How To Deal With An Economic Crisis (COVID 19)

How are you acting during this health and economic crisis?

Are you being reactive, proactive, or are you leading others to help your community?

Are you financially resilient?

statistically 10% or less people are leading and 80% are being reactive. learn why and what you can do in times of crisis to thrive and come out of the crisis more resilient.

economic crisis


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Consider Betterment.

It doesn’t cost much to start, and you get access to a portfolio built around your risk tolerance and your goals. Using Modern Portfolio Theory, pioneered by a Nobel laureate, Betterment can help you build wealth without getting caught up in the noise of the market.



Today's Panelists

Investing Legends: Steven Bregman – Value Investing In Uncertain Market Conditions

Markets around the world are overpriced. Value stocks have under-performed for over 10 years. If you are a value investor, where do you invest?

This is one of my favorite interviews. This week we  interview Investing Legend, Steven Bregman. He explains how he looks at the markets from a value lens, why value investing is important to overall market health, the danger of low interest rates, why you should worry about the indexation of markets, and the bond ETF bubble. We cover a lot in this episode, but if you are serious about investing, this episode is pure gold.

Value Investing

Value Investing - One Historical Extreme Among Many

Interest rates are now the lowest in the recorded history of mankind. Here is a sampling from across the scope of global history to give you a sense of what ‘normal’ rates are.

o   Over the course of 600 years through 100 BC, the ancient Greeks generally charged between about 6% and 12% for loans secured against real estate or to cities.[1]

o   During the 1300s, in Venice, long-term loans to States were generally in the 5% to 8% range.

o   In 1799, after Napoleon gained power, France issued 5% bonds.

o   In the 1860s, during the Civil War, U.S. Treasuries were largely in the 4 ½% to 5 ½% range.

o   During the entire 20th Century, there were only 3 separate years – all during the 1940s – when U.S. 10-year Treasuries declined below 2%. This reflected the government’s extraordinary mobilization of the economy for World War II. To understand the extremity of that environment, every American citizen was issued ration books, with coupons that were required for buying necessities ranging from gasoline to butter. Infractions were punishable by fines up to $10,000 – in 1940s dollars! That would be roughly $300,000 today.

[1] A History of Interest Rates, Sidney Homer, Rutgers University Press, New Brunswick, NJ. 1963.


Bonus Insight into YCharts Stock Screening Tools

Value Stocks Travel Industry
Value Stock Screen

 

The Path to Indexation Dominance of Modern Investing

The 2008/2009 Financial Crisis catalyzed an accelerated movement toward indexation:  no one wanted security specific or manager specific risk. They wanted a basket of securities.  The accumulation of over a decade of $100 billion+ annual flows into ETFs looks a little like this:

  • At March 2009, there were fewer than 100 ETFs in the U.S., today there are over 2,000.  This occurred even as the number of listed stocks in the U.S. declined by about 25%.
  • The ETF industry in March 2009 had total assets of $485 billion, today it’s $4 trillion. Just a single ETF, the SPDR S&P 500, now has over $300 billion. 

An ocean of buying power has been directed at an ever-smaller sub-set of mega-companies with sufficient share trading liquidity to serve index funds’ needs.  Last year, Indexed equities passed that critical 50% border: they are now well above 50% of all equities – the majority of the pool – and have been the marginal trade for a decade. They were supposed to be passive, just along for the ride, but it appears they have hijacked the clearing price mechanism.  If the clearing price mechanism of the marketplace is broken, how does one know what the fair or natural price is, what the ‘market price’ is?

==================

 

A Window into the Value of the Industrial Strength Trading Liquidity of Mega-Cap Companies

Microsoft is in 212 different ETFs.  This small sample might shed some light on why.  It’s in:

    • The Technology Select Sector SPDR Fd, as a 20.2% position.
    • Vanguard Growth ETF, 9.3%
    • JP Morgan US Value Factor ETF, 2.3%
    • iShares USA Momentum Factor, 5.4%
    • iShares Minimum Volatility USA, 6.1%
    • Invesco Dividend Achievers ETF, 4.5%

So, Microsoft is simultaneously a growth stock and a value stock.  It’s both a momentum stock and a low volatility stock. It’s also a dividend stock and, of course, a technology stock. The point is, there is an insufficient population of super large companies to go around.  If one of them really has industrial strength trading liquidity, and if a fund organizer is starting a new ETF, it will be shoehorned into that ETF if they can possibly swing it. 

Here are a few more Microsoft ETFs:

  • iShares USA ESG Select ETF (Environmental, Social, Governance), 5.5%
  • US Vegan Climate ETF, 5.3%
  • Impact YWCA Women’s Empowerment ETF, 5.4%

=================

 

ETF Truth in Labeling (or Flying Blind)

Someone who wanted diversified exposure to Spain would probably have bought the iShares Spain ETF (EWP), a popular asset allocation building block with $940 million of AUM.

Just two problems:

  1. The top 5 holdings account for over 50% of the ETF’s value, and the top 10 for over 70%.  So, it’s super concentrated, not diversified. Security-specific diversification is a basic tenet of passive investing, so that a disaster in any one or few stocks will not meaningfully harm the fund’s results. Rest assured, any active manager found to be that concentrated would immediately be dismissed by a consultant for taking excessive risk.  But an index can’t be dismissed; it merely represents ‘the market’, after all.
  2. These top 10 holdings get over 70% of their revenues from OUTSIDE of Spain!  Buy Spain, and get NOT Spain.

This is another reflection of the requirement by ETFs for large, liquid companies:  EWP can’t afford to traffic in modest-sized local companies that truly reflect the character of the local economy.  All but one of the top 10 are global multi-national companies. Buying Banco Santander is not so very different than buying Citibank in the U.S., and buying Amadeus, the airline reservation infrastructure system, is not so very different than buying Sabre in the U.S. 

Historical Risk

 

Compare & Contrast:  Indexed Bond Funds vs. a non-Index-Centric Bond Fund

Bond Market Bubble


 

iShares Invest. Grade Corporate Bond ETF (LQD)

BlackRock MuniHoldings Quality Fund (MUS)

Inception date

2002

1998

Assets

35 Billion

0.3 Billion

Yield to Maturity

2.6%

5.7%

Distribution Yield

2.6%

4.1%

Yield after Fed Taxes

2.0%

4.2%

Average Maturity

13 Years

25 Years

Average Bond Price

115

116

Credit Quality

 

 

AAA

2%

15%

AA

8%

36%

A

39%

30%

BBB

48%

14%

Leverage

0%

37%

Discount to NAV

0%

-9.0%

10 Year Annualized Return

5.93% (taxable)

5.97% (tax-exempt)

Closed End fund search tool: www.CEFconnect.com

Basically, the laws of supply and demand have never been healthier. If every institution determines to buy bonds through the index funds that traffic in the same large-tranche securities, they will be priced higher:  a 2% after-tax yield. If every institution ignores non-index-suitable bonds, even if in a fund format (but a non-standard format), they will be priced lower; in this case 4% after tax yield, plus the possibility of appreciation.

Footnotes:

[1] A History of Interest Rates, Sidney Homer, Rutgers University Press, New Brunswick, NJ. 1963.

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YCharts - Smart Investment Decisions Made Simple

We here at Money Tree Podcast use YCharts to uncover new investing opportunities, analyze trends and monitor our progress. YCharts is a powerful financial data platform designed for Individual Investors, Financial Advisors and Asset Managers. Their platform makes our lives easier. What can be better than that.

We struck a deal for our listeners where you get 20% off your access to YCharts if you sign up in the next month


Today's Guest:  Steven Bregman

Steven Bregman - President, Co-Founder of Horizon Kinetics LLC

Steven is the President of Horizon Kinetics and is a co-founder of the Firm. He is a senior member of the Firm’s research team, a member of the Investment Committee and the Board, and supervises all research reports produced by the Firm. As one of the largest independent research firms, Horizon focuses on structurally inefficient market sectors, including domestic spin-offs, global spin-offs (The Spin-Off Report and Global Spin-Off Report), distressed debt (Contrarian Fixed Income) and short sale candidates (Devil’s Advocate), among others. Horizon Kinetics has also taken an interest in creating functionally improved indexes, such as the Spin-Off Indexes and the Wealth Indexes (which incorporate the owner-operator return variable). Steve is also the President and CFO of FRMO Corp., a publicly traded company with interests in Horizon Kinetics. He received a BA from Hunter College, and his CFA® Charter in 1989. Steve has authored a variety of papers, notably “Spin-offs Revisited: A Review of a Structural Pricing Anomaly” (1996) and “Equity Strategies and Inflation” (2012).

Steven's Online Presence:


Today's Panelists

Market Update – Our Panelists Opinions on Coronavirus, Supply Chain Disruptions and Oil Price Drop

Back by popular demand, Kirk Chisholm, Megan Gorman and Barbara Friedberg discuss a market update for today March 12, 2020.

Today we are discussing the coronavirus, the big oil price drop and the supply chain disruption… and most importantly, what to do with your portfolio now.

Listen to three experts tell you how to manage your investments during this market turmoil… And we do it without scaring you.

oil price drop

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Looking for a better way to invest?

Consider Betterment.

It doesn’t cost much to start, and you get access to a portfolio built around your risk tolerance and your goals. Using Modern Portfolio Theory, pioneered by a Nobel laureate, Betterment can help you build wealth without getting caught up in the noise of the market.

Today’s Panelists

Market Monday: How to Protect Yourself In This Market, The Coronavirus, Lebanon Debt Default, and Fed Manipulation – March 8 2020

Welcome to our first Market Monday where we discuss what happened last week, what to expect next week and to help put the market into perspective. Last week was a crazy one… just like the week before. Will this continue?

We talk about how to look at the market with an unbiased lens, how to not lost your mind while others are losing theirs, the bond market, the Lebanon bond default, the spike in the VIX and what it means, the coronavirus (COVID-19), economic conditions, black swan events, fed manipulation and more…

market mondaycoronavirus ytd returns

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Listen onApple Podcasts​​​​Follow us onSpotifyFollow us onStitcher Radio

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Looking for a better way to invest?

Consider Betterment.

It doesn’t cost much to start, and you get access to a portfolio built around your risk tolerance and your goals. Using Modern Portfolio Theory, pioneered by a Nobel laureate, Betterment can help you build wealth without getting caught up in the noise of the market.

Today’s Panelists

Listener Questions: Asset Allocation Methods, Evaluating REITs, Emergency Funds, Personal Budgets, and more

Top Listener Questions from our favorite listeners. 

Where should I invest my emergency fund? Do I need a formal Budget? How do I evaluate REITs? What is the best asset allocation for me?

Listen to these questions and more...

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Looking for a better way to invest? 

Consider Betterment.

It doesn’t cost much to start, and you get access to a portfolio built around your risk tolerance and your goals. Using Modern Portfolio Theory, pioneered by a Nobel laureate, Betterment can help you build wealth without getting caught up in the noise of the market.


Today's Panelists

Financial Advisor Research Survey – How Do You Want To Communicate With Your Financial Advisor?

Want to know how most financial advisors communicate with their clients?

This recent survey from Sean Brown at Ycharts discusses the current state of communications with clients and their financial advisors. How are you looking to communicate with your advisor?

financial advisor research


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financial advisor research 1
financial advisor research 2
financial advisor research 3
financial advisor research 4


YCharts - Smart Investment Decisions Made Simple

We here at Money Tree Podcast use YCharts to uncover new investing opportunities, analyze trends and monitor our progress. YCharts is a powerful financial data platform designed for Individual Investors, Financial Advisors and Asset Managers. Their platform makes our lives easier. What can be better than that.

We struck a deal for our listeners where you get 20% off your access to YCharts if you sign up in the next month


Today's Guest:  Sean Brown

  • Proud father of 2 (13 year old son, Quinn; 11 year-old daughter, Emerson) and husband to Lisa. And their family dog is Lou.

  • Notre Dame & Stanford grad

  • College football and Chicago Cubs fan

  • President and CEO at YCharts (Swiss Army Knife of investment research and client communications)

  • Has been an executive at several startups, private equity backed firms, and public companies. Predominant focus on financial services and software.

  • He’s passionate in his belief that investors should be able to leverage great investment data and tools anywhere, and any time and they should also have access to outstanding human support to ensure their success

Sean's Online Presence:


Today's Panelists

Money Conversations: How To Talk About Money With Elderly Parents

What is more awkward that talking to your parents about money?

If you are like me, not much.

Its a close call between talking to them about money or about the birds and the bees.

This week we discuss how to talk to your parents about money with Cameron Huddleston. She talks about why this is such an important topic, how you can make the conversation a lot less weird, and what can happen if you don't have this awkward conversation.

5 Reasons to End Your Fear of Talking to Your Parents About Their Finances

By Cameron Huddleston

Talking to your parents about their finances might seem like one of the most awkward conversations you can have. It ranks right up there with the birds and the bees talk your parents gave you when you were a child. In fact, you still might cringe every time you think about that awkward conversation.

But talking about money with your parents might seem even more taboo than talking about sex. A survey by personal finance website GOBankingRates found that 10% of respondents said they’d be more comfortable talking to their parents about their romantic life than their parents’ finances. And 9% said they’d rather talk to their parents about their parents’ romantic life than their finances.

Trust me – talking to your parents about their finances isn’t nearly as difficult as it seems. It’s certainly not as weird as talking to them about their love life. (Seriously, I can’t understand why anyone would rather talk to their parents about that.)

But if you are afraid of having family financial talks, it’s time to get past those fears. Why? As the author of Mom and Dad, We Need to Talk: How to Have Essential Conversations With Your Parents About Their Finances, I can tell you that the consequences of not having these conversations can be a lot scarier than the conversations themselves. Here are five reasons why you should stop being afraid to talk to your parents about their finances and should start the conversation as soon as possible.

Reason 1: The Conversation Won’t Be as Awkward as You Think

A friend of mine told me that he recently talked to his parents about their finances after his mom had a health scare. He wanted to make sure their finances were in order to deal with situations like that and to find out whether they had important legal documents such as a will, a power of attorney to make financial decisions for them if they no longer could and an advance health care directive that spelled out what sort of end-of-life care they did or did not want.

My friend said that the first conversation with his parents was the toughest – but it really wasn’t that hard. He just thought it was going to be awkward, which made starting the conversation difficult for him. Once my friend and his parents started talking, though, he realized that his fears were overblown.

If you let your parents know that you want to talk to them about their finances because you’re looking out for their best interests, they likely won’t get upset with you. Some parents might balk initially. But most will open up and start having these conversations with you.

Reason 2: Your Parents Might Not Have Their Financial Act Together

You might think you don’t even need to talk to your parents about their finances because you assume that they have their act together. They worked hard and seem to be getting by just fine. So why rock the boat by sticking your nose some place it doesn’t belong?

Unfortunately, your parents might not be as on top of their finances as you think. A 2019 survey by the Insured Retirement Institute found that 45% of baby boomers surveyed did not have any retirement savings. An earlier IRI survey found that only a quarter of boomers think they have enough money for health care expenses in retirement. And many don’t have a plan for paying for long-term care – which more than half of adults 65 and older will need at some point.

If your parents are among those statistics, they might turn to you for support as they age. You need to know whether they will need your help sooner rather than later so you can be prepared financially – or emotionally if you have to tell them you can’t afford to help them. You’ll also have time to encourage your parents to take steps to be better prepared (such as downsizing before they retire) and to meet with professionals such as a financial planner, accountant and long-term care insurance agent to help them plan.

Reason 3: Your Parents Might Not Have Essential Legal Documents

There’s also a good chance your parents don’t have the legal documents they need. A Gallup poll found that nearly half of adults ages 50 to 64 don’t have a will, and more than one-third of adults 65 and older don’t have a will. If you die without a will, your state laws will dictate who gets what. So if your parents want to have a say in who gets what they leave behind (even if it’s not much), they need to put it in writing in a will. Otherwise, family members could end up in court fighting over who gets what.

Even more important than a will are power of attorney and living will documents – which surveys have found that at least half of boomers don’t have. A power of attorney is someone you legally appoint to make financial decisions for you if you can’t. A living will (also called an advance health care directive) lets you spell out what sort of end-of-life medical care you do or do not want and name someone to make health care decisions for you if you can’t.

You have to be mentally competent to sign any of these legal documents. If something were to happen to your parents and they hadn’t named you their power of attorney or health care proxy and you needed to make financial or health care decisions for them, you’d have to spend thousands of dollars and several months in court proving they were incompetent so you could be appointed to act for them.

Reason 4: Your Parents Probably Won’t Initiate the Conversation

Some parents are eager to talk with their adult children about their finances. Some even give their kids updated spreadsheets of all of their accounts and passwords annually. But these parents are a minority.

Most won’t open up to their kids about their finances for several reasons. Fortunately, an Ameriprise survey found that the most common reason that older adults haven’t talked with their kids about their finances is because they simply haven’t gotten around to having the conversation.

Just because your parents haven’t talked to you about their finances doesn’t mean they don’t expect you to be involved with their finances as they age. In fact, it’s quite the opposite.

A survey by Fidelity Investments found that an overwhelming majority of parents expect one of their children to help manage their finances in retirement, be their caregiver and be the executor of their estate when they die. Yet, a large percentage of children expected to fill these roles didn’t know of their parents’ expectations.

Wouldn’t you rather know if your parents expected you to be involved in their financial lives before you actually had to step in and help?

Reason 5: This Conversation Can’t Be Avoided

I didn’t have detailed conversations with my mom about her finances before she was diagnosed with Alzheimer’s disease at the age of 65. Fortunately, I did get her to meet with an attorney while she still was competent enough to sign a will, power of attorney and living will. But I had to figure out the details of her finances as she was forgetting things. And I had to discuss long-term care with her as she needed it.

My situation with my mom is not unique. With people living longer, there’s a greater chance that your parents will have to rely on you or other family members for care-giving or financial support as they age. And the truth is, you will have to have conversations with your parents one way or another. It’s better to do it when they’re healthy and mentally competent. Then you can talk about what ifs and make a plan for emergencies rather than wait until an emergency happens when emotions are running high and there are fewer options to deal with the situation. As I said, as awkward as talking to your parents about their finances might seem, the consequences of not having the conversation can be much worse.

Cameron Huddleston is the author of Mom and Dad, We Need to Talk: How to Have Essential Conversations With Your Parents About Their Finances. She also is an award-winning journalist who has been writing about personal finance for more than 17 years. You can learn more about her at CameronHuddleston.com.

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Looking for a better way to invest? 

Consider Betterment.

It doesn’t cost much to start, and you get access to a portfolio built around your risk tolerance and your goals. Using Modern Portfolio Theory, pioneered by a Nobel laureate, Betterment can help you build wealth without getting caught up in the noise of the market.


Today's Guest:  Cameron Huddleston

Cameron Huddleston is an award-winning journalist with more than 17 years of experience writing about personal finance. Her work has appeared in Kiplinger’s Personal Finance, Business Insider, Chicago Tribune, Fortune, MSN, Yahoo, USA Today and many more print and online publications. She currently is the Life + Money columnist for GOBankingRates.


U.S. News & World Report named me her of the top personal finance experts to follow on Twitter, and AOL Daily Finance named me one of the top 20 personal finance influencers to follow on Twitter. She has appeared on CNBC, MSNBC, CNN and “Fox & Friends” and has been a guest on ABC News Radio, Wall Street Journal Radio, NPR and other radio shows nationwide. She also has been interviewed and quoted as an expert in The New York Times, Chicago Tribune, Forbes, MarketWatch and more.

Cameron's Online Presence:



Today's Panelists

My Worst Investments Ever and The Stories from Personal Finance Professionals

A Very Special episode this week... Live from Bankok and Live from Washington DC... We discuss our worst investments ever. Want to learn from the mistakes of others? Good. It is a lot smarter than making them yourselves. This week we discuss some Titanic investing failures and the top 6 mistakes to avoid at all costs.

worst investments
list of worst investments


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Looking for a better way to invest? 

Consider Betterment.

It doesn’t cost much to start, and you get access to a portfolio built around your risk tolerance and your goals. Using Modern Portfolio Theory, pioneered by a Nobel laureate, Betterment can help you build wealth without getting caught up in the noise of the market.


Today's Guest:  Andrew Stotz

In 1992 Dr. Andrew Stotz, CFA moved from a management career at Pepsi-Cola in California to teach finance in Thailand, he has never stopped teaching since then. However, in 1993 he fell in love with the job of being a financial analyst for which he was eventually voted #1. He transitioned into the job of head of research to cap a 20-year career at various investment banks. During that time, he co-founded CoffeeWORKS, Thailand’s leading B2B specialty coffee roaster and served as president of CFA Society Thailand. He now runs A. Stotz Investment Research, which services institutions and high net worth investors. In 2017 he launched the ValuationMasterClass.com to teach everything he learned to aspiring analysts. In 2018 he started MyWorstInvestmentEver.com podcast to help future generations reduce their investment risks by learning through the stories of others. Andrew lives in Bangkok with his 81-year-old mother, who will attest that he remains an analyst at heart!

Andrew's Online Presence:


Book References:


Today's Panelists

Retirement Distribution Strategies for Smart People Interview with Brandon Renfro

Want to know how much you are going to need in order to retire? You may be surprised at the answer... and its not what you think.

This week we discuss retirement distribution strategies in our interview with Brandon Renfro. Brandon is capital in the national guard with a PhD in finance as well as a professor of finance. We discuss the different methods you should consider if you are close to retirement or want to plan your retirement before it happens to you. 


retirement distribution strategies

 

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Looking for a better way to invest? 

Consider Betterment.

It doesn’t cost much to start, and you get access to a portfolio built around your risk tolerance and your goals. Using Modern Portfolio Theory, pioneered by a Nobel laureate, Betterment can help you build wealth without getting caught up in the noise of the market.


Today's Guest:  Brandon Renfro

Brandon is a fee only financial advisor, a PhD, CFP,  RICP, and Assistant Professor of Finance at East Texas Baptist University in Marshall, TX. He helps clients in retirement by planning distributions strategies that will meet their income goals, protect savings, and minimize taxes.He has been in the Arkansas Army National Guard since 2009 and an Infantry Captain in the 39th Infantry Brigade. 



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Today's Panelists

Wall Street Insider Secrets: Learn How to Negotiate Your Healthcare Costs To Save Yourself Over $10,000+ In Only A Few Minutes

Are you happy paying thousands of dollars in healthcare costs you don't use? Are you angry at the medical bills you incur for services that should cost a fraction of that amount? Are you looking for answers?

This week we interview a healthcare industry insider, Scott Heiser. He spills the secrets on what is actually causing the problems in our system. He also gives us some simple tips and tricks to save yourself thousands of dollars with only a few minutes of your time.

healthcare costs

Wall Street Insider Secrets: How to Negotiate Your Healthcare Costs To Save Yourself Over $10,000+ In Only A Few Minutes

By Scott Heiser

If you’re not unhappy with the escalating costs of healthcare, you should be. You are paying for all the increases, whether it’s through your premium (which usually goes up every year), or increased out-of-pocket costs through deductibles, coinsurance, or co-pays. If it were any other consumer good, people would be boycotting or buying alternatives. Yeah, yeah…I know what you’re saying, “My healthcare is not a 12-pack of beer, a TV, or a car. I’m not willing to challenge individuals entrusted with my care.”

That’s one of the main reasons we are where we are! If you’re like most, you’re a passive participant in the system. Third parties, insurance carriers, the government, your employer, hospitals, and doctors have been making the decisions for you.

That’s about to change. The revolution is going to start with you. I’m not suggesting storming the ramparts and single-handedly taking on the healthcare industrial complex. What I’m talking about is taking an active role—one you’re entitled to—in the purchasing of your healthcare at the point of service. We’ll start small and work on areas that you’re comfortable working with and in which you can make a difference.

As your confidence grows through knowledge and practice, you will grow into a healthcare consumer and that will impact your life. The more knowledgeable you are, the more confident you’ll be. Better communication and mutual respect flow out of that confidence, which allows you to start negotiating prices with your healthcare provider.

Before we become healthcare negotiation gurus, let’s answer an important question.

Why is Healthcare Consumption Treated Differently?

Common reasons include the following: it’s too complicated! Doctors spend years studying, so how can I begin to understand or second-guess them?

My insurance company takes care of all that. I don’t want to mix money discussions with my health situation; I’m sick and want to get better—that’s it! I’m not qualified.

I don’t know what it costs until after I receive the bill. Doctors never talk about the cost. What if I make a mistake and offend my doctor, my caregiver?

A faculty radiologist at one of the top thirty medical schools in the country said it this way, “Since the 1950’s, medicine had made spectacular advancements: antibiotics, organ transplants, vaccines, birth control in a pill. Medicine became transformative. They were miracle workers. The generations growing up in the fifties, sixties, seventies, and eighties grew to expect miracles from their doctors. You don’t question miracles.”

A new report in JAMA published in March of 2018 comparing the US with the highest income countries in the world, points out the US spends far more per capita on healthcare when compared to other countries but has less in healthcare outcomes to show for it. In defense of the US, there are mitigating factors including a more diverse population, freer, quicker access to care, and a litigious environment—but we still spend more on healthcare. We don’t ration our healthcare like other nations.

Fortunately, the environment is changing in the US. Transparency is driving options and causing the system to reevaluate the efficacy of the treatments being performed. Options are beginning to exist, and it’s our job to find them when they do and when they are appropriate, partnering with our providers to find the most cost-effective solutions.

President Clinton appointed a commission in 1997 to draft a “consumer bill of rights” for the healthcare industry. Although never fully adopted and subsequently watered down by the American Hospital Association, it directed healthcare professionals to provide consumers with easily understood information and the opportunity to decide among treatment options with an informed consent process.

Specifically, with regard to treatment and costs, it stated:

Discuss all risks, benefits, and consequences to treatment or non-treatment.

Give patients the opportunity to refuse treatment and to express preferences about future treatment decisions.

Disclose to consumers factors—such as methods of compensation, ownership of or interest in healthcare facilities, or matters of conscience—that could influence advice or treatment decisions.

The good news is the budding transparency movement offers the meat to enact those initiatives highlighted in 1997. So, let’s get going.

Basic Concepts of Healthcare Consumerism

Let’s start with the basics on how to become an involved consumer of healthcare.

  • Know your objective. Why are you seeing the doctor? Why did you pick that doctor? What do you want to get out of the appointment?
  • Be prepared. Do your homework. Who is the right provider to address your issues? Bring your health record. Identify your symptoms in detail.
  • Develop questions. Write them down in a checklist.
  • Communicate efficiently and on a factual basis. Listen with an open mind.
  • Ask about treatment plan options and cost. Tell them you are paying for the care.
  • Don’t be afraid to talk about second opinions or seeking alternative cost solutions or cash flow options. Understand how they’re paid, by whom, and for how much.
  • Research alternatives and search for the most cost-effective care.
  • Re-consult with your caregiver regarding your findings. Solidify an action plan.
  • Seek out advocates who can help you organize, listen to, and speak with your caregivers. Look to family, friends, even concierge case managers provided by your health insurance carrier.

Questions to Ask When Negotiating

As you begin to think about trying to negotiate with providers on cost, remember one key factor: doctors are people, too. They know the pain of paying for healthcare. They are trained to recognize and understand when patients need financial help.

Your primary care doctor needs to be involved in your financial well-being, and many of them will be—if you ask. Here’s a list of questions to begin asking your caregivers:

  • If your diagnosis is complex and treatment is extensive and/or invasive, ask for all available options, their outcomes, and their cost. Ask for referrals of those they successfully treated. Ask for referrals for second opinions.
    • When shopping for alternative care, tap into the transparency tools. Costs can vary wildly even in the same city (MRIs from $650 to $1,350 in the same town). Look also regionally and nationally for the best costs and outcomes. For example, if the average cost for knee replacements in San Francisco is $61,817 versus $27,674 in Detroit, it may be worth traveling.
  • If you’re challenged by deductibles, co-pays, or out-of-pocket costs, ask providers (hospitals/physicians) for payment plans and discounts for paying up front.
    • For example, an individual opted for a High-Deductible Health Plan with an HSA. She had a chronic condition requiring costly monthly medication, which caused short-term cash flow challenges. Her physician agreed to a monthly payment plan that stretched her deductible payment over twelve months instead of her having to pay all at once. She was even granted a discount on the amount owed if she paid the last three months at once!
  • Ask out-of-network providers if they’ll offset increased out-of-pocket charges.
    • Doctors and hospitals generally reduce their retail rates by 45 to 50 percent for major health insurance companies. Ask what they’ll do for you.
    • Ask if there is a further discount if you pay cash.
  • Check the place in which a treatment or procedure is being performed.
    • Outpatient services aren’t always less expensive.
    • Diagnostic testing services performed by the same provider are convenient but often more expensive.
    • Scrutinize freestanding health facilities. You may think you are at an urgent care facility, but it may be an emergency room extension of a hospital. Charges are significantly different!
  • Ask for detailed hospital invoices listing all services upon checkout and look for duplicate charges and services not performed.
    • If you end up reducing the bill, share your story with your HR department.  
    • If you used an “in-network” hospital and doctor, make sure all the hospital charges are “in-network.” Oftentimes, certain medical practices at an “in-network” hospital are actually out-of-network. Thus, they’ll cost you significantly more in deductible costs and non-discounted rates.
    • Try to clarify with the hospital how all the charges will be assessed before the treatment. A perfect example is the anesthesiologist. They are often not covered as “in-network” providers and are expensive. Your approach should be that you have complied with the insurance plan and attended an in-network facility that does not make all services available on an in-network basis. How can you be liable for that?
    • Question them: should you have gone to another hospital to have the anesthesiologist perform their service before your surgery at their hospital? Stand your ground with the hospital and insurance carrier.
    • If you have already received care and are now facing unmanageable medical costs, you may want to hire a billing advocate. This type of advocate will normally charge for their services but may be able to save you thousands. They can either charge an hourly rate, generally $100–$200 per hour, or a percentage of the savings from your bill, usually 25–35 percent. You can find patient and medical billing advocates through the National Association of Healthcare Advocacy Consultants or the Alliance of Claims Assistance Professionals.
  • Ask for charity care if you’re uninsured and at a nonprofit hospital.
    • ACA mandates all nonprofit hospitals have a written charity care policy.
    • Individually, you may qualify for discounted or waived charges.
    • Regardless, no uninsured individual may be billed for more than the discounted insured rates accepted by the nonprofit hospital.

Negotiating is About Relationships

Again, you don’t want to walk into your doctor or hospital and be a belligerent jerk. You are all looking for the best outcome. You have the right to ask questions, and, as you can see, there isn’t just one simple, cast-in-stone fee for every service.

There is, like any other service industry, a range of options and costs. Remember this and this alone: cash is king. By reducing billing and collection issues, streamlining payments to providers, knowing that discounts are available, and confirming the services billed were performed, you may be able to receive discounts or more favorable treatment. You must ask, research, and audit to achieve.

**

For more advice on negotiating your healthcare costs, you can find the book Healthcare is Making Me Sick on Amazon.

Scott Heiser has more than twenty years’ experience as a consultant for clients in the insurance and healthcare system. Scott was a partner and owner of a commercial insurance brokerage, in which he led and developed an employee benefit practice that managed more than half a billion dollars in health benefits. Scott is a strategic innovator who knows the ins and outs of what can feel like the overwhelming world of healthcare and insurance. Today, he is dedicated to sharing his knowledge to help educate and empower his readers. His goal is to improve your health outcomes while lowering your costs. To get started, visit www.UncoveredHC.com

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Today's Guest:  Scott Heiser

Scott Heiser has more than twenty years’ experience as a consultant for clients in the insurance and healthcare system. Scott was a partner and owner of a commercial insurance brokerage, in which he led and developed an employee benefit practice that managed more than half a billion dollars in health benefits. 


Scott is a strategic innovator who knows the ins and outs of what can feel like the overwhelming world of healthcare and insurance. Today, he is dedicated to sharing his knowledge to help educate and empower his readers. His goal is to improve your health outcomes while lowering your costs. To get started, visit www.UncoveredH​​C.com .


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