More on “income inequality” and financial planning

“The rich get richer and the poor get poorer”

By Rick Kahler CFP®

One of the pillars of my profession of financial planning and counseling is to help people get richer. For many people, this statement might evoke the idea of “income inequality” as summed up by the phrase “the rich get richer and the poor get poorer.” This is a common money script around a topic that evokes a lot of difficult emotion.

Of course, there are people who have wealth that tends to increase over time. This includes some who inherit vast wealth and others who achieve wealth through business ownership or creative successes. It also includes those who live on less than they make, invest the difference, and make sound investment decisions with the money they have saved.

Goals of financial planning

Regardless of the economic class people start out in, one of the goals of financial planning is to help them expand their lifestyles—in in other words, to get richer. We help them build wealth so they can afford to send their children to college, or can take care of themselves in old age, or can someday not have to work for an income. We help the poor to become middle class, the middle class to become affluent, the affluent to become rich, and the rich to become richer.

When I frame “the rich getting richer” in that manner, people typically respond, “I never thought of it that way.” It contradicts the popular interpretation that the way the rich get richer is by taking from the poor, hence “the poor get poorer.”

Certainly it’s true that some rich people and companies do exploit the poor or try to influence legislation in their own interests. The artificially high prices they charge can be one factor in causing the poor to get poorer. Examples of this might include the secondary educational system as well as industries where excessive regulations limit competition.

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https://www.amazon.com/Comprehensive-Financial-Planning-Strategies-Advisors/dp/1482240289/ref=sr_1_1?ie=UTF8&qid=1418580820&sr=8-1&keywords=david+marcinko

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Reasons

However, just as most of the rich don’t get richer by exploiting the poor, most of the poor don’t get poorer by being exploited by the rich. Some get poorer because they lack education or don’t know how to access help. Some get poorer by events out of their control, such as job layoffs, serious illnesses, or cultural, racial, or sexual discrimination. There are many reasons.

Some get poorer through choosing careers with little future, not taking care of their health, or making poor money decisions such as financially enabling children. Others are caught up in destructive behaviors like addictions or compulsive gambling. A few even choose poverty for religious or philosophical reasons.

Complex

As with many things, income inequality is complex.

For example, some people choose to take large risks that could result in their becoming very rich or very poor.

Others choose the security of a steady paycheck. There could ultimately be a huge wealth gap between the entrepreneur who hits it big and the more conservative person who wants to play it safe. Does that mean the gap is inherently bad, or that the risk-taker doesn’t deserve the rewards of success?

Certainly, the risk-taker could have ended up far worse than the person who played it safe. Does that make one right and the other wrong? I don’t believe so.

Assessment

Just as with other money scripts, “the rich get richer and the poor get poorer” is true in some circumstances. At other times, the truth can be that “the rich get poorer and the poor get richer.” It can also be true (think of the 2008 economic crash) that “the rich get poorer and the poor get poorer.” And the final truth—one that financial planners work toward—is to help “the rich get richer and the poor get richer.”

Conclusion

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Appreciating Post Cyber Monday Stock Market Volatility

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Living with Ambiguity [Is it Friend or Foe?]

By Robert Klosterman CFP® http://www.whiteoakswealth.com/

The stock market was down a bit last month and up last week, and then down today; back and forth, rising and falling and rising again the last few years, etc, etc.

Now: 23 557 DJIA

Whipsaw is the word I’ve heard to describe it lately. And, without a doubt, the question that gets asked the most is “How do you like this volatility?”

My reply, without exception, is “I LOVE volatility. I do prefer upside volatility to downside though”. The response is a smile or an outright laugh. Of course, few physicians or laymen I have ever met get worried about upside price movements in investing.

Third Quarter 2017

The third quarter of 2017 – post election results – clearly experienced both major up and downside volatility with the recent emphasis on the upside. Investors that fully invested in equities saw their portfolios rise in the positive and record-breaking direction.

Europe

The market pundits have a daily hero to pin the market movements on. Europe, Syria, Russia and Putin, Turkey, Greece, US Congress stalemates and other forces like the death of Fidel Castro are some of the most recent “good guys” that have given rise to Mr. Market’s positivity. Did we mention  Donald Trump?

How Long?

The bigger question is how long will these issues persist? Established societies, often described as western economies, have some significant headwinds facing them for the next few years: high debt, mounting costs of social insurance programs, and the likelihood of higher taxes to solve the problems.

There is nothing new or unique about that last sentence. There seems to be a wide consensus on those points and coupled with the record low interest rates, investors seem to have few traditional options to consider. It appears likely that it will take a few years to resolve these issues and provide a platform for above average growth.

Strategies

There are a number of strategies that can utilize volatility including Long-Short, Mean Reversion, Managed Futures and Market Neutral, etc [previously noted on this ME-P]. These provide returns in a secular bear market that may continue for a few more years.

Link: https://medicalexecutivepost.com/2007/11/28/what-is-a-market-neutral-fund/

It’s also important to recognize that while the US and Western Europe maybe having to face the headwinds there are economies in parts of the world that will likely experience above average growth rates for the next few years. For the most part, these emerging markets include Brazil, Russia, India and China (BRIC). A strong dollar not-withstanding.

BRIC Analogs to the USA

In the 1870‘s, the US was an emerging market the same way the BRIC economies are today’s emerging markets; developmentally analogous. Whereas the US and Western Europe face many headwinds, some of these emerging economies actually have wind in their backs. Trade surplus, demographics, low debt and low cost of Government are some of the key advantages. These countries’ standard of living is changing to the positive, and they have a large percentage of their population that can move up and be a purchaser of goods and services where previously they could not.

Income Generation

Another important focus will be on income generation. For many years the income portion of an investment in equities was half or more of its return. Only in recent years has the largest portion come from capital gains. We are likely “back to the old days” in order to achieve returns that will offset inflation and meet longer-term investment goals

Opportunities exist in a variety of areas, including real estate, Mortgage Backed Securities, Private Equity and others to have more focus on income as a dominant portion of the total return.

Assessment

Volatility is going to be with us and it would be wonderful to have the confidence needed to say the emphasis would be on upside volatility, but that is not the case right now. The optimum strategies are to align portfolios with the world we live in today.

IOW: Doctors, medical professionals and all investors must learn to “live with ambiguity.”

About the Author

Robert J. Klosterman® has been listed as one of the Top 250 Financial Advisors in the United States by Worth Magazine. He has also been recognized as one of the top 150 Financial Advisors by Mutual Fund Magazine, Medical Economics and Bloomberg’s Wealth Manager Magazine. Bob’s published quotes appear frequently in dozen’s of local and national publications, including USA Today, the New York Times, Minneapolis Star Tribune, CFP Today, Barron’s and Fortune.

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Conclusion

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OUR OTHER PRINT BOOKS AND RELATED INFORMATION SOURCES:

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Comprehensive Financial Planning Strategies for Doctors and Advisors: Best Practices from Leading Consultants and Certified Medical Planners(TM)

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Healthcare Executive Attitudes Toward Artificial Intelligence

Opportunities and Obstacles

By http://www.MCOL.com

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Conclusion

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Health Plan Premium [Increase] Projections

Projections for 2018

By http://www.MCOL.com

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Conclusion

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On Health Care Spending Increases

Circa 1996 – 2013

By http://www.MCOL.com

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Conclusion

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A Block Chain Video

What it is – How it works

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http://www.realitysharesadvisors.com/indexes/blockchain-index/

Conclusion

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On Medication Therapy Management (MTM)

What it is – How it works

By wikipedia

DEM 2

David Edward Marcinko

http://www.HealthDictionarySeries.org

Medication therapy management (MTM) is medical care provided by pharmacists whose aim is to optimize drug therapy and improve therapeutic outcomes for patients.

Eleven national pharmacy organizations adopted this definition in 2004. Medication therapy management includes a broad range of professional activities, including but not limited to performing patient assessment and/or a comprehensive medication review, formulating a medication treatment plan, monitoring efficacy and safety of medication therapy, enhancing medication adherence through patient empowerment and education, and documenting and communicating MTM services to prescribers in order to maintain comprehensive patient care.

Core Elements

Medication therapy management includes five core components: a medication therapy review (MTR), personal medication record (PMR), medication-related action plan (MAP), intervention and/or referral, and documentation and follow-up. A MTR is a systematic process of collecting patient and medication-related information which occurs during the pharmacist-patient encounter.

In addition, the MTR assists in the identification and prioritization of medication-related problems. During the MTM encounter, the pharmacist develops a PMR for use by the patient. The PMR includes all prescription and nonprescription products and requires updating as necessary. After assessing and identifying medication-related problems, the pharmacist develops a patient-specific MAP. The MAP is a list of self-management actions necessary to achieve the patient’s specific health goals.

Moreover, the patient and pharmacist utilize the MAP to record actions and track progress towards health goals. During the MTM session, the pharmacist identifies medication-related problem(s) and determines appropriate intervention(s) for resolution. Often, the pharmacist collaborates with other health care professionals to resolve the identified problem(s). Following the patient encounter and/or intervention, the pharmacist must document his/her encounter and determine appropriate patient follow-up.

Pharmaceutical care  defined 

Hepler and Strand define pharmaceutical care as the provision of drug therapy in order to achieve definite outcomes that improve a patient’s quality of life. Outcomes include cure of a disease, elimination or reduction of a patient’s symptoms, arresting or slowing of a disease process, and preventing a disease or symptom. The process includes pharmacist collaboration with other health care professionals in designing, implementing, and monitoring a therapeutic plan for a patient. Pharmaceutical care focuses on the pharmacist’s role in achieving therapeutic goals to improve the patient’s quality of life.

MMA of 2003 – Part D

The Medicare Modernization Act of 2003, requires Medicare Part D prescription drug plans to include medication therapy management services delivered by a qualified healthcare professional, including pharmacists, beginning in 2006. MTM services target beneficiaries who have multiple chronic conditions (such as diabetes, asthma, hypertension, hyperlipidemia, and congestive heart failure), take multiple medications, or are likely to incur annual costs above a predetermined level.

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Assessment

Medication therapy management is a unique niche for the pharmacy profession, allowing pharmacists to apply their extensive medication knowledge as medication experts with the intent of improving patient outcomes.

Conclusion

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An End of Year Financial Check List

Important for your Financial Health

By Patrick Bourbon CFA

The last few weeks of the year are often a mad rush so we thought that it is a good time to share this checklist of important items to consider before the calendar year ends, all related to your investments and finances so that you can reach your goals and dreams faster.

1. Review your IRA – 401(k) / 403(b) retirement accounts – Are you on track for a comfortable retirement?
2. Start tax planning! It’s not too early to think about taxes – Asset location & Tax efficiency
3. Rebalance your portfolio
4. Harvest your capital losses
5. Check your emergency fund
6. Review your insurance policies
7. Contribute to your Health Spending Account
8. Take your Required Minimum Distribution
9. Contribute to your 529 Plan
10. Determine your net worth
11. Check your credit score
12. Check your beneficiaries
13. Update your estate plan
14. Maximize your business deductions
15. Spending and automated savings – You want to look ahead

Assessment

Short and sweet.

Conclusion

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R.I.P Uwe Reinhardt PhD

Good-Bye Professor Reinhardt

By Dr. David Ewdard Marcinko MBA CMP™

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https://en.wikipedia.org/wiki/Uwe_Reinhardt

Uwe Reinhardt PhD, the famed economist and James Madison professor of political economy and health economics at Princeton University in New Jersey, died this week after an undisclosed illness.

Here is his obituary from colleague Austin Frakt PhD.

https://THEINCIDENTALECONOMIST.COM/WORDPRESS/UWE-REINHARDT-GIANT-MENSCH-KNIFE-TWISTER/

Assessment

Along with Ken Arrow PhD, Uwe was a professional hero of mine. And, although I never met him, I did cite and quote him in several of my books, white-papers and texts. In fact, he wrote and e-mailed me several times, with words of encouragement, throughout my career.

Robert Pine said it well, when he noted:

“What we have done for ourselves is soon forgotten but what we have done for others remains and is immortal.”

Rest in peace my friend.

Conclusion

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On non-traded real estate investment trusts (REITS)

Private real estate investment trusts (REITS)

By Rick Kahler CFP®

In February 2016, I published an article that was not kind to non-traded or private real estate investment trusts (REITS). Unlike the traded variety that can be sold immediately on a public exchange, non-traded REITS have no public market if you want to liquidate the shares, making them much more illiquid. I contended that even though non-traded REITS had some theoretical benefits, the high fees and commissions, illiquidity, lack of transparency, and lack of a track record associated with them negate any advantage. My longstanding recommendation has been to stay with traded public REITS for your portfolio.

That article was picked up by Barron’s, where it was read by Tom Lonergan of JLL Income Property Trust. He agreed with me that most non-traded REITS did have all the negatives I listed, but pointed out that others did not. While I was skeptical, I decided to investigate further.

A Sleuth

My investigation over the past year did turn up a handful of non-traded REITS that don’t pay a commission, have reasonable fees, have limited liquidity, offer transparency, and do have an existing portfolio of properties that offers an easily discernable track record. This article is my acknowledgement that not all non-traded REITS are equal.

First, why should you even care if real estate is in your portfolio? The biggest reason is that it’s the third largest asset class, behind bonds and stocks. Of all that real estate, about 7% is owned by public REITS. The remaining 93% is owned by publicly traded corporations, private partnerships and REITS, and individuals.

One of the strongest arguments for including a non-traded REIT in your portfolio is that it acts much more like directly owning real estate than a traded REIT. The big difference between non-traded and traded REITS is volatility. Traded REITS are more volatile than stocks. Traded REITS have a potential annual volatility (referred to as standard deviation) of 22%, while the stocks of large companies are 16%. A non-traded REIT has a volatility of around 2%, which is almost that of bonds at 3%.

Why the huge difference in non-traded and traded REITS when they are the same asset class? The answer is liquidity. With traded REITS, liquidity is both a major strength and an Achilles heel. Traded REITS are subject to public sentiment, just like stocks. Their price is driven by behavior. Since they are liquid and can be bought and sold in a nanosecond, their price can swing wildly. In this regard, traded REITS act more like a stock investment than a real estate investment.

Non-traded REITS, just like rental houses or office buildings owned directly by an investor, can’t be traded or liquidated quickly. The price of a non-traded REIT is set by the value of the properties that are owned, not public sentiment. That is why the share value of traded REITS dropped around 75% in 2009, while non-traded REITS dropped around 25%. The properties owned by the traded REITS didn’t decrease any more than the non-traded REITS, but the wholesale panic in the public exchanges dropped their share value three times more than the decline in the actual value of the real estate.

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Assessment

As with many things in life, when it comes to real estate we can’t have our cake and eat it too. One factor that makes real estate such a stable investment is that it is inherently illiquid. You can’t have both liquidity and low volatility. But you can have a non-traded REIT that has limited liquidity, a track record, with reasonable fees and no commission. However, you do have to look hard to find them.

Conclusion

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Speaker: If you need a moderator or speaker for an upcoming event, Dr. David E. Marcinko; MBA – Publisher-in-Chief of the Medical Executive-Post – is available for seminar or speaking engagements.

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Regulator Floats Idea of Merging Banks and Commerce

On the Bank of Amazon? Wal-Bank, Face-Bank, etc.

https://www.bloomberg.com/news/articles/2017-11-08/banking-commerce-divide-may-be-unnecessary-u-s-regulator-says

Conclusion

Your thoughts and comments on this ME-P are appreciated. Feel free to review our top-left column, and top-right sidebar materials, links, urls and related websites, too. Then, subscribe to the ME-P. It is fast, free and secure.

Speaker: If you need a moderator or speaker for an upcoming event, Dr. David E. Marcinko; MBA – Publisher-in-Chief of the Medical Executive-Post – is available for seminar or speaking engagements.

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Contact: MarcinkoAdvisors@msn.com

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More on Medical Practice Business Costs

Unknown and Under-Appreciated by Many

By Rick Kahler CFP®

I recently talked with an administrator of a private medical practice about some of the financial challenges she faces in dealing with the medical system, insurers, and patients.

Some of the insights she gave me into the realities that private physicians face in providing medical care were rather disturbing.

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Here are a few of them.

Let’s start with the insurers who account for the bulk of their revenue. Many payments for procedures from insurance companies (including Medicare) are below the cost of providing the service. This forces physicians to make up the difference on other procedures or find other sources of income to sustain the profitability of the practice.

Conversely, in markets that have just one hospital, the insurance companies have no leverage. If the insurers won’t pay what the hospitals demand, the hospitals can threaten to drop out of the network, leaving the insurers with nowhere to send their insureds in those markets. The insurers end up agreeing to pay the hospitals more.

Charges for services provided in-house at the hospital can end up being substantially higher than those same services done by outside providers.

Example:

She gave me an example of a lab test that cost $1,500 to $2,000 at the hospital lab but $35 to $80 at an independent lab. Patients do have the option to direct the hospital to use an independent lab. But, how many people know that and will have the presence of mind to make the request? While it makes financial sense to price-shop if you have a high deductible HSA plan, there isn’t much incentive if your plan has low deductibles.

Collections

Another challenge is collecting from patients. She says a surprising percentage of Americans maintain checking accounts with no money or keep checks from accounts which have long been closed. While writing bad checks is a crime, those who game the system know they can probably get by with writing a low-dollar check because the cost of pursuing justice is much more than the check is worth.

Most companies would never do business with such a person again. Healthcare professionals tend to have a bias toward giving everyone services, so these same people do return requesting care. She said she and her physician employer have had huge internal arguments about this. Her position is that these people take advantage of the physician in a premeditated fashion and don’t deserve to be extended services. The physician argues that everyone, even deadbeats, deserves healthcare. Since the practice doesn’t provide life-and-death services, she was able to get the physician to agree that if someone has an outstanding bill they need to settle it upfront, in cash, before any new services are provided.

Then there are those who use credit cards and then fraudulently dispute the charges. Some providers let this go because of the difficulty of proving that the charge is legitimate. It requires photographs of customers during the transaction, copies of driver’s licenses, customers’ signatures on the paperwork, and notarized statements from the provider verifying that this was the person who received services and presented the credit card.

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http://www.CertifiedMedicalPlanner.org

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SSNs

A final interesting point concerned patients’ Social Security numbers. She said the only time these are ever needed is when an outstanding bill is sent for collection. Otherwise, they are never accessed or used.

Assessment

Finally, she was quick to add that only a small fraction of their patients premeditate stealing from them. She also stressed that not all insurance companies or hospitals behave unethically, and some do wonderful, humane acts of kindness. Nevertheless, the lack of integrity that does occur on both sides is infuriating and adds to the cost of health services.

Conclusion

Your thoughts and comments on this ME-P are appreciated. Feel free to review our top-left column, and top-right sidebar materials, links, urls and related websites, too. Then, subscribe to the ME-P. It is fast, free and secure.

Speaker: If you need a moderator or speaker for an upcoming event, Dr. David E. Marcinko; MBA – Publisher-in-Chief of the Medical Executive-Post – is available for seminar or speaking engagements.

Contact: MarcinkoAdvisors@msn.com

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The Marine Corp Anniversary

Happy Birthday!

By Dr. David Marcinko MBA

Yesterday, (Nov 10th) in 1775 the Marine Corp was established in a small tavern in Philadelphia to provide protection for our fleets. The Corp is steeped in history; history that I am proud of and thankful for as an American. We are far from a perfect nation, but we should ALL be proud and thankful for the blessing that is our country.

We live free by NEVER “taking a knee.”

This was from the  Commandant of the Marine Corp (his address to all Marines yesterday):

Seventy-Five years ago today, after months of fighting at Henderson Field and along Edson’s Ridge, Marines on Guadalcanal spent the night of 10 November 1942 planning and preparing. Although the Battle of Guadalcanal would continue for three more months, the plans laid on our Corps’ most sacred day became integral to the amphibious campaigns that followed. Success at Guadalcanal proved to be the turning point that ultimately paved the way for Allied victory in the Pacific. Those warriors defended their positions in brutal conditions against a formidable enemy – and triumphed. Through every major conflict our Nation has seen since the Revolution, Marines performed their duty with utmost courage, devotion, and raw determination. Their valiant deeds in the face of overwhelming challenges give us confidence and inspire us to meet the trials of today. As we pause to celebrate the birth of our Corps this year, we honor the legacy that was passed down to us and we recommit ourselves to carrying those traditions into the future.

This November 10th marks 242 years of warfighting excellence. At places like Trenton, Tripoli, Chapultepec, Belleau Wood, Guadalcanal, Chosin, Khe Sanh, Fallujah, Sangin, and so many others, Marines have fought with an inner spirit – a spirit that bonds us, binds us together as a cohesive team. It’s that intangible spirit that has formed the foundation of our warfighting reputation for the past 242 years. Now it’s our responsibility to ensure we honor and carry on that legacy. The American people expect a Corps of men and women who are committed, selfless, willing to sacrifice, who epitomize honor, courage, commitment, virtue, and character. We owe our Nation and our predecessors no less.

Today, as we celebrate our 242nd birthday, we must remember who we are, where we came from, and why we’re here. We must remember the past, honor those who are no longer with us, focus on today’s battles, and get ready for tomorrow. We can and will prevail as we always have, in any clime and place. But we must prevail together, united by the unyielding spirit in each of us that makes our Corps unique – that willingness to put our Corps and fellow Marines ahead of ourselves. Victory in battle comes through the integrated efforts of many – teamwork. We value the sacrifices and contributions of every Marine and Sailor, as well as our family members without whose support we would not be able to accomplish our mission. And we remain committed to being our Nation’s Expeditionary Force in Readiness that sets the standard for honor, discipline, and courage. I am proud of each and every one of you. Happy Birthday, Marines!

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coin-side-flat-b

Semper Fidelis

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APPLE and the iPhone X

Now Apple must show what’s next after iPhone X

By  Vitaliy Katsenelson CFA

The iPhone X is likely to be a phenomenal success for Apple. But its success will not be driven by anything new that the new phone packs inside. Instead, its success will be based on the phone’s screen size. Essentially, iPhone X provides the same screen real-estate as an iPhone Plus, but with the sleeker form factor of the iPhone 7 or 8.

Apple has done a great job at changing the paradigm of our thinking about the iPhone. If you only care about making phone calls, then an iPhone 4 is good enough. Why pay for more? You probably don’t even need to upgrade your phone for years, as long as the battery keeps holding its charge. However, for most, the actual “phone” function is the least important of the iPhone.

Earnings

From an earnings perspective, iPhone X will be a tremendous boost. It will increase the average selling price per unit by a few hundred dollars, which should help not just sales, but profit margins as well. This is actually healthy for both Apple and the entire iPhone ecosystem (including DRAM and solid state drive makers — for example, we still have a large position in Micron Technology). People were also postponing buying new iPhones while waiting for the iPhone X; thus, the number of units sold will probably exceed most optimistic expectations.

What is next?

Then the question becomes, What is next? Higher-priced iPhones will also change the dynamics of the upgrade cycle. Apple is going to have a harder time convincing iFanatics to shell out $1,000-$1,200 every year (or even every two years). The upgrade cycle will likely be elongating to three or four years.

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Thus, any blow-out success of iPhone X in 2017 and early 2018 will be coming at the expense of future years. Even if you are a loyal Apple shareholder, you have to be prepared for this.

Assessment

Absent a new category of products, Apple is turning into a fully ripe stock. Yes, it will look statistically cheap based on 2018 earnings, but that will not be the case if you look at 2019 or 2020 earnings.

As all the excitement subsides, Apple stock will have to answer an extremely important question: What is next? After all, the value of any business is a lot more than the earnings generated next year, but far beyond that.

Conclusion

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On Health Plan Communication Preferences

According to Age

By http://www.MCOL.com

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Conclusion

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On “Forced” Required Minimum Distributions

Mandatory RMDs

By Rick Kahler CFP®

Planning is important for all things financial, including retirement, which is inevitable no matter how far into the future it may seem. The financial decisions you make in your 20s through your 60s will greatly impact the quality of your lifestyle during retirement. Social Security and family won’t be enough to get you through 30 years of retirement. If you haven’t worked for a branch of government, you will rely heavily on income you’ve stashed in 401(k)s and IRAs.

Traditional IRAs

One of the big advantages of a traditional IRA or 401(k) is being able to save pre-tax dollars and let them grow tax deferred until you need them. Hopefully, when you take the distributions in retirement, you will be in a lower tax bracket than when you made the contribution. The downside is that traditional IRA funds become 100% taxable when you withdraw them.

Deferrals

Deferring distributions from your IRA only works until age 70½, when you’ll be forced to take money out whether you want to or not. This is called a Required Minimum Distribution, or RMD. If, at age 70½, you don’t need to withdraw funds to live on but are faced with an annual RMD, there are several things you can do to minimize your tax hit.

The easiest is don’t stop earning an income if you have a substantial 401(k). Employees are not required to take RMDs when they are still working, even part-time. This only applies to your employer’s 401(k). You will need to take RMDs from personal IRAs or 401(k)s and IRAs from previous employer plans.

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However, if you plan ahead you may be able to bypass this. If you have IRAs that are rollovers from previous 401(k)s, your employer may allow you to roll them into your current plan. By consolidating previous qualified employer plans into your current plan, you can defer taking an RMD until you quit working.

If you give to charities, you can give any portion or all of your RMD to a charity and not pay any taxes on the distribution. This can really save you a lot of money if you are currently giving to charities out of taxable accounts. When you turn 70½, simply redirect your charitable giving from taxable accounts to your IRA. You can give up to $100,000 annually without paying taxes on those distributions.

Another strategy we use commonly with clients is converting traditional IRA funds to Roth IRAs. Money in a Roth is not subject to RMDs. Of course, the downside is that you must pay taxes on the funds converted from your traditional IRA to a Roth.

For a conversion to make financial sense, two important factors must apply. You generally want to do a Roth conversion when your current tax bracket is lower than you anticipate it will be in the future. The most obvious scenario here is when you delay Social Security until age 70 and you are currently in a 10% or 15% tax bracket. It’s highly possible that Social Security and RMDs all kicking in at the same time may put you into the 25% tax bracket. Moving as much money at the 15% bracket prior to age 70 can make a lot of sense. It’s also important that the money to pay the taxes needs to come from a taxable account.

Assessment

As with all financial strategies that are crammed into a 600-word article, there are variations and nuances I am not able to go into. If you think one of these strategies may apply to you, don’t try it on your own. First get advice from a competent tax advisor or financial professional.

Conclusion

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http://www.CertifiedMedicalPlanner.org

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Dr. Richard H. Thaler and Behavioral Economics

A behavioral scientist 2017 

By Rick Kahler MS CFP®

Human beings make most of our decisions—including financial ones—emotionally, not logically. Unfortunately, too much of the time, our emotions lead us into financial choices that aren’t good for our financial well-being. This is hardly news to financial planners or financial therapists. Nor is it a surprise to any parent who has ever struggled to teach kids how to manage money wisely.

Economic Model Assumptions

Yet many of the economic models and theories related to investing are based on assumptions that, when it comes to money, people act rationally and in their own best interests. There’s a wide gulf between the way economists assume people behave around money and the way people actually make money choices. This doesn’t encourage financial advisors to rely on what economists say about financial patterns, trends, and what to expect from markets or consumers.

2017 Nobel Prize in Economics

It’s significant, then, that the 2017 Nobel Prize in Economics went to Dr. Richard H. Thaler, professor of behavioral science and economics at the University of Chicago Booth School of Business. Dr. Thaler’s work has focused on the differences between logical economic assumptions and real-world human behavior. His research not only demonstrates that people behave emotionally when it comes to money; it also shows that in many ways our irrational economic behavior is predictable.

This predictability can help advisors and organizations find ways to encourage people to make financial decisions in their own better interest. The book Nudge, by Dr. Thaler and Cass R. Sunstein, describes some of those methods.

Example:

One example is making participation the default option for company retirement programs like 401(k)’s. Employees are free to opt out, of course, but they need to actively choose to do so.

A second example is the “Save More Tomorrow” plan, which offers employees the option of automatically increasing their savings whenever they receive raises in the future.

Both of these examples rely on a predictable behavior—human inertia. Most of us tend to postpone, ignore, or forget to take action even when that action would be good for us. So if a system is set up so not taking action leaves us with the choice that serves us better, we are “nudged” toward helping ourselves toward a healthier financial future.

Integration

As one of the pioneers in integrating the emotional aspect of money behavior into the practice of financial planning, I’ve long since come to understand that managing money is about much more than numbers. The world of investing may seem to be cold and calculating, but it’s actually driven by emotions. I’m familiar with the work of researchers who have demonstrated that some 90% of all financial decisions are made emotionally rather than logically.

I was pleased in 2002 when one of those researchers, psychologist Daniel Kahneman, won the Nobel prize in economics for his studies of human behavioral biases and systematic irrational behaviors. (That research was done jointly with psychologist Amos Tversky, who died in 1996.)

I’m even more pleased to see the economics Nobel prize go to a behavioral researcher for the second time. Maybe the realm of economics is beginning to integrate the untidy realities of human emotions into its theories. Eventually, this might lead to new economic models that take into account the emotions that shape people’s money decisions and the fact that money is one of the most emotionally charged aspects of our lives.

Assessment

Perhaps economists are beginning to appreciate the truth of the statement Dr. Thaler made at a news conference after his prize was announced. “In order to do good economics, you have to keep in mind that people are human.”

Conclusion

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On Spotting Medical Billing Errors – For Patients

Are you over-paying?

By Aetna

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Conclusion

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The Medicaid Share of In-Patient Cases

In 2015

By http://www.MCOL.com

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Conclusion

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Traditional Reasons for a Medical Practice Valuation

Some economic reasons for a medical practice valuation 

By Dr. David Edward Marcinko MBA CMP™

http://www.CertifiedMedicalPlanner.org

The decision to sell, buy or merge a medical practice, while often financially driven, and is inherently an emotional one for these impact investors who went into the profession largely because of a deep seated zeal to help others.

Still, beyond impact investing musings, there are other economic reasons for a practice valuation that include changes in ownership, determining insurance coverage for a practice buy-sell agreement or upon a physician-owner’s death, organic growth meter, establishing stock options, or bringing in a new partner; etc.

Practice appraisals are also used for legal reasons such as divorce, bankruptcy, breach of contract and minority shareholder complaints. In 2002, the Financial Accounting Standards Board (FASB) issued rules that required certain intangible assets to be valued, such as goodwill. This may be important for practices seeking start-up, service segmentation extensions, or operational funding. Some other reasons for a medical practice appraisal, and the considerations that go along with them, are discussed here.

https://www.crcpress.com/Risk-Management-Liability-Insurance-and-Asset-Protection-Strategies-for/Marcinko-Hetico/p/book/9781498725989

Estate Planning

Medical practice valuation may be required for estate planning purposes. For a decedent physician with a gross estate of more than current in-place tax limits, his or her assets must be reported at fair market value on an estate tax return. If lifetime gifts of a medial practice business interest are made, it is generally wise to obtain an appraisal and attach it to the gift tax return.

Note that when a “closely-held” level of value (in contrast to “freely traded,” “marketable,” or “publicly traded” level) is sought, the valuation consultant may need to make adjustments to the results. There are inherent risks relative to the liquidity of investments in closely held, non-public companies (e.g., medical group practice) that are not relevant to the investment in companies whose shares are publicly traded (freely-traded). Investors in closely-held companies do not have the ability to dispose of an invested interest quickly if the situation is called for, and this relative lack of liquidity of ownership in a closely held company is accompanied by risks and costs associated with the selling of an interest said company (i.e., locating a buyer, negotiation of terms, advisor/broker fees, risk of exposure to the market, etc.). Conversely, investors in the stock market are most often able to sell their interest in a publicly traded company within hours and receive cash proceeds in a few days. Accordingly, a discount may be applicable to the value of a closely held company due to the inherent illiquidity of the investment. Such a discount is commonly referred to as a “discount for lack of marketability.”

Discount for lack of marketability is typically discussed in three categories: (1) transactions involving restricted stock of publicly traded companies; (2) private transactions of companies prior to their initial public offering (IPO); and, (3) an analysis and comparison of the price to earnings (P/E) ratios of acquisitions of public and private companies respectively published in the “Mergerstat Review Study.”\

With a non-controlling interest, in which the holder cannot solely authorize and cannot solely prevent corporate actions (in contrast to a controlling interest), a “discount for lack of control,” (DLOC), may be appropriate. In contrast, a control premium may be applicable to a controlling interest. A control premium is an increase to the pro rata share of the value of the business that reflects the impact on value inherent in the management and financial power that can be exercised by the holders of a control interest of the business (usually the majority holders). Conversely, a discount for lack of control or minority discount is the reduction from the pro rata share of the value of the business as a whole that reflects the impact on value of the absence or diminution of control that can be exercised by the holders of a subject interest.\

Several empirical studies have been done to attempt to quantify DLOC from its antithesis, control premiums. The studies include the Mergerstat Review, an annual series study of the premium paid by investors for controlling interest in publicly traded stock, and the Control Premium Study, a quarterly series study that compiles control premiums of publicly traded stocks by attempting to eliminate the possible distortion caused by speculation of a deal.

Human Skull

Buy-Sell Agreements

The ideal situation is for physician partners to put in place a buy-sell agreement when practice relationships are amicable. This establishes the terms for departure before they are required, and is akin to a prenuptial agreement in the marriage contract. Disagreements most often occur when a doctor leaves the group, often acrimoniously. Business operations of the practice decline, employee and partner morale suffers, feuding factions develop spilling over into the office, and the practice begins to implode creating a downward valuation spiral. And so, valuations should be done every 2-3 years, or as the economic circumstances of the practice change. Independence and credibility are provided, and emotional overtones are purged from the transaction.

Physician Partnership Disputes

Medical practice appraisals are often used in partnership disputes, such as breach-of-contract or departure issues. Obvious revenue declinations are not difficult to quantify. But, revenues may not immediately fall since certain Current Procedural Terminology [CPT®] code reimbursements may actually increase. Upon verification however, lost business may be camouflaged as the number of procedures performed, or number of patients decrease after partner departure.

https://www.crcpress.com/Risk-Management-Liability-Insurance-and-Asset-Protection-Strategies-for/Marcinko-Hetico/p/book/9781498725989

Divorce

Physicians getting divorced should get a practice appraisal, and either side may hire the appraiser, although occasionally the court will order an expert to provide a neutral valuation. Such valuations should be done in light of both court discovery rules and IRS requirements for closely held businesses. Generally, this requires the consideration of eight elements:

• Practice specialty and operating history
• Economic and healthcare industry condition
• Estimates of practice risks and future returns
• Book value and financial condition of the practice
• Practice future earning capacity
• Physician bonuses, dividends and distributions
• Intangible assets
• Comparable practice sales

https://www.crcpress.com/Risk-Management-Liability-Insurance-and-Asset-Protection-Strategies-for/Marcinko-Hetico/p/book/9781498725989

Assessment

Sometimes, the non-physician spouse may even desire a lifestyle analysis to evaluate the potential for under reported income, by a forensic accountant, or appraiser. A family law judge is often the final arbiter of different valuations, and because of varying state laws there may be 50 different nuances of what the practice is really worth.

MORE: Valuation

Conclusion

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Speaker: If you need a moderator or speaker for an upcoming event, Dr. David E. Marcinko; MBA – Publisher-in-Chief of the Medical Executive-Post – is available for seminar or speaking engagements.

Contact: MarcinkoAdvisors@msn.com

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ON STATE MEDICAL BOARDS

A Brief History

By Eric A. Dover MD

The first medical board was established in Connecticut in 1792 by the state legislature. It consisted of a group of physicians who evaluated the competency of physicians wishing to practice in the State. Medical Boards eventually evolved and became very powerful with the addition of Medical Practice Acts containing a plethora of administrative rules. The Medical Boards stated mission was, and still is, the protection, health and safety of the public. State Boards formed a national group, the Federation of State Medical Boards (FSMB), in 1912. The FSMB was the first institution to publically list names of disciplined physicians in a monthly bulletin.

In the 1980’s and 1990’s there were a number of high profile cases involving physicians and public safety. One such case, international in scope, concerned surgeon Dr. Jayant Patel. Significant news coverage regarding his surgical outcomes and knowledge resulted in the heightened questioning of Medical Boards and whether they were actually fulfilling their mission of protecting public health and safety. The Oregon Medical Board (OMB) was scrutinized for allegedly “ignoring” 79 complaints, and at least three deaths, attributed to Dr. Patel’s surgical care from 1989 to 1998. The OMB abdicated all responsibility for the situation with a myriad of excuses for why they had no control over this physician or the HMO he worked for.

OMB

The OMB then came to the state legislature with a “fix” to supposedly prevent any further such incidents. The OMB advocated for greater authority over physicians and greater independence from government oversight. With the din of the press and public, the Oregon Legislature gladly granted the OMB their wish. Other states followed Oregon’s example. Not a single individual associated with the OMB, whether administrative or board member was investigated in any meaningful way for their horrendous dereliction of duty. Not one of them had their license restricted, suspended or revoked for such serious offenses. None of them were ordered to pay out of pocket to go to “programs” for competency evaluations, psychological examinations or “courses” to help them become better board members. No one resigned, nor was anyone dismissed, from their position of power. The OMB’s inaction led to a number of deaths and numerous patients with chronic post-surgical medical disorders, yet all individuals involved with the OMB were protected from malpractice lawsuits

Case examples

With cases such as Dr. Patel’s featured prominently in the mainstream media, Medical Boards nationwide came under intense public pressure and scrutiny as it became clear they were not fulfilling their mission of protecting the public’s health and safety. The public saw physicians as a privileged class, protected by their colleagues and Medical Boards. They were correct to a degree. Public safety groups like Public Citizen, who had been taking Medical Boards, hospitals and large clinics to task for years regarding what they felt was a lack of physician oversight and discipline, began ranking state medical boards based on how many disciplinary actions they handed out each year. In their 2011 report, Public Citizen’s Health Research Group Ranking of the Rate of State Medical Boards’ Serious Disciplinary Actions, 2009-2011, the authors made the erroneous assumption that the greater the number of physician “disciplines” (actions) per 1000 physicians, the better job that State’s Medical Board was doing. Therefore, at 6.79 actions per 1000 physicians, Wyoming was doing the “best” job and at 1.33 actions per 1000 physicians, South Carolina was doing the “worst” job.

https://www.crcpress.com/Risk-Management-Liability-Insurance-and-Asset-Protection-Strategies-for/Marcinko-Hetico/p/book/9781498725989

Medical boards vary state -2- state 

Medical Boards vary remarkably from state to state. There are only two constants among them. First, each state has a Medical Board. Second, the Board makes all final decisions concerning licensees. Otherwise, there’s no consistency when it comes to what’s sandwiched in between. The Medical Board’s authority is grounded in the States Medical Practice Act, which gives them the authority to enforce laws for licensing, monitoring and disciplining physicians in the state. Every state has its own unique laws and processes, but every medical practice act covers the basics regarding oversight of physicians practicing medicine in the State.

Assessment

The U.S. Federation of State Medical Boards (FSMB) periodically issues guidelines on the essential elements of a medical practice act.

Conclusion

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Speaker: If you need a moderator or speaker for an upcoming event, Dr. David E. Marcinko; MBA – Publisher-in-Chief of the Medical Executive-Post – is available for seminar or speaking engagements.

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Risk Management, Liability Insurance, and Asset Protection Strategies for Doctors and Advisors: Best Practices from Leading Consultants and Certified Medical Planners™

What is “Shelf Registration” for Securities?

What is “Shelf Registration” for Securities?

By Dr. David E. Marcinko MBA CMP™

http://www.CertifiedMedicalPlanner.org

A relatively new method of registration under the Act of ’33 is known as shelf registration.

Under this rule, an issuer may register any amount of securities that, at the time the registration statement becomes effective, is reasonably expected to be offered and sold within two years of the initial effective date of the registration.

Once registered, the securities may be sold continuously or periodically within 2 years without any waiting period for a registration to clear issuers generally like shelf registration because of the flexibility it gives them to take advantage of changing market conditions.

def_auto_shelf_reg

https://www.crcpress.com/Comprehensive-Financial-Planning-Strategies-for-Doctors-and-Advisors-Best/Marcinko-Hetico/p/book/9781482240283

In addition, the legal, accounting, and printing costs involved in issuance are reduced, since a single registration statement suffices for multiple offerings within the 2 year period. In effect, what the issuer does is register securities that will meet its financing needs for the next 2 years.

It issues what it needs at the current time, and puts the balance on the “shelf” to be taken off the shelf as needed.

Conclusion:

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Speaker: If you need a moderator or speaker for an upcoming event, Dr. David E. Marcinko; MBA – Publisher-in-Chief of the Medical Executive-Post – is available for seminar or speaking engagements.

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Risk Management, Liability Insurance, and Asset Protection Strategies for Doctors and Advisors: Best Practices from Leading Consultants and Certified Medical Planners™8Comprehensive Financial Planning Strategies for Doctors and Advisors: Best Practices from Leading Consultants and Certified Medical Planners™

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