The Medicaid Extension Debate

Since the Supreme Court published its decisions regarding the constitutionality of the Affordable Care Act, there’s been far more discussion over the option to reject the Medicare expansion plan than the mandate that all Americans must purchase health insurance.


For Republicans, the option to reject federal aid offers a glimmer of hope that there’s still time to overturn the health care legislation, and many have reiterated this stance.


[CLICK HERE to read the full Supreme Court opinion, at, 2011/2012.]


[CLICK HERE to read a letter from Kathleen Sebelius, Secretary of the Department of Health and Human Services, to state Governors at, July 10, 2012.]


In Texas, Governor Rick Perry has joined at least 14 other states in saying he will reject federal aid to extend Medicare to non-elderly recipients in his state. Like many other Republican-dominated states, he opposes what he views as the socialization movement of the health care reform law and argues that such reforms are too costly and will devastate the state’s budget.


[CLICK HERE to read the article, “Fifteen governors reject or leaning against expanded Medicaid program,” at, July 3, 2012.]


[CLICK HERE to read the article, “Gov. Perry tells feds Texas won’t expand Medicaid,” at The Houston Chronicle, July 10, 2012.]


[CLICK HERE to read “Medicaid expansion is a bad deal for Georgians,” at The Atlanta Journal-Constitution, July 12, 2012.]


On the other side of the coin, supporters like Patricia Young Brown, president and CEO of Central Health of the Travis County hospital district in Texas, say expanding Medicaid and implementing other reforms mandated by the new legislation will help save the state money in the long run. “You can pay a dollar now to keep someone as healthy as possible … or you’re going to pay for it later when they’re sick,” observes Brown.


[CLICK HERE to read the article, “Not joining Medicaid expansion will hurt hospitals, clinics and taxpayers, officials say,” at, July 10, 2012.]

[CLICK HERE to read the article, “How the Medicaid expansion could actually save states money,” at, July 5, 2012.]


Whether Medicaid is extended in your state or not, the ruling to uphold the individual insurance mandate (subject to a penalty “tax” for non-compliance) means that the Patient Protection and Affordability Care Act will achieve at least part of its funding objectives and will likely move forward. While there’s still the possibility that it could be overturned by Congress should Republicans take over the presidential administration, many health care industry experts observe that the sands of change are already in motion and reforms underway within the industry itself are not likely to reverse.


Regardless of where you stand on the political forum, it’s never a good idea to depend solely on government programs to provide for your wellbeing in the future – particularly with something as important as your personal health care. Please contact us to discuss strategies for positioning your assets for flexible options that can include a plan for your health care needs in retirement.




If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.


Female Influence

Traditionally, we’d hear about the “woman behind the man.” But these days, women seem to be emerging more front and center as we read daily news about their roles in consumer spending, corporate boardrooms, driving economic expansion as small business owners, and as major players in this year’s presidential election.

Corporate America

In 2008, Paul Bulcke took over the job of CEO global food giant Nestle. At that time, despite the fact that 80% of the company’s consumers were women, only 3% of managers in the company’s leadership pipeline were women. One of Bulcke’s top priorities when he took over was to put the issue of women and gender at the top of his Executive Committee’s agenda. In his own personal view, Bulcke felt that it was important for “women stay women” instead of the usual practice that for women to succeed in business they had to become tougher than men. During his tenure, the percentage of women on management teams increased from 15 to 21%, including women heading two of Nestlé’s five global Strategic Business Units and a female CFO at the corporate level.

Why would a CEO make such strides to increase women’s roles in management? In the case of Nestle, it was less about politically correct mandates and more about good business for a company that markets primarily to women. In addition to their intimate understanding of the products and target market, women tend to have inherent traits that make them valuable in the corporate environment: they aren’t afraid to ask for help, they tend to be great at building relationships, and they are skilled multi-taskers.

[CLICK HERE to read the article, “Gender in the Multi-Cultural Corporation,” at Harvard Business Review, June 22, 2012.]


Women have been starting businesses at a higher rate than men for the last 20 years and these days more and more are quitting their jobs to become entrepreneurs – which may not be reflected in recent unemployment numbers. While women-owned businesses created only 16% of total U.S. jobs that existed in 2010, it is projected that they will create over half of the 9.72 million new small-business jobs expected to be created by 2018.1 Some of the reasons women are leaving the security of a job in today’s uncertain employment market have to do with job dissatisfaction, a poor value structure, and lack of work/life balance. The Guardian Life Index cites “office politics” as a driving factor for women leaving Corporate America to start their own businesses.1

1 [CLICK HERE to read the article, “Entrepreneurship is the New Women’s Movement,” at Forbes, June 8, 2012.]

[CLICK HERE to read the article, “Why Women Still Can’t Have It All,” at The Atlantic, July/August 2012.]


Meanwhile, women continue to wield influence in politics whether running for office, positioning for running mates or being wooed for their vote in this year’s upcoming presidential election. In fact, more women have been running for positions in the Senate this year than ever before.

[CLICK HERE to read the article, “Romney, Obama: When Wooing Female Voters, Check Marital Status First,” at NPR, June 13, 2012.]

[CLICK HERE to read the article, “Mitt Romney’s wife, Ann: Woman being eyed for ticket,” at Newsday, July 5, 2012.]

The influence of women – whether in major corporations, small businesses, government agencies or in the home – offers inarguably a different approach to solving problems and may well be one that can have a positive impact on this country’s recovery going forward. That’s just one reason why it’s important for women to be involved in professional consultations regarding finances – whether single or married. Please contact us to schedule a time to review your personal situation.


If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.


Health Insurance for All

The much-awaited ruling finally came as the Supreme Court determined that the Patient Protection and Affordable Care Act (PPACA) is for the most part  constitutional. The biggest question was whether or not the federal government could mandate legislation requiring that all Americans purchase health insurance. It can’t, of course, but what was ruled constitutional is that Congress can levy a tax on those who don’t.

The ruling was so long in coming that nearly every pundit out there has already offered its “what if” scenario depending on which way the upper court ruled. However, post-ruling, there are a few insights worth noting from journalists, experts, and health industry players.

[CLICK HERE to read the article, “Supreme Court Upholds Health Care Law, 5-4, in Victory for Obama” at The New York Times, June 28, 2012.]

[CLICK HERE to read the full document of the Supreme Court’s opinion at its website, June 28, 2012.]

What Now?

The Kaiser Family Foundation offers a good overview of the nuts and bolts of what will happen now that a decision has been rendered and the dust has settled. For example, if a person chooses not to buy health insurance, what is the fine he must pay? According to Kaiser, starting in 2014 the penalty would start at $95 a year, or up to 1% of income, whichever is greater, and rise to $695, or 2.5% of income, by 2016.

[CLICK HERE to read, “After the Ruling: A Consumer’s Guide,” at, June 28, 2012.]

Medicaid Provision

One caveat the Court did not rule in favor on is that the federal government may not withdraw existing federal Medicaid funds to states that refuse to expand their Medicaid programs pursuant to the health reform act. However, at the American Hospital Association’s blog, litigator Dominic Perella notes that the Court did not address the fact that the federal government can still punish states by withholding other PPACA-based funds if they decline to participate. Those funds, after all, are not “existing” funds.

[CLICK HERE to read the article, “The Health Care Ruling – Big Takeaways and New Questions,” at the American Hospital Association Health Care Reform Law blog, June 28, 2012.]

Investors Mixed

The New York Times summarized the impact of the ruling as it may influence investors, observing that, “Hospitals will gain millions of paying customers. Insurers, by contrast, could face crimped profits from restrictive rules. Medical device and pharmaceutical companies will bear new taxes and other higher payouts, but they were already expecting such costs.”

Consequently – at least on the day the ruling came down – the price of shares of hospital stocks raced up, that of health insurers dropped, and some medical device and pharmaceutical stocks experienced slight declines.

Looking forward, the ruling is generally considered a plus for health insurance companies. If the individual mandate had been over-ruled, they would have been expected to uphold the law’s provision that they must insure people with pre-existing conditions, but would not have the expected revenues from new participants (resulting from the mandate) to help defray those costs. The law basically implies growth for health insurers. And when you consider that many people who do not currently choose to purchase health insurance do so because they are basically healthy (such as young adults), the mandate adds assets to the insurance pool with low risk liability of paying claims by new entrants.

[CLICK HERE to read the article, “In Health Care Ruling, Investors See Mixed Blessing” at The New York Times, June 28, 2012.]

For many, the Supreme Court ruling is good news, but for others it signifies further federal government intervention and spending. Whichever side of the fencepost you stand on, it’s a good idea to prepare for your own financial independence – including a long-term plan to pay for health care expenses – as well as possible. We have ideas and options to help you do this.

If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.



Organic Growth

We often read about how large American corporations have done such a great job of cutting back expenses and strengthening their balance sheets. And yet, our economy continues to languish. Many attribute this lack of growth to unemployment and unwillingness of corporations to open their pocketbooks and invest in growth, for fear of the financial crisis in Europe and our own “fiscal cliff.” In short, fear and perhaps a lack of ideas on where to go from here are holding us back. After all, no track offers a guarantee of success.

The latest quarterly earnings reports reveal that corporate profits rose for the 10th consecutive quarter.1  But as a recent article at Harvard Business Review points out, a lot of the net profit in recent years has come from reduced operating costs. According to the article, “CEOs can’t rely on cost-cutting to keep their profit momentum going – it’s gone about as far as it can at most companies.”

The author proposes ways companies can jumpstart real organic growth – as opposed to acquisition growth – into their balance sheets. One recommendation is to pursue a targeted strategy instead of throwing money at every new initiative. The result should not just be a greater ROI (return on investment) but ROE – a greater return on effort.

1[CLICK HERE to read the article, “Getting Back to Growth” at Harvard Business Review, June 22, 2012.]


Peter Cappelli, a professor at Wharton, recently published a book on hiring issues titled, Why Good People Can’t Get Jobs: The Skills Gap and What Companies Can Do About It. Cappelli addresses the claims that companies have jobs available but that there’s a severe lack of talent available and America’s universities are rolling out a new generation of unqualified candidates.

Do you remember your first job? Was there much you learned in college that honestly prepared you or contributed to your ongoing success? I remember grads who didn’t know how to work a copy machine (although fixing them seems to be the real skill).

Cappelli slaps down these claims with some aggressive observations. For example, to the claim that companies want experience but say they can’t find qualified people who will accept the salaries offered he responds, “Don’t call it a skills gap – you’re just being cheap.” This explains why older workers can’t get jobs (at their previous salaries) and younger workers (with no experience) can’t get in the door.

He also criticizes the “gutting” of HR departments and lack of human judgment in finding candidates. Due to the ramp-up in resumes received, automation is necessary. However, some savvy applicants have learned to “game” the automation system, getting their resumes pushed up the pike while other, less-savvy but more qualified applicants are weeded out. Cappelli observes, “Is that really who you want to be hiring? People who can game the system? I suppose it tells you something about people, but it doesn’t tell you much about who has the requisite skills.”

He’s got an interesting take on why unemployment numbers aren’t improving, with suggestions to bridge the hiring gap. Cappelli says the first thing companies should do is determine the cost of keeping a job vacancy open while searching for the perfect candidate.

[CLICK HERE to read the article, “Why Good People Can’t Get Jobs” at Knowledge@Wharton, June 22, 2012.]


In addition to job growth, there are multiple forward-thinking issues America’s companies must face to drive organic growth. In a recent article he penned for the BBC, the CEO of Coca-Cola put forth five “mega trends” that will influence market demand in the future. The list is below; note that most of these trends are already highly prevalent – it’s just that they will become massively prevalent in a few short years.

      1.      Mass urbanization – requiring the modernization of infrastructure and supply delivery logistics

2.      The aging demographic – baby boomers drive mass demand (as usual)

3.      The global middle class – largely comprised of emerging market countries

4.      Consumer domination – social media gives consumers a voice in how we conduct business

5.      Green issues – sustainability will no longer be a nice-to-have, it will be expected/assumed

[CLICK HERE to read the article, “The five consumer mega trends shaping tomorrow’s customers,” at the BBC, June 21, 2012.]

As we all know from Darwin’s theory of evolution, the strongest will survive. It’s up to our corporations to figure out the best way to meet the demands of consumers and grow organically – while at the same time benefiting our country with domestic jobs and innovation. It’s up to the rest of us to figure out which companies are poised to do that best. Please contact us if you’d like some help with that.

The information and opinions contained herein are provided by third parties and have been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed by our firm. Content is provided for informational purposes only and is not a solicitation to buy or sell the products mentioned. The information is not intended to be used as the sole basis for financial decisions, nor should it be construed as advice designed to meet the particular needs of an individual’s situation.



A Post-Apocalyptic World

Perhaps the U.S. subprime mortgage debacle that kicked off economic recessions, debt crises, and job losses all over the world can’t quite be described as an apocalypse. However, the world may seem a bit apocalyptic if you’ve lost your house and have been out of work for a year and a half.


They say what goes up must come down, but surely the opposite is true – what goes down eventually goes back up. We were all caught off guard by the severity of our latest economic downturn. Perhaps it would be prudent not to be so caught off guard when the financial world rights itself back up. Perhaps we should plan for this eventuality.


As is often the case, opportunities exist even in troubled areas. For example, the eurozone continues to dominate negative financial headlines these days. However, Europe is a very important market for U.S. multinational corporations – not to mention the rest of the world. This is something we should remember as we plan for a post-apocalypse portfolio.


According to a report published by the Center for Transatlantic Relations, over the last 10 years at least half of U.S. global foreign direct investment has gone to Europe. Even now, the region is still the most profitable in the world for U.S. companies. In 2011, U.S. affiliate income reached $213 billion – twice the earnings in Asia and South America combined.

[CLICK HERE to read the report, “The Case for Investing in Europe” at the Center for Transatlantic Relations, 2012.]

Bear in mind, too, that the performance of many large European companies is more tied to global growth than to EU economies. As is noted in an upcoming article in Kiplinger’s Personal Finance magazine, where a company is based isn’t necessarily the same as where it sells or produces its products.

[CLICK HERE to read the article, “The Case for Investing in Europe” at Kiplinger’s Personal Finance magazine, August 2012.]

In this year’s World Economic Forum report, European-based companies represented 25% of global Research & Development spending – more than China (13%) and Japan (11%) combined. Even now, seven of the top 10 most competitive countries in the world are located in Europe and, as a beacon for the future, Europe has the most science and engineering college graduates.

[CLICK HERE to readThe Global Competitiveness Report, 2011-2012″ from the World Economic Forum, 2011.]

So sure, Europe may be down but it is by no means out. As for the U.S., there are plenty of signs that indicate we’re in the last innings of this downtrodden game. But just as America’s favorite pastime (baseball) returns season after season, we’ll be back. Europe will be back. And it’s time to think about the future.


What would (or should I say “will”) you do when prosperity returns? Take a long-awaited, long-planned expensive vacation? Buy a second home? Invest more aggressively? Stay within your current budget and stash away all extra money for retirement? Convert a portion of your portfolio to an annuity contract that says it will guarantee* your income in the future?


Give us a call. We can help you make a plan that best suits your goals – both short and long term.



*Life insurance and annuity product guarantees rely on the financial strength and claims-paying ability of the issuing insurer.


If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.





Let’s Talk Pensions

It used to be (just a few years ago) that if you worked for a company that offered a pension, you were one of the lucky ones. That retirement income was reasonably secure compared to workers contributing to a 401(k) or other defined contribution (DC) plan.

Not so much anymore though. First of all, government and corporate assets managed for pension payouts have underperformed in recent years due to rising costs, increased beneficiaries and economic instability, putting these plans at risk. In May, the funded status of the typical U.S. corporate pension plan fell by 6.5 to 69.8 percent, the lowest level since 2007.1

For state government pension plans, shortfalls mean that other funded services such as education will be shortchanged to shore up pension fund deficits and costs moving forward. Both corporate and government plan sponsors are looking at changing retirement plan structure for new hires in the future, including eligibility requirements and/or transitioning to a defined contribution plan.

1 [CLICK HERE to read the article, “Funded Status of U.S. Pensions Declines to Lowest Recorded Level, According to BNY Mellon,” at, June 7 2012.]

So on one hand, pension assets at their scheduled level of payouts are at risk. On the other, pension sponsors are changing the structure of plans to offset these risks. For example, some plans are offering new retirees the choice between annuity benefits paid out every month for life or a lump sum of the projected value of the lifetime pension payouts. A lump sum means you’ll need to manage your own income for the rest of your life, and there are tax issues to consider. You could come out ahead if you select financial vehicles wisely and interest rates/market performance goes your way. Or, you could run short of money before you run out of retirement.

[CLICK HERE to read the article, “Deciding Between a Lump Sum and an Annuity,” at The Pension Rights Center, June 5 2012.]

If you choose a one-time payout, you should get up to speed on fixed index annuity (sometimes called “hybrid” contracts that combine regular payouts with the guarantee of lifetime retirement income, called guaranteed* lifetime withdrawal benefits (GLWB).


[CLICK HERE to read the article, “Retirement income review: GLWB / GMWB,” at, May 24, 2012.]




There is increasing recognition and concern that DC plans will not be able to provide the same level of benefits as a defined benefit (DB) plan. Therefore many of today’s employers are beefing up their DC plan options to help their employees better secure retirement income. According to a recent survey of more than 500 large employers, 16 percent now offer a retirement income tool such as a GLWB within their 401(k) plan, with another 22 percent likely to adopt one in 2012.

[CLICK HERE to read the article, “401(k) Income Options Coming Your Way,” at, May 15, 2012.]

It certainly feels like the economy and the burgeoning senior population has taken a toll on nearly every component of retirement that, in the past, was rendered strong and dependable. Things like pensions, Social Security benefits and home equity. Now everything is on shaky ground and it’s like trying to tiptoe by an erupting volcano to get to the other side – retirement “paradise.”

If you’re tired of wondering if the government and/or your employer are going to be able to hold up their end of the bargain and would like to secure some retirement income funds of your very own, please give us a call. We can help you with that.

*Insurance and annuity product guarantees rely on the financial strength and claims-paying ability of the issuing insurer.

If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.[RC1] 

The information and opinions contained herein are provided by third parties and have been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed by our firm. Content is provided for informational purposes only and is not a solicitation to buy or sell the products mentioned. The information is not intended to be used as the sole basis for financial decisions, nor should it be construed as advice designed to meet the particular needs of an individual’s situation.



 [RC1]This is a TX requirement. It means a copy of each of these resources should be printed off and kept on file while the book is available (and five years thereafter).


Euro Blues

This line was recently floated across social media sites: “Greece is collapsing, Iran is getting more aggressive, and Rome is in disarray. Welcome to 450BC!”

Indeed, the similarities are interesting to note. And with the 2012 Olympic Games in London on deck alongside news of Greek austerity rebellion, it’s easy to recall the days of toga robes and laurel leaf crowns, speeches and betrayals.

The Greek government is expected to run out of cash next month if it doesn’t receive more bailout funds. However, the country is revolting over requisite austerity measures in return for the money, so now the biggest question is whether Greece will exit the Euro. But that’s not the worst of it. In addition to the threat of economic collapse and ongoing political instability, there is a break down in infrastructure that may fail to meet basic human needs–such as providing electricity and preventing the spread of infectious diseases. These conditions are bound to continue if not worsen civil unrest within the country.

[CLICK HERE to read the article, “Greece’s debt woes mutate into energy crisis” at Reuters, June 1, 2012.]

[CLICK HERE to read the article, “Greece on the breadline: HIV and malaria make a comeback,” at The Guardian, March 15 2012.]

Europe on the Brink

Unfortunately, Greece is just part of the problem. Other European countries such as Italy and Spain are not far behind. The number of Spanish companies filing for bankruptcy climbed by 21.5 percent in the first quarter. In Barcelona, the government failed to sell 26 buildings because a bidder wanted a clause that required rents to be paid in dollars should the euro break-up.1

In its twice-yearly global economic outlook, the Organization for Economic Cooperation and Development (OECD) recently cautioned that the 17-country Eurozone risked falling into a severe recession. The organization–which monitors economic trends for the world’s most developed economies–warned that the Eurozone economy could shrink anywhere from 0.1 to 2 percent this year and predicts a mere 0.9 percent growth rate in 2013.

[CLICK HERE to read the article, “The pain in Spain that threatens the Eurozone” at, May 31, 2012.]

1 [CLICK HERE to read the article, “Europe in limbo: Home and dry” at, May 26, 2012.]

2 [CLICK HERE to read the article, “Eurozone warned ‘severe recession’ looming,” from Associated Press, May 22, 2012.]

In contrast to the Euro blues, the OECD projects the United States to grow 2.4 percent this year and 2.6 percent in 2013. Japan is projected to grow 2 percent in 2012 but just 1.5 percent next year. China is expected to jump from 8.2 percent in 2012 to 9.3 percent in 2013.2

It just goes to show you that there is still credibility in global diversification: Where one area of the world falters, others are on the rise. If you’d like assistance to help you evaluate your financial situation  for areas of relative strength, please contact us for a mid-year analysis.

If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.


The information and opinions contained herein are provided by third parties and have been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed by our firm. Content is provided for informational purposes only and is not a solicitation to buy or sell the products mentioned. The information is not intended to be used as the sole basis for financial decisions, nor should it be construed as advice designed to meet the particular needs of an individual’s situation.    



Good News in Real Estate

Hope…it may be the most powerful force in the universe. Evidence shows time and time again that when people receive just a glimmer of hope that they may be able to achieve something, that hope is the driving force that can move mountains, end wars and, apparently – increase home property values.


Dare we hope? The most recent news coming from the real estate industry gives us reason.


[CLICK HERE to read the article, “Hope springs a trap,” at The Economist, May 12, 2012.]


The chief economist for the National Association of Realtors (NAR) believes the housing recovery is underway. In April, new home sales rose 3.3% to a seasonally adjusted annual rate of 343,000. Home resales hit a two-year high and, compared to April last year, sales were up nearly 10%.[1]


Many believe home values have bottomed out. Despite the number of foreclosures and short sales in today’s market, the  NAR reports that the percentage of investors picking up distressed homes is getting lower, indicating a stronger return to normal home buying – surely a reflection of renewed hope for the economy. In fact, foreclosures and short sales accounted for only 28% of sales in April, down from 37% in April 2011. Foreclosed homes are selling for an average 21% discount and short sales an average of 14% below market value.


Some areas (Washington D.C., North Dakota, Phoenix, Seattle, Miami, Naples, Florida and Orange County, California) are actually seeing the return of a seller’s market, due to a shortage of inventory.


[CLICK HERE to read the news release and video, “April Existing-Home Sales Up, Prices Rise Again,” from the National Association of Realtors, May 22, 2012.]


[CLICK HERE to read the article,US home prices jump 1.8%” at Crain’s New York, May 23, 2012.]


[CLICK HERE to read the article, “New-Home Sales Climbed in April, Building Optimism,” at The New York Times, May 23, 2012.]


Lending Still Tight for Prospective Homebuyers

In a recent speech at the Conference on Bank Structure and Competition in Chicago, Federal Reserve Chairman Ben Bernanke gave a relatively positive overview of today’s current banking conditions with one glaring exception: residential lending. According to Bernanke:


“Residential mortgage lending has been particularly sluggish. Tight lending standards and terms remain especially evident…even when the loans were accompanied by a 20 percent down payment, many banks were less likely to originate loans to borrowers with given GSE-eligible [government-sponsored enterprises] credit scores, despite the originating bank’s ability to sell the mortgage to the GSEs.”


Bernanke indicated that most banks are reluctant to accept mortgage applications from borrowers with less-than-perfect records because of the previous requirement that they buy back a defaulted loan if the underwriting or documentation is judged deficient.

[CLICK HERE to read Ben Bernanke’s speech, “Banks and Bank Lending: The State of Play,” at the Federal Reserve website, May 10, 2012.]

Considering your home may represent a large portion of your total net worth, please contact us if you’re interested in a mid-year assessment of your overall financial picture.




[1] New York Times, “New Homes Sales Climbed in April, Building Optimism,” May 23, 3012.


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.