “The 86 million invisible unemployed,” at, May 4, 2012.]


[CLICK HERE to read the article, “The Marriage Gap: The Impact of Economic and Technological Change on Marriage Rates,” at The Brookings Institution, February 3, 2012.] 




We’ve been waiting so long for good news that we are expecting one day, one report or one leading indicator to come out that will announce: “It’s over! Prosperity is here! Go out and buy a home and ask your boss for a raise. The good times are here again!”


Much like your golf game doesn’t convert overnight, neither will our economy. It will take a lot of hard work on consumers’ part to diligently save for retirement and pay down debt. It will take fiscal austerity and enormous compromise between party lines to cut back government spending and keep taxes at a manageable level for middle Americans. It will take a lot of hard work, and it will not happen overnight. So much for the hole-in-one shot.


Which is perhaps why it’s so hard when we see the latest reports that the U.S. economy grew more slowly in the first quarter of this year compared to the end of last year. Once we get good news, we want it to continue, however slowly. These back steps are painful and it feels like we’re having an emotional roller coaster relationship with our own economy.


[CLICK HERE to read, “A Weaker First Quarter Doesn’t Mean a Weak Year,” at, April 27, 2012.]


Global Warming Is Doing Its Part

Interestingly, consumer spending managed to accelerate to an annual rate of 2.9% in the first quarter. The strength is largely attributed to the relatively mild winter that got people outdoors and casing car lots on Saturday afternoons – as apparently the greatest increases came from robust growth in auto sales.


One surprising highlight of the first quarter was spending on home construction and renovations – also attributed to the milder weather. Residents may be fixing up their homes in anticipation of a stronger real estate market, which certainly indicates renewed hope. Experts anticipate housing to contribute to growth this year for the first time since 2005.


Overall, most agree that the first-quarter slowdown is only temporary. Growth is expected to settle in at about 3% by the end of 2012, with expectations that stronger job growth will induce more consumer spending.


Facebook Is Doing Its Part

There’s a lot of press right now about the upcoming Facebook IPO. We’ve learned more about the company’s financials and plans for its future from its S-1 financial statement filed – and amended several times – with the SEC. For example, the company has added 1,500 hundred jobs in just the last 12 months – 43% of its current workforce (although many of those jobs are overseas). The satellite Facebook app industry, which has rapidly taken off during the course of this multi-year recession, employs between 129,000 to 182,000 workers.[1] The wages and benefits they earn range from $1.2 billion to $15.7 billion. Furthermore, Facebook has virtually doubled its spending in the last year thanks to hiring, acquiring and building data infrastructure.


[CLICK HERE to read the article, “Facebook Creates Jobs, Study Finds,” at Smith Business, Spring, 2012.]


[CLICK HERE to view the video, “Facebook Revenue Revealed: The Metrics That Matter,” at Yahoo Finance, April 24, 2012.]


[CLICK HERE to read, “Facebook Growth Stats for 2011-2012,” at Internet World Stats, April 24, 2012.]


You Can Do Your Part

If you’re worried that you’ve gotten behind on your retirement savings, a recent paper from Boston College’s Center for Retirement Research indicates that there are strategies you can employ other than taking on riskier investments to reach your goals. For example, working longer, using a reverse mortgage, or spending 5% less can all have about the same impact as investing your retirement assets in a higher risk, all-stock portfolio. In fact, simply delaying when you start drawing Social Security benefits can have a sizeable impact on your quality of life in retirement. Monthly benefits are more than 75% higher at age 70 than at age 62.


[CLICK HERE to read the article, “The top factors in retirement planning,” at, April 24, 2012.]


[CLICK HERE to read the working paper, “How Important Is Asset Allocation to Financial Security in Retirement?” at the Center for Retirement Research, April 2012.]


Please give us a call to help you devise a plan to potentially increase your economic security in retirement. After all, we should be doing something other than “puttering around” waiting for the economy to rebound.



[1] University of Maryland, Smith School Business, “Facebook Creates Jobs, Study Finds,” Spring 2012.



Today’s economic environment is more complex than ever before, and achieving financial success can be an incredibly confusing process to even the most experienced individuals. That’s exactly why we’ve created this blog – to provide a forum for discussion, a portal for helpful information and resources and an ongoing stream of expert insights to help you make informed decisions about your financial future.

What are your biggest financial concerns? If you’re like many individuals preparing for or actively enjoying retirement, you may be wrestling with any number of pressing issues that keep you up at night.  Many find themselves asking questions such as:

Have we really saved enough?
How do we make up what we’ve lost over the past 2-3 years?
What are the right moves to make in today’s uncertain economy?
What should we be doing with our IRA and 401(K)?
Are there ways to reduce what we’re paying in taxes each year?
How do we create the most meaningful legacy possible for our children and grandchildren?
Will we outlive our retirement savings?

We’ll use this blog to provide valuable insights into each of these areas and more, so take a look around, check out the most recent posts and be sure to offer feedback or post a question if there are topics you’d like to see addressed!

Prefer to have your particular situation reviewed in person? We’d love to meet you!  Simply contact us to schedule a complimentary consultation today!