Foster Group

IMS and Foster Group co-host successful Wise Wealth Lecture Series with Economist Brian Wesbury and IMS President Michael Kitchell, MD.

Uncertainty.  Turbulence.  Two words describing the economic environment physicians are coping with today.  Between the general economic conditions found in the United States as we recover from 2008’s financial crisis, and the twists and turns of the national healthcare reform debate, physicians can feel like they are looking at live weather radar showing two storms simultaneously tracking toward them from the east and the west.

Storm A: Healthcare Reform

On October 8, 2009, physicians gathered at the Embassy Suites in downtown Des Moines to hear about these storms. IMS President Michael Kitchell, MD led off the evening describing the current legislative proposals being debated in Washington, D.C.  Referring to the problems created by having over 40 million uninsured Americans, Dr. Kitchell helpfully differentiated between the “Public Option” for creating universal coverage in the House bill (government-funded and government-run) versus the private insurance approaches in the current Senate bill.  Proposals in the Senate bill include a health benefit exchange where “affordability credits” are offered to lower-income Americans so that every American can, and likely will be mandated to, purchase health insurance coverage.

The bigger question about how damaging this “storm” could be for physicians becomes who will ultimately pay for the goal of reducing healthcare costs while accomplishing universal coverage.  Iowa physicians are already “paying” some of these costs through the geographic penalty imposed by Medicare reimbursement formulas (only North Dakota and Arkansas doctors are paid less), even though Iowa is ranked second  in the nation by the Commonwealth Fund for healthcare quality and value.  Dr. Kitchell cited numerous statistics and examples, including the fact that physicians are effectively being reimbursed by Medicare at 1998 levels, but the bottom line seemed to be that while lawmakers are hoping for a “magic bullet” solution, the likelihood is that it will take multiple strategies to get there.  Key cost drivers that must be addressed include:

1. 75% of all medical bills are related to treatment of chronic diseases, many of which could be reduced through healthier lifestyles,
2. 3% of the population is responsible for 50% of the healthcare costs in the U.S.,
3. On average, physicians are spending $68,000 per year filling out pre-authorization and related paperwork, and
4. “Defensive Medicine” due to the threat of litigation, seems to imply that some form of tort reform must be a part of the solution.

Without some type of healthcare reform, Iowa physicians are already set to receive a 21% reduction in Medicare payments on January 1, 2010.

Storm B: Economic Uncertainty

Immediately following Dr. Kitchell, nationally known economist Brian Wesbury addressed an even larger group of physicians and investors about the condition of the US and world economies, as well as investment markets.  Wesbury, a regular contributor to the Wall Street Journal, commentator on CNBC and Fox Business and the economics editor of the American Spectator magazine, started his comments answering the question “Has capitalism failed us?”  The short answer according to Wesbury was that capitalism had not failed; rather government (the Federal Reserve and Treasury) had failed by creating and sustaining artificially low interest rates during the mid 1990s and again in the early 2000s.  These low interest rates created an “unnaturally” low cost of capital that led people to take risks that higher rates would have discouraged.  

While Wesbury had a number of reasons to explain how and why the “panic” of 2008 happened, his comments on the future centered on the strength of capitalism to create recovery and growth.  Citing historical examples ranging from the banking crisis of 1907 to the recession of 1972-1973 to the banking and lending problems of the 1980s, Wesbury expressed confidence the “V-shaped” recovery of the stock market that began in March 2009 would continue.  This “V-shaped” recovery seems to indicate the recession has indeed ended, and that job losses will continue to slow and turn to job creation, possibly by year-end.

What to do about the radar warnings

Both experts, Dr. Kitchell and Mr. Wesbury, were quick to point out that many uncertainties still exist, so the end result is far from certain.  In an interview immediately following his talk, Dr. Kitchell reflected that he thought the healthcare reform debate was likely in the fifth inning of a nine inning baseball game, and that there would be many arguments and surprises before any laws were signed by President Obama. 

For his part, Wesbury, who was named the top economic forecaster by the Wall Street Journal in 2001 and one of the top ten forecasters in 2004 by USA Today, admitted that he originally believed the U.S would not go into recession in 2008.  But Congress’ commitment to “mark-to-market” accounting created problems not seen since the Great Depression (coincidentally, strict “mark-to-market” accounting rules were modified in 1938, helping end the Great Depression, only to be reinstated in 2007 when they at least contributed to the 2007-2008 economic decline).  So, while there are no guarantees regarding the economy, the title of Wesbury’s new book, due out in November, reflects his optimism:  It’s Not as Bad as You Think -  Why capitalism trumps fear and the economy will thrive.

In light of both presentations, Foster Group is more committed than ever to offering evidence-based, comprehensive financial planning and investment management.  In uncertain environments of any kind, managing risk by preparing for a variety of future outcomes is always wise.  In this current uncertain financial “weather pattern,” Foster Group is offering a “Second Opinion” service to physicians who would like a no-obligation, unbiased review of their current portfolio and general financial condition.  If this is of interest to you, please contact us at (800) 798-1012 or go to www.fostergrp.com/second-opinion for more information. We continue to consider it a privilege to be a trusted advisor to physicians like you.