Medical Economics

A Modest Proposal To Fix American Healthcare

Using the definition that value = quality ÷ cost, Americans get the least value in healthcare of all nationalities in the world. Per OECD data, U.S. healthcare cost per person is the highest in the world at $11,072 per year; the next closest is Switzerland at $7,732. But the U.S. trails other peer countries in most measures of quality of medical care. In other words, we pay more and get less.

A Kaiser Family Foundation survey found that most Americans are in favor of a national health plan. However, the three words that create the most political polarization among Americans with regard to healthcare are: “Medicare For All“. The reality is that Medicare is already a national health plan for 44 million Americans over age 65, Medicaid is already a national health plan for 74 million low income adults, and CHIP is already a national health plan for 7 million low income children. Add in 9 million Americans covered by the Veteran’s Administration and 9 million covered by the Federal Employees Health Benefits program and it turns out that 44% of Americans are already covered by one national health plan or another. When looked at by expenditures, according to CMS, 73% of all U.S. healthcare is currently paid for either by the government or by individual households:

One of the problems with our existing national health plans is that they all too often pay for health care for preventable medical conditions; had these conditions been prevented in the first place, then the overall cost to society would be less. For example, if an uninsured person does not have their hypertension and diabetes diagnosed and treated, then they become a financial burden on society when they develop kidney failure and require dialysis (Americans requiring dialysis are automatically eligible for Medicare, and thus paid for by taxpayers). Or if an American has unrecognized hepatitis C at age 45, that person can develop cirrhosis requiring a costly liver transplant later in life when they are now over age 65 and on Medicare. Or the low income woman who lacks access to birth control has an unintended pregnancy that results in delivery costs charged to Medicaid and child healthcare costs charged to CHIP.

Although I believe that the United States will eventually have a national health plan akin to “Medicare for all”, there are too many powerful economic and political forces that pose a barrier to overnight adoption of a national health plan. Most notably, opposition can be expected from health insurance companies, pharmaceutical companies, some hospitals, and some doctors who all benefit from private health insurance (which generally pays more for any given medical service than Medicare does).

Therefore, I believe that the first step toward improving U.S. health outcomes while reducing U.S. health costs per capita should not be “Medicare For All” but should instead be “Preventive Care For All“.

The Affordable Care Act already requires Health Insurance Marketplace plans and Medicaid to provide a group of preventative services to all covered individuals, without co-pay. For adults, this includes services such as 14 different vaccinations, blood pressure & diabetes screening, and HIV prevention medications for high-risk persons. For women, this includes services such as birth control, breast cancer screening, and bone density screening. For children, this includes services such as vaccinations, well-child visits, and autism screening. People who have Medicare, Medicaid, CHIP, or commercial insurance through a Health Insurance Marketplace plan already get preventive care at no additional out-of-pocket costs. The problem is that uninsured Americans do not have access to preventive care, unless they pay for it with their own money. So, who are these uninsured?

Currently, according to a report by the Kaiser Family Foundation, there are about 27 million uninsured Americans who are nearly all between ages 18 -64. Children of parents without commercial insurance are mostly eligible for healthcare coverage through CHIP and adults 65 and over are eligible for healthcare coverage by Medicare. In short, the typical uninsured person in the United States is non-white, low income, employed, and lives in a South or Mountain West state:

  • Race: 41% White, 38% Hispanic, 13% Black, and 4% Asian.
  • Income: 21% fall below the Federal Poverty Level (FPL), 28% fall between 100-200% of the FPL, 34% fall between 200-400% of the FPL, and 17% have an income greater than 400% of the FPL.
  • Work status: 73% have at least one family member working full-time, 11% have a part-time worker, and 15% have no one in the family working.
  • Age: 85.4% are between ages 18-64 and 5.6% are younger than age 18.
  • Citizenship: 77% are U.S. citizens and 23% are non-U.S. citizens.
  • State of residence: In Medicaid expansion states, 8.3% of the population is uninsured whereas in states that did not expand Medicaid, 15.5% of the population is uninsured. States with the highest percentages of uninsured persons are in green and the next highest percentages in dark blue in the map below:

When an uninsured person is discovered to have a medical condition that requires treatment, such as kidney failure, unintended pregnancy, or metastatic breast cancer, one of the first things the hospital will do is to get that person enrolled in Medicaid or Medicare in order to cover the costs of chronic dialysis, pregnancy, or chemotherapy. For those patients who are not eligible for Medicaid or Medicare, the hospital will generally provide “free” medical care. However, nothing in health care is really free, so, the hospital has to charge more to the commercial insurance companies in order to pay for treating the uninsured. Consequently, employed American taxpayers eventually end up paying for medical care for the uninsured, either directly through taxes or indirectly through health insurance premiums.

Prevention costs less than treatment

The costs of preventable medical conditions is staggering. Dialysis costs about $90,000 per year per person. Delivery costs of an unintended pregnancy is about $15,000 (and that does not include costs of pre-natal care or health care for the next 18 years for the child). The cost of treating breast cancer in the 24 months following diagnosis is $72,000 for stage I but $183,000 for stage IV.

However, the cost to diagnosis hypertension and diabetes (before they cause kidney failure) is about $40/year. The cost of birth control pills to prevent unintended pregnancy is about $200/year. the cost of a mammogram is about $300/year. When it comes to preventable medical conditions, for the American taxpayer, it is a “Pay me now or pay me later” proposition… and it is a lot cheaper to pay for preventive care now rather than pay for the medical condition later.

How to pay for it

The greatest resistance will come from those opposed to increasing taxes to pay for someone else’s health care. It is true that in the short run, Preventive Care For All will require increased federal expenditures that will consequently require increased taxes. I would argue, however, that in the long run, Preventive Care For All will pay for itself by:

  • Reduction in expenditures by Medicaid and Medicare for medical conditions that could have been prevented
  • Reduction in Social Security disability payments for Americans who leave the workforce early due medical conditions that could have been prevented
  • Reduction in CHIPs expenditures for healthcare for children resulting from unwanted pregnancies due to lack of access to and information about birth control
  • Increase in income tax and payroll tax receipts from American workers who are able to stay in the workforce by avoiding unwanted disabling medical conditions

Seen this way, Preventive Care For All is a national investment that will cost us more now but more than pay us back after several years.

Humans have created a myriad number of ways to tax ourselves but taxes can be broken down into three basic types: (1) taxes on what you earn, (2) taxes on what you buy, and (3) taxes on what you own. Healthcare in the U.S. is primarily funded by the first of these types, taxes on what you earn. Commercial health insurance is usually paid by a combination of employee pay deductions to cover premiums for employer-sponsored health insurance plus an employer contribution that is derived from the employee’s benefit package. Medicare is paid for similarly by employee and employer payroll taxes. Payroll taxes are divided into two buckets: Social Security at 12.4% (which is only taxed on the first $142,800 in income) and Medicare at 2.9% for people making less than $200,000/year and 3.7% for those making greater than $200,000/year. Medicaid is a bit different and is paid for jointly by the Federal and State governments. I would propose paying for Preventive Care For All by increasing the Medicare component of payroll taxes.

Inevitably, progressives will argue that increasing payroll taxes on earned income hurts low-income persons. My counter argument is that by funding through payroll taxes, the wealthy pay more than the poor and furthermore, Preventive Care For All will primarily benefit low-income families.

Equally inevitably, conservatives will argue that increasing taxes takes more money from those Americans with higher incomes. My counter argument is that by funding through payroll taxes (rather than regular income taxes), all American workers contribute by an equal proportion of income and furthermore, Preventive Care For All will ultimately reduce future Medicaid and Medicare expenditures, offering the possibility of decreasing payroll taxes in the future.

Americans hate taxes, and I am no different. However, if you take the view that premiums Americans pay for employer-sponsored health insurance are simply a tax paid to a commercial insurance company rather than a government, then it is clear that we are already paying an enormous tax bill for healthcare in the United States. The best way to reduce that tax bill is to pay for prevention so we do not have to pay for disease.

How to implement it

As a starting point, the group of preventative services required by the Affordable Care Act could be made available to all uninsured Americans with a family income less than 400% of the Federal Poverty Level (currently, the Federal Poverty Level is $12,880 for an individual and $26,500 for a household of 4 people).

There will be groups that object on moral or philosophical grounds, such as anti-vaxxers who object to using government money to cover vaccinations and some religious groups that will object to using government money to cover birth control. My response to the anti-vaxxers is that they are just nuts. My response to the religious objectors is that America’s abortion problem is mostly an unintended pregnancy problem and reducing unintended pregnancies is the best way to non-controversially reduce abortions.

It could also be a disincentive for some lower income workers to purchase full health insurance since they would be able to get preventive care for free from the government. This could be addressed by an income-driven co-pay for the program. For example, no co-pay for family incomes less than 100% of the Federal Poverty Level, a $200/year/person co-pay for incomes 100-200% of the FPL, a $300/year/person co-pay for incomes 200-300% of the FPL, etc.

Another implementation barrier would be deciding who would provide the preventive care? It would be difficult to turn this over to existing primary care private physician practices. Many of these physicians already do not accept Medicaid patients due to the low reimbursement and a preventive care program paid by the Federal government would likely also be hard to break even on. Furthermore, once a full-service primary care physician establishes a preventive care relationship with an otherwise uninsured patient,  that physician will feel morally (and possibly legally) responsible to treat any chronic medical conditions that the physician identifies, even if he or she will not be paid for that care by the uninsured patient.

Personally, I believe that this type of preventive care could be ideally provided by groups of nurse practitioners, physician assistants, and nurse midwives. Preventive care is largely protocol-driven which is ideal for advance practice providers. Furthermore, there would not be a moral or legal requirement for such a preventive care office practice to manage chronic medical conditions or answer sick-calls from patients. Instead, these practices would function similarly to health screening fairs currently sponsored by hospitals, religious groups, and social service organizations.

“An ounce of prevention is worth a pound of cure”… Benjamin Franklin: February 4, 1735

By preventing many chronic medical conditions and by screening to identify other medical conditions early, Preventive Care For All would reduce overall American healthcare costs, keep lower income workers in the workforce, and improve the quality of health in the United States. In other words, Preventive Care For All would improve the value of American health care. We would do well to heed the words of one of America’s Founding Fathers…

August 11, 2021

Physician Retirement Planning

Retirement Investment Allocations

So, you are finally done with all of your education and you are now actually earning an income. You want to start saving for retirement but the number of investment options can seem overwhelming. Many people turn to their company’s 401(k) and a “target date” mutual fund that automatically invests a certain percentage of the fund allocation in U.S. and foreign stocks and a certain percentage in U.S. and foreign bonds. When the investor is young, a higher percentage goes into stock and as the investor ages, the percentage invested in bonds increases. In fact, 24% of all money held in 401(k) accounts is in target date funds. Although this approach is simple and works reasonably well for most people, the savvy retirement investor can do better with understanding of the 4 buckets of retirement assets and the 4 types of retirement investments.

Retirement Investment Summary

Deferred Compensation Accounts

  • Do include:
    • Stock and bond funds in a pre-determined ratio
    • REIT funds
  • Do not include:
    • Cash
    • Tax-free bond funds

Roth Accounts

  • Do include:
    • Stock funds
    • REIT funds
  • Do not include:
    • Cash
    • Bond funds (until you are close to age 72)

Regular Investments

  • Do include:
    • Cash
    • Stock and bond funds in a pre-determined ratio
    • Tax-free bond funds
    • Any stocks held in individual companies for your entertainment (non-retirement) purposes
  • Do not include:
    • REIT funds
    • Certificates of deposit

The 4 buckets of retirement assets

The money that you use in retirement is going to primarily come from 4 sources or “buckets”: (1) defined benefit income, (2) deferred compensation, (3) Roth accounts, and (4) regular investments.

First, there is defined benefit income. This is a dependable amount of money that you get every month from a source such as Social Security, a pension, or an annuity. For most people, Social Security will not be enough to cover a retiree’s expenses. If you can get one, a pension is a great component of a balanced retirement asset portfolio but pensions are increasingly uncommon. Annuities have their place for some investors but for the majority of people, annuities are too expensive and too complicated to be worth it, particularly if you have a moderate to high income during your working years. Defined benefit income can serve as an important safety net in retirement so that even if there is a major recession, you still have enough income coming in each month to ride out that recession, without having to sell your stock or bond funds at a time when you can potentially take a substantial loss on those funds.

The second bucket is deferred compensation. This includes IRAs, 401(k)s, 403(b)s, and 457s. This is money that you put away into an investment without paying income taxes on it while you are working. When you withdraw the money in retirement, you pay regular income tax on those withdrawals at whatever your income tax rate is during that year. Any interest and dividends generated from the investments in deferred compensation accounts just gets added to the value of the account so when you take that money out, you pay regular income tax on the withdrawal no matter whether the money in that withdrawal was derived from your original deposit into the account, interest earned on that investment, dividends earned from that investment, or the capital gain in value of that investment. At age 72, the IRS requires you to take a portion of money out of deferred compensation accounts each year; this is called “required minimum distributions”. If you have a lot of money in your deferred compensation accounts at age 72, those required minimum distribution can push you into a high tax bracket; this is why many advisors recommend drawing down from your deferred compensation accounts early in retirement, before age 72. For many people, deferred compensation accounts will be their main source of retirement income.

The third bucket is Roth accounts. The most common of these is the Roth IRA but some people can invest in a Roth 401(k) or Roth 403(b). This is money that you pay income tax on during the year that you earned and deposited the money into Roth account. That money then grows tax-free in the account with the addition of any interest or dividends from the investments. When you withdraw money from the Roth account, you do not pay any tax on it. Money in Roth accounts are not subject to required minimum distributions so you can leave money in these accounts beyond age 72. Regular Roth IRAs are only available to people with lower incomes; however, a “back-door Roth IRA” is available to anyone and is a great idea for most middle and high income people. The Roth 401(k) and Roth 403(b) are only advisable if you anticipate that you will be in a higher tax bracket in retirement than you are when you are working, which is uncommon except for young people early in their careers when their annual income is relatively low.

The fourth bucket is what I will call regular investments. This is money that you pay regular income tax the year that you earn it and then invest that money in stocks, bonds, etc. You can pay taxes on these investments in three different ways: interest, dividends, and capital gains. Interest income is taxed each year at your regular income tax rate. Dividends can be taxed two ways: “ordinary dividends” are subject to your regular income tax rate the year that you earned the dividends. On the other hand “qualified dividends” are taxed at your capital gains tax rate the year that you earned the dividends. A typical U.S. stock index fund will have approximately equal amounts of ordinary and qualified dividends each year. When you sell an investment, such as a stock, you pay capital gains tax on the amount that that investment has increased in value since you purchased it. For most people, the capital gains tax rate will be lower than their regular income tax rate. The current capital gains tax rates for people married filing jointly are 0% for annual income < $80,800, 15% for annual incomes $80,801 – $501,600, and 20% for annual incomes > $501,600. The IRS also has a 3.8% dividend surtax for anyone with more than $200,000 in annual investment income (this is uncommon). Note that interest, dividend, and capital gains taxes only apply to regular investments and do not apply to deferred compensation investments (which are taxed at your income tax rate) or Roth investments (which are not taxed at all).

The 4 types of retirement investments

Okay, this is a little oversimplified. In reality there are more than 4 types of investments but I am not going to include less common investments such as fine art, jewelry, wine collections, and digital currency as these are considerably less common in the typical retirement portfolio. The main 4 types of retirement investments most people have are (1) stocks, (2) bonds, (3) real estate, and (4) cash. Knowing which of these to put in each of your retirement buckets depends on how they are taxed and when you will want to use them.

The first type of investment is stocks. It is inadvisably risky for most people to buy stocks in individual companies. It is preferable to buy shares of mutual funds which are composed of stocks from many different companies, thus allowing you to spread out your risk. For American investors, stocks can be divided into U.S. stocks and foreign stocks – a diversified portfolio will have some of both. In the short-run, the value of stocks can swing widely, losing value some years and gaining value in others. However, in the long-run, stocks will outperform all other kinds of investment.

The second type of investment is bonds. Once again, most people don’t buy individual bonds but instead buy shares of bond mutual funds. Bonds can come from U.S. companies, the U.S. government, local governments, and state governments. Some government bonds are tax-free, meaning that you do not pay tax on the income from those bonds. However, tax-free bonds tend to pay the investor lower yields than taxable bonds. Bonds can also come from foreign companies and foreign governments. An advantage of bonds is that their value does not fluctuate from year to year as much as the value of stocks (in other words, bonds have less volatility than stocks). However, over the long-term, the return on bonds is less than the return on stocks.

The third type of investment is real estate. Most of us cannot easily go out an purchase a plot of land or a building as a retirement investment but we can invest in shares of real estate investment trusts (REITs). Functionally, these are similar to mutual funds and an REIT will own many different properties, such as apartment buildings, office buildings, warehouses, retail centers, etc. Like stock mutual funds, the value of REITs can fluctuate widely from year to year and will outperform bond funds in the long-term. However, REITs are subject to different economic forces than stocks, so the performance of REITs may not mirror the performance of the stock market in any given year.

The fourth type of investment is cash. These are investments that do not earn a very high return but are relatively safe and dependable; their value does not fluctuate much from year to year. Because the annual inflation rate will usually be higher than the annual return on cash investments, those cash investments will actually lose value over time; for this reason, you do not want to have too much of your retirement portfolio in cash. Included in this category are checking accounts, savings accounts, and money market accounts. Some people include certificates of deposit (CDs) in this category but I consider cash as money that you can take out with immediate notice; the problem with certificates of deposit is that those funds are locked up for the term of the CD and so you cannot access them on short notice without paying a penalty. Another disadvantage of certificates of deposit is that the yield on the CD is taxed as interest, in other words, at you regular income tax rate.

Putting the right investment type in the right asset bucket

So far, we’ve seen that there are 4 basic buckets of retirement assets and 4 basic types of retirement investments. The next step is to determine how much of each type of investment to put in each bucket of retirement assets. The decision will be based on how each investment is taxed in each bucket, how far in the future you plan on taking money out of the investment, and the short-term volatility of each type of investment.

Defined Benefit Income Bucket

For the most part, you are not going to have any say in how the money in your defined income bucket is invested. Social Security income will be determined by congress and pension payments will be determined by a central pension committee. You can have some limited control over annuity investment by purchasing different types of annuities.

Some advisors argue that an investor is better off not contributing to a pension and instead investing that money themselves. Although I agree that most investors can outperform their pension, the key advantage of having a pension as a component of a balanced retirement portfolio is that by having the guaranteed monthly income from the pension, you can afford to put a larger percentage of your other retirement investments in stocks than you otherwise would. In the long-run, those riskier stocks will result in higher overall returns.

Deferred Compensation Bucket

Most people will start to withdraw money from their deferred compensation accounts shortly after retirement. Therefore, the composition of your deferred compensation account will depend on the number of years until you retire. If you are younger, then the stock-to-bond ratio should be primarily U.S. and foreign stocks with relatively little bonds – you have plenty of time to weather out the year-to-year volatility of stocks. As you get closer to retirement, the proportion of bonds should increase and the proportion of stocks should decrease. The idea of the “target date” mutual fund is that you choose a fund that corresponds with your planned year of retirement and the fund automatically adjusts the ratio of stocks to bonds each year as you get closer to retirement. Target date funds are designed to meet the needs of the average person but the problem with target date funds is that we are not all average and the target date funds do not take into account an individual person’s unique circumstances that can affect the ideal stock:bond ratio for that individual’s retirement portfolio. The ideal ratio of stocks:bonds will depend on (1) your own willingness to accept risk inherent in stock market volatility, (2) whether or not you will have defined benefit income in retirement, and (3) how long you expect to live in retirement. One strategy is to look at the stock:bond ratios from investment companies such as Vanguard, Fidelity, or Blackrock and use those ratios as a starting point. If you are risk-adverse, then increase the percentage of bonds in your portfolio. If you will have a pension or if you anticipate living a long time in retirement, then increase the percentage of stocks in your portfolio. A small portion of the deferred compensation fund should be real estate, for example, 5-6% of the funds invested in an REIT.

Do NOT put a lot of cash in your deferred compensation accounts – you want investments that are going to grow in value over time in these accounts. Do NOT put tax-free bonds in your deferred compensation accounts – these bonds will not increase in value as much as taxable bonds and the annual interest generated by these bonds does not get taxed each year in the deferred compensation fund, anyway.

Roth Bucket

Ideally, you want Roth accounts to hold investments that are going to have the highest long-term increase in value. Therefore, your Roth accounts should be mostly composed of stocks, both U.S. and foreign. Because your Roth account is not subject to required minimum distributions at age 72, you will likely want to withdraw money from your Roth accounts at an older age than you start to tap into your deferred compensation accounts (in other words, you want to spend down your deferred compensation accounts before reaching age 72). As with your deferred compensation bucket, a small amount of the Roth accounts should be in REITs, say 5-6%.

Do NOT have cash investments in your Roth accounts – there is little to no tax advantage. Do NOT have bond funds in your Roth accounts (at least when you are younger) – since you will not start to take withdrawals from your Roth accounts for 5-10 years after you start to take withdrawals from your deferred income accounts, you can afford to have a higher percentage of stocks in your Roth bucket than in your deferred income bucket. As you get close to age 72 (or whatever age you anticipate starting to withdraw money from your Roth account), you can then begin to shift some of the Roth funds into bonds. Even more importantly, do NOT have tax-free bonds in your Roth accounts ever – the Roth accounts are already tax-free and tax-free bonds will have a lower annual return than regular taxable bonds.

Regular Investment Bucket

This is the bucket that you want your cash investments in. Everyone, regardless of age, should have enough money in cash to cover at least 3 and preferably 6 months of normal expenses. You or your spouse could lose your job, have an unexpected (and expensive) illness, or suffer a financially catastrophic loss such as a house fire.

For most middle and high income earners, it is better to maximize annual contributions to your 401(k), 403(b), 457, IRA, and/or Roth before investing money meant for retirement in regular investments. But if you have maximized your deferred compensation and Roth account contributions and you still have some money left over to invest for retirement, what you invest in? The decision will largely be based on taxes.

If you want tax-free bonds in your retirement portfolio, this is where you should put them – where you can benefit by not having to pay annual regular income tax on the annual yields that these bonds generate. As I stated in a previous post, most people should not invest retirement money in individual stocks – you are better off diversifying your stock holdings. However, if you do want to hold a few individual stocks for your own entertainment purposes, this is also where you should put them.

Most people should have a higher percentage of bonds in their regular investment bucket than in their deferred compensation bucket. There are two important reasons for this. First, if you need money for an unexpected expense before you retire, you are better off drawing that money from your regular investment bucket rather than your deferred income bucket since you will be charged an early withdrawal penalty from deferred income accounts. Therefore, you may need the money sooner than your planned retirement date so you want to have less investment volatility given your potentially shorter investment horizon. Second, since you want to have your Roth account composed mostly of stocks, you will need to have someplace else to put bonds in order to maintain your overall desired stock:bond ratio across all of your retirement buckets.

Do NOT put certificates of deposit meant for retirement saving in your regular investment bucket. You will pay regular income tax on the interest each year and your regular income rate will usually be higher during your working years than during your retirement years. Certificates of deposit are better used for non-retirement savings, for example, savings for a new car or down payment for a house.

Do NOT put REIT retirement investments in your regular investment bucket. Unlike a stock mutual fund that generates about half ordinary and half qualified dividends, REIT dividends are almost all ordinary dividends and thus taxed each year at your regular income tax rate. Because most people will have a lower income tax rate in retirement than when working, you will pay more tax on REIT dividends in a regular investment when you are working than you will on REIT dividends in a deferred compensation account when you withdraw in retirement.

Some financial advisors argue that dividend-generating stocks should be in your deferred compensation bucket and not in your regular investment bucket for the same reason. I do not have as strong of an opinion – the explanation is a bit complicated, so bear with me (if you feel like your head is ready to explode after reading this far, skip reading this paragraph). If a stock mutual fund is held in your regular investment bucket, you will be taxed each year at your regular income tax rate for the ordinary dividends and at your capital gains tax rate for the qualified dividends. On the other hand, if that same index stock fund is held in your deferred compensation bucket, you will not pay annual tax on the dividends each  year – those dividends just build up in the account until you make a withdrawal in retirement and then you will be taxed at your regular income tax rate on that withdrawal. Your income tax rate will likely be higher during your working years than in your retirement years so you might think that it would be better to have dividend-producing stocks in your deferred compensation account. However, your income tax rate in retirement will likely be higher than your capital gains tax rate when you are working. Therefore, in order to minimize taxes, you are better off having stocks that generate ordinary dividends in your deferred compensation bucket and having stocks that generate qualified dividends in your regular investment bucket. Since most index stock funds generate approximately equal amounts of ordinary dividends and qualified dividends, I believe that taxes on ordinary and qualified dividends balance out whether the index stock fund is held in your regular investment bucket or in your deferred compensation bucket. For that reason, I do not believe that dividend generation should be a factor in deciding whether a stock fund should be in your regular investment bucket or in your deferred compensation bucket.

Diversification is the key

Diversification is at the core of every healthy retirement portfolio. That means diversifying across all 4 of the buckets of retirement assets and across all 4 of the types of retirement investments. The optimal amount of each type of retirement investment you have in each bucket of retirement assets will depend on tax implications, your age, your risk tolerance, and whether or not you will have a pension.

August 9, 2021

Outpatient Practice

Should Your Medical Practice Require Employee Vaccinations?

It is now mid-summer 2021 and the United States is in yet another surge of COVID-19 infections. Vaccines are now widely available and no longer in short supply. So, should you require your outpatient medical office employees to get a vaccine? First, full disclosure, my very strong personal opinion is, yes. However, there can be mitigating circumstances that can affect the decision about vaccine mandates in certain office practices.

Know your state laws

Tragically, the COVID-19 pandemic has become polarizingly politicized. As a consequence, several conservative states have passed laws prohibiting employee vaccine mandates. A recent report from Becker’s Hospital Review outlined laws affecting vaccine mandates in 11 states including: Arizona, Arkansas, Michigan, Montana, New Hampshire, North Dakota, Ohio, Tennessee, Texas, and Utah. Each state’s law is a little different. For example, Arizona has a provision exempting healthcare institutions; Ohio’s law only applies to public schools and universities and then only applies to vaccines that have not yet received final FDA approval.  It is likely that many of these state laws will be challenged in court – for example, here in Ohio, Cleveland State University (a public university) has made a requirement that students be vaccinated, despite the recent Ohio law, thus opening the door for someone to legally contest the university’s policy. However, most small medical practices do not have the time or financial resources to be the test case in their state’s court system contesting vaccine mandate restriction laws. If your practice is in one of these states, then familiarize yourself with the laws affecting your practice.

How vulnerable is your patient population?

A rheumatology or oncology practice that manages a lot of older, immunosuppressed patients is different than a sports medicine practice that primarily manages otherwise healthy, younger patients. Patients who are more likely to become sicker or die should they become infected with COVID-19 need greater protection from unvaccinated office employees. If your practice has a significant number of patients who are over age 60, immunosuppressed, obese, or diabetic, then office employee vaccine mandates become more important.

Is telemedicine an option?

Patients of medical practices are customers of your medical business and customers across the country are increasingly demanding that the businesses that they go to be safe with respect to COVID-19. If your patients perceive that your office is not a safe place, they will not walk in the door. So, if you are not able to vaccinate all of your office staff, look to how you can use telemedicine to cater to those patients who are not comfortable being in a room with unvaccinated staff. Many medical services can be performed just as well by telemedicine as by an in-person office visit, for example, those that are primarily for counseling or data review. Other medical services that require a hands-on physical examination or office-based procedure may not be amenable to telemedicine.

Can you afford to fire an unvaccinated employee?

In a large medical practice with many employees, if one employee refuses to get a mandated COVID-19 vaccine, then it is not a terrible loss to the practice to fire that employee – he or she is dispensable. However, a solo practitioner with a single office nurse who has worked with that practitioner for many years may not be able to fire that nurse for refusing to get vaccinated – the practice’s operations would suffer too much and would likely lose money while recruiting and orienting a new nurse.

You don’t need a mandate if everyone is already vaccinated

By far, the easiest solution is for all of your employees to be vaccinated voluntarily. Everyone who has ever trained a pet dog or a toddler knows that rewarding good behavior is more effective than punishing bad behavior. Mandates can be perceived by some employees as a form of punishment. You are better off listening to your unvaccinated employee’s concerns about the vaccine and then use education and patience to alleviate those concerns. Firing an unvaccinated office employee can also be very expensive when the cost of being short staffed, recruiting a new employee, and training that new employee is figured in. Using monetary incentives or extra vacation time incentives can be cheaper in the long run than hiring a replacement employee.

Vaccine mandates can make your business more competitive

Last week, I walked into a hotel that had a big sign on the front door stating “All of our employees are vaccinated for COVID-19 or wear face masks”. I felt much safer walking through that door and in the future will go to that hotel rather than one where I don’t know if I am safe being around the employees. Once you have all of your employees vaccinated, use that to your competitive advantage by publicizing it. A 70-year old diabetic with a skin rash can go to any dermatologist in town but is more likely to go to a dermatology office that advertises that all of the office staff are vaccinated. It is true that a conservative anti-vaxxer might be miffed at seeing such an advertisement but given that 90% of Americans over age 65 years old have received at least 1 dose of the COVID-19 vaccine, you are going to attract 9 older patients for every 1 who is put off by your employee vaccine mandate. Medicine is a business and with all businesses, success requires you to know your customers. Anti-vaxxers tend to be loud and get the most attention but they are a rather small minority of the population.

What is your legal liability if an unvaccinated infected employee gives a patient COVID-19?

To date, there has been no precedent for personal injury lawsuits if someone acquires COVID-19 at a business. Indeed, some states have laws that prevent people from suing a medical practice or business if they get infected from an exposure at that medical practice or business. However, until relatively recently, vaccines were not available to the entire adult population. Now that COVID-19 vaccines are widely available to any adult in the U.S. and that the U.S. is now giving away tens of millions of doses to other countries because we have a vaccine surplus, legal liability may change. It is possible that in the future, that if your 80-year-old immunosuppressed cancer patient gets COVID from your unvaccinated nurse and then dies, you could potentially face a personal injury or wrongful death suit. In a rapidly changing pandemic, it is not possible to predict the liability ramifications of unvaccinated healthcare workers in the future… it is safest to not take any chances. Some people view vaccine mandates similar to laws requiring people to wear a seatbelt – if you get in an accident, you are not going to be sued for not wearing a seatbelt. With vaccines now available, I see vaccine mandates more similar to laws regarding cell phones and driving – if you get in an accident while you are texting someone, there is a pretty good chance that you are going to get sued.

It is the right thing to do

The list of hospitals mandating employee vaccines is increasing daily. Nationally, organizations such as the Veteran’s Administration and Kaiser Health now require employees to be vaccinated. Here in Central Ohio, all 4 of our hospital systems now mandate COVID-19 vaccines for employees. The Hippocratic Oath that physicians take states: “First, do no harm“. It is morally appropriate to ensure that your patients are not harmed by one of your employees (and that your other employees are not harmed, also). As physicians, we are the ones who are most knowledgeable about vaccines and about COVID-19 so we should be the leaders in advocating for public health safety by requiring our office staff to be vaccinated.

The founder of Jet Blue Airlines, David Neeleman, once said that Jet Blue is a customer service organization that happens to fly airplanes. The same could be said about our medical office practices: we are customer service organizations that provide healthcare. In the midst of a pandemic, our customers want to feel safe in our businesses and it is incumbent on us to be sure that the patients who we serve feel safe in our medical offices.

August 4, 2021

Epidemiology Inpatient Practice

The Next Surge In COVID-19 Hospitalizations

Just when we thought it was safe to go back to the movie theater, to church, and to the grocery store… it looks like we are in for COVID, the sequel. The CDC reported that an outbreak of COVID infections in a town on Cape Cod earlier this month resulted in 469 people becoming infected, of whom 74% had previously been vaccinated. Of these vaccinated persons who developed infection, 79% had symptoms and 4 of them required hospitalization. Disturbingly, vaccinated people who developed COVID-19 had the same viral load detected in their noses as unvaccinated people who developed COVID-19.

This change in the epidemiology of the pandemic is attributed to the Delta variant, a much more contagious strain of the coronavirus that causes COVID-19. Coupling Delta with recent evidence that the SARS-CoV-2 virus is not simply transmitted by droplet spread as originally believed but can also be spread by aerosolization is a warning that we will likely see a resurgence in COVID hospitalizations in the near future. In anticipation of this, the CDC yesterday published recommendations to resume indoor masking for all people (regardless of vaccination status) in areas of the country where there is “substantial or high transmission” of COVID-19. In July 2021, there was a dramatic increase in U.S. counties with high transmission. The three figures below show the change in transmission rates over the past 4 weeks (red is high transmission and orange is substantial transmission):

This data indicates that most U.S. counties are now experiencing high transmission rates. To determine what these trends will mean in the upcoming weeks for U.S. hospitals, we can look at COVID-19 hospitalization trends. The figure below shows the number of new hospitalizations for the entire United States from August 1, 2020 through July 28, 2021. This indicates that the hospitalizations are going up but are not as high as the nationwide peak in January 2021.

Florida was one of the first states to convert from moderate to high transmission over the past month. As such, Florida may be a bellwether for the rest of the country. The figure below shows the same hospitalization data but just for Florida. Hospitalizations in Florida now exceed those of January 2021, when the rest of the country was at peak numbers.

So, if hospitalizations are about to go up, what demographic of patients are likely to be hospitalized? Intuitively, one might think that hospitalizations will be mainly younger people since older Americans are considerably more likely to be vaccinated. The figure below is data from the CDC that shows that in Florida (graph on the right), more younger people are being hospitalized now than in January (yellow line). However, older people still comprise the majority of hospitalizations.

So, what should hospitals do now?

From the Massachusetts outbreak and the Florida data, we can draw several conclusions: (1) the Delta variant is more contagious than earlier variants, (2) vaccinated persons can still get infected and when they do, they have just as high of a viral load as unvaccinated persons, (3) the Delta variant is more likely to be spread by aerosolization rather than simply by droplets, (4) adult hospitalizations are increasing. With those conclusions in mind, here are some tactics that hospitals can take now:

  1. Ensure that all front-line healthcare workers are vaccinated. During the January 2021 surge, many hospitals found that healthcare workers were more likely to get infected by another healthcare worker than by an infected patient. Furthermore, if a hospitalized patient becomes infected from an unvaccinated infected healthcare worker, the hospital could face litigation vulnerability in the future.
  2. Re-institute routine admission SARS-Co-2 testing. Given that more Americans are vaccinated, it is likely that we will begin to see more asymptomatic infections in patients being admitted to the hospital for non-COVID-19 related medical/surgical conditions. These asymptomatic patients can serve as vectors to infect other patients and hospital staff.
  3. Re-institute universal masking. Last winter, nearly all hospitals in the U.S. required patients, visitors, and healthcare workers to wear face masks while in patient care areas and public areas of the hospital. Because of “anti-masking” political pressure, some hospitals have loosened masking requirements in the past few months. These hospitals need to resume universal masking.
  4. Buy more N-95 masks. Given that the Delta variant is so contagious and given that it appears to be more likely to be spread by aerosols than simply by droplets, N-95 masks are likely to be more protective than simple face masks to prevent acquisition of Delta. It is likely that frontline healthcare workers will increasingly demand access to N-95 masks.
  5. Update the surge plan. Last December, hospitals made plans for expanding ICU bed capacity and for increasing the number of non-ICU beds for the January COVID surge of inpatients. It is time to revisit those plans, both for intra-hospital care as well as inter-hospital care.

17 years ago, my family was stuck on an island in the outer banks when Hurricane Alex hit. The night before, the main road became covered by a shifting sand dune and the bridge to Hatteras Island had to be closed. A few hours before impact, the local radio announcer said “Hope for the best but prepare for the worst“. That was sound advice in 2004 and it is sound advice again in 2021.

July 31, 2021

Outpatient Practice

Should you hire an RN or an LPN for your office practice?

LPNs (licensed practical nurses) and RNs (registered nurses) have very different training and scopes of practice.  Understanding these differences will help you decide which one is best for specific outpatient office practices.

Differences In Training

It takes more training to become an RN than an LPN. Although the duration of  LPN programs can vary, one year is about average. LPNs typically train at community colleges or technical schools. On the other hand, to become an RN, the minimum training (associate degree) takes two years and most RNs will complete a bachelor of science in nursing degree (BSN) that takes about four years. Associate degree programs are generally found at community colleges and bachelor degrees are generally found at universities or 4-year colleges.

Many hospitals preferentially hire RNs who have a bachelor degree due to their more extensive education. Also, hospitals seeking “nursing magnet status” are required to have mostly RNs with bachelor degrees as opposed to those with associate degrees. In the outpatient physician office setting, the differences between RNs with associate degrees versus those with BSN degrees are less important since their scope of practice is similar and nursing magnet status is not relevant.

Differences In Scope Of Practice

Each state regulates what LPNs and RNs can and cannot do. In general, RNs are permitted to function independently and perform a higher level of assessment than LPNs. RNs are considered to be able to practice nursing independently whereas LPNs are considered to have a “dependent” practice, meaning that the LPN must work under the supervision of a physician, an RN, a podiatrist, a physician assistant, a dentist, etc. In most states, RNs, but not LPNs, can administer intravenous medications. For these reasons, hospitals have moved away from employing LPNs and now primarily employ RNs for inpatient care. However, in an outpatient office practice, there are more similarities rather than differences in the LPN and RN scopes of practice.

Either an LPN or an RN can perform the majority of nursing tasks in the outpatient office practice. For example, checking vital signs, teaching patients, taking phone messages, taking basic history information for the electronic medical record, scheduling tests, and administering vaccinations. Similarly, both types of nurses can perform common office procedures such as EKGs, spirometry, and influenza tests.

There are situations when an RN is preferable. For example, if intravenous medications are given in the physician office and RN is required. Also, when a higher level of assessment is required, such as answering sick calls to independently make recommendations to patients and RN is needed.

Where Do RNs And LPNs Work?

According to the U.S. Bureau of Labor Statistics, there were 721,700 LPNs working in 2019 (the most recent year data is available). The following is a breakdown of where they work:

  • 38% nursing homes and residential care facilities
  • 15% hospitals
  • 13% physician offices
  • 13% home health care
  • 6% government

In 2019, there were 3.1 million RNs working, four times the number of LPNs. The breakdown of RN job locations is:

  • 60% hospitals
  • 18% ambulatory care (including physicians’ offices, home healthcare, and outpatient care centers)
  • 7% nursing homes and residential care facilities
  • 5% government
  • 3% education

Salary Differences

In general, an RN will command a higher salary than an LPN due to the longer amount of training required and the greater scope of practice permitted by state nursing boards. According to the Bureau of Labor Statistics, the overall median annual income for an LPN in 2019 was $48,820 and the median annual income for an RN was $75,330. However, different locations of employment command different salaries. For example, hospital employment requires working weekends, nights, and holidays whereas physician offices are generally open only on during daytime on weekdays; thus nurses working in hospitals command higher salaries than those working in physician offices.

So, Do You Need An RN Or An LPN?

One of the central tenets of operational efficiency in healthcare is to allow employees to work at the top of their license. An implication of this is that you should not hire an RN to do an LPN’s job. When both salary and benefits are considered, an RN will cost $30,000 more per year; in other words, you can hire 3 LPNs for the cost of 2 RNs. Because of the lower cost of LPNs plus the fact that most nursing duties in the ambulatory office practice fall within the LPN scope of practice, LPNs are the right choice for most nursing positions in physician offices. Some physicians may not even need any RNs in the office. However, there are situations when an RN will be preferable to an LPN such as when intravenous medications are administered in the office and when the practice gets a lot of walk-in visits or ill calls from patients that require a higher degree of independent nursing assessment.

In multi-physician practices, some physicians will inevitably view having an RN (as opposed to an LPN) as a measure of prestige or of the physician’s self importance. I’ve often heard physicians say that they need to have an RN rooming their patients because: “…my patients are sicker”, “…I’m more senior”, or “…I see more patients”. However, vital signs taken by an RN are not any better than vital signs taken by an LPN. So, when those physicians are faced with taking a $30,000 reduction in salary in order to have an RN do the job of an LPN, they generally have second thoughts. A large multi-physician medical office will be most efficient with LPNs managing most of the day-to-day duties and then a smaller number of RNs for phone triaging, complex patient management, and supervisory roles.

RNs will continue to be the predominant type of nurses in our nation’s hospitals. In physician outpatient office practices, LPNs and RNs both have important roles. However, LPNs are considerably more cost-efficient for the majority of nursing roles in the office.

June 28, 2021


Is COVID-19 A Rural Disease In Ohio?

Over the past year, I heard repeatedly from patients, politicians, and the press about how COVID-19 was an urban disease and not a rural disease. There was a perception that small towns and farm country were not as affected as cities. Many of my patients who lived in small communities did not want to travel to Columbus for office visits because of fear of getting infected during a visit to the city. There were complaints from rural residents that they were being unnecessarily subject to social distancing penalties for what was a “big city problem” that were not relevant to them. After all, COVID-19 spreads by close contact with other people and it seemed logical that in densely populated urban areas, COVID-19 would be more prevalent. However, in analyzing data from the Ohio Department of Health, it appears that just the opposite is true.

At the core of this misperception is how epidemiological data are reported. Early on in the pandemic, we heard about total numbers of infection (“1,000 people in Columbus have been infected”). And by total numbers, it is true that cities in the United States had more cases than rural areas. But total numbers do not tell you anything about the chance you have of getting infected. Instead, the rate of infection is more important than the total number of cases.

Consider this analogy: If 100,000 lottery tickets are sold and there were 5 winning lottery tickets, the total number of winners is 5 and the rate of winning is 5 per 100,000 tickets. On the other hand if 500,000 lottery tickets are sold and there are 10 winning lottery tickets, the total number of winners is higher (10 versus 5) but the chance of winning is considerably lower (2 per 100,000 versus 5 per 100,000).

So, what is important is not the total number of infections in the city versus in the country but what the chances of getting infected are if a person lives in a city versus living in the country. The Ohio Department of Health regularly releases data on the incidence of COVID-19 infection for each zip code in Ohio. And it turns out that the zip codes where a person is most likely to become infected are in rural areas, not urban areas. In the figure below, the darkest areas are those zip codes with the highest incidence of COVID-19 since the pandemic began and the lighter areas have the lowest incidence of infection.

The next figure below shows the population density in Ohio with the dark red areas having the highest population per square mile. The dark green areas have the lowest population density with yellow and light green having a middle population density.

By superimposing these two figures, we can see where the 8 major urban areas are on the map (Cleveland, Cincinnati, Columbus, Dayton, Toledo, Akron, Canton, and Youngstown). As it turns out, the darkest zip codes are in the least populated areas of the state. In other words, you are statistically more likely to get infected with COVID-19 at a restaurant, church, or grocery store in rural Ohio than in urban Ohio.

As of June 24, 2021, there had been 1,110,000 cases of COVID-19 in Ohio. With Ohio’s total population of 11.69 million people, that makes the average rate of infection 9,495 per 100,000 population in Ohio. That is almost exactly the incidence for zip code 43203 (location of OSU East Hospital, an urban area and my practice location prior to retirement) at 9,548 per 100,000. So, where are the locations where the chances of getting infected were the highest?

It turns out that of the 15 highest incidence zip codes in Ohio, all but one are in rural communities and only 44702 (Canton) is in a medium or large city. Most of these locations are small villages of a few dozen to a few hundred people. Therefore, the concept that rural areas are “safer” from COVID-19 is not true.

The rural versus urban differences in COVID-19 infection rates are likely to be amplified in the coming months as urban communities outpace rural communities with respect to vaccinations. For example, in Cuyahoga County (location of Cleveland), 52.6% of the total population has received at least one dose of the COVID-19 vaccine. On the other hand, in Holmes County (location of Walnut Creek, the highest incidence zip code in the state), only 15.2% of the population has received a COVID-19 vaccine. In the figure below, the darker counties have the highest percentage of the population receiving at least one dose of vaccine whereas the lighter colored counties have the lowest percentage of the population vaccinated. Ohio’s largest cities are in the darker counties indicating that our urban communities are more fully vaccinated than our rural communities.

Epidemiologists will be analyzing the COVID-19 pandemic for years to come and much of what we believe to be true today will turn out to be wrong.  But at the present, no place appears to be safe from COVID. Measures to prevent infection, such as vaccination, are just as important, if not more important, in rural communities than in urban communities.

June 25, 2021

Physician Retirement Planning

Why Everyone Should Have A Roth IRA

Traditional wisdom holds that you should only contribute to a Roth IRA if your income tax rate in retirement will be higher than your current income tax rate. I would argue that everyone should have a Roth IRA as part of a diversified retirement portfolio.

What is a Roth IRA?

With a Roth IRA, you pay income taxes on money you earn today and then put that money in the Roth IRA. That money then grows without you having to pay interest, dividend, or capital gains taxes each year. When you retire, you take that money out to spend in retirement and you do not pay any taxes on the withdrawals. If your taxable income in 2021 is less than $125,000 (filing single) or less than $198,000 (filing jointly), you can contribute money you earned directly to a Roth IRA after paying 2021 taxes on that income. If your taxable income is higher than those limits, you can still contribute to a Roth IRA but you cannot do it directly. Instead, you have to do a “conversion” where you first contribute to a traditional IRA and then convert the money in that traditional IRA into a Roth IRA. This is sometimes called a backdoor Roth IRA. There is a limit to the amount that you can contribute each year: $6,000 if you are under age 50 years old or $7,000 if you are over 50.

Roth IRAs have one additional advantage for retirees – there are no required minimum distributions. For traditional IRAs and other deferred compensations investments, when you reach age 72, you are required to withdraw a certain amount of money from your deferred compensation plan accounts. The percentage of the total of all of your deferred compensation plan accounts that you are required to withdraw will be based on your life expectancy. As an example, a 72-year-old retired married couple with $500,000 in their combined deferred compensation plan accounts would be required to withdraw 4.0% of the value of these accounts ($20,000) in 2021.  On the other hand, an 82-year-old married couple would be required to withdraw 4.3% ($21,500) in 2021. Roth IRAs are exempt from required minimum distributions so those funds can be left alone each year if desired. This can be an advantage if you: (1) want to leave money to your heirs, (2) are saving for a planned large expense in a future year, or (3) believe that you are going to live longer than the IRA life expectancy tables would predict.

The four retirement income buckets

OK, in reality there are a lot more than 4 sources of money that most retirees can draw from, but for most people, retirement income can be divided into four general categories:

  1. Fixed income. This includes annual Social Security benefits, pension income, and annuity income. This is a predictable amount that does not change from one year to the next (although it may increase slightly for annual cost-of-living adjustments). This income will be taxed at your ordinary income tax rate.
  2. Deferred compensation. This includes a long list of retirement savings options including 401(k)s, 403(b)s, 457s, SEPs, RCPs, and 415(m)s. A traditional IRA can also be included in this group if you are able to contribute pre-tax income directly to the IRA – this is the case if you are not covered by another retirement plan at work. You can also contribute to a traditional IRA with pre-tax income if you are covered by another retirement plan at work and your income is < $66,000 (filing single) or < $105,000 (filing jointly). Deferred compensation grows tax-free, so you do not pay any taxes on interest, dividends, or capital gains. When you withdraw money in retirement, the withdrawals will be taxed at your ordinary income tax rate.
  3. Post-tax investments. Although this can include everything from investment real estate properties to investment artwork, for most people, this will be stocks, bonds, and mutual funds. These are investments that you buy with your disposable income after you have paid income tax that year. Each year, you will pay taxes on interest and dividends from these investments (at your ordinary income tax rate that year) and when you sell these investments, you will pay taxes on the difference between the purchase price and the selling price (at your capital gains tax rate).
  4. Roth accounts. Although the most common of these is the Roth IRA, there are also Roth 401(k)s, Roth 403(b)s, and Roth 457s. All of these Roth accounts are similar in that you pay regular income tax on the money the year that you contribute to the account and then pay no taxes on the withdrawals.

Why you need a Roth IRA

There are two ways that a Roth IRA can save you money on taxes. First, if you have disposable income after paying this year’s income tax and you want to invest for retirement, you can either put it in a post-tax investment (for example, by buying shares of a mutual fund) or you can put it in a Roth IRA (either directly or by doing a Roth IRA conversion, depending on your taxable income). If you put it in a post-tax investment, then you are going to be taxed every year on the interest and dividends and then when you withdraw the money in retirement, you are going to be taxed on the capital gains – over the years, that will add up to a lot of taxes. On the other hand, if you put that same money in a Roth IRA, you will never pay any taxes on interest, dividends, or capital gains. Therefore, everyone should maximize contributions to a Roth IRA before putting money in a post-tax investment for retirement purposes.

The second way a Roth IRA can save you money on taxes is by taking advantage of periodic changes in federal income tax rates. As I described in a previous post, income tax brackets are one of the most misunderstood parts of the American tax system. What is important is your effective income tax rate and not your tax bracket. The effective income tax rate will vary widely depending on how the U.S. Congress sets taxes. It is a certainty that tax rates will change every few years, largely depending on which political party is in power. Having a Roth IRA allows you to maintain a consistent annual disposable income in retirement while weathering the ups and downs of income tax rates. To demonstrate this, let’s look at the effective tax rates in 2016 versus 2020.


In 2016, the effective federal income tax rate on an a taxable income of $250,000 was 21% or $53,500. In 2020, the same income of $250,000 was taxed at 16% or $40,000. In other words, you would have $13,500 more in disposable income after taxes in 2020 than you did in 2016. In fact, in 2020, you would have to have a disposable income of $430,000 to be taxed at 21% which was the effective tax rate on $250,000 in 2016. Similarly, if your taxable income was $160,000 in 2016, your federal income tax would be 17.5% ($28,000) but in 2020 your federal income tax would be 13% ($20,800), a $7,200 difference in disposable income.

In retirement, during years when the effective income tax rate goes up, you want to draw relatively more money from a Roth IRA and in years when the effective income tax rate goes down, you want to leave the Roth IRA alone and draw more money from your deferred income accounts. By using this strategy, you can maintain a constant disposable income while minimizing income taxes.

It is inevitable that federal income tax rates will go up in some years and down in others during a person’s retirement years. American taxpayers want low taxes but they also want federal services such as Social Security, Medicare, a strong military, investment in transportation & infrastructure, and perhaps in the future even national healthcare. Our political party system results in a see saw effect every few years with pressure to decrease taxes followed several years later by pressure to increase federal services. I would argue that for most people, it is impossible to predict whether their federal income tax rate will be higher or lower in any given year during retirement than it is during the years that they are working. The reality is that over the duration of their retirement years, it will likely be both. Having a Roth IRA allows you to take advantage of these inescapable swings in the effective income tax rate in order to maximize your disposable income.

April 18, 2021


An Unintended Casualty Of COVID: Tuberculosis

Currently, 2 billion people are infected with tuberculosis, about one-quarter of the world’s population. It lies dormant in most people but every year, it causes active disease in 10 million people and 1.6 million die of it. It is the number one cause of infectious disease-related death in the world. In the United States, healthcare providers are required by law to report cases of TB to health departments and the health departments in turn do contact tracing to identify and test others who could potentially have been infected. Because of this reporting requirement, we have very good epidemiological data about tuberculosis in the U.S.

Tuberculosis control in the United States has generally been a success. The number of new cases of TB per year has dropped from 84,304 in 1953 to 8,916 in 2019, a nearly 10-fold drop in cases. Because the United States total population has grown during this time period, the reduction in new cases per 100,000 population has dropped even more dramatically from 52.6 in 1953 to only 2.7 in 2019, a nearly 20-fold drop in case rates. This is a testament to the effectiveness of public health measures. Indeed, quarantining and the wearing of masks is nothing new – they have been our primary tool for controlling the spread of TB for more than a century.

The reduction in TB cases has not been linear. There was a spike in cases in 1975 that was largely related to a different surveillance case definition instituted that year and not due to an actual increase in TB in the United States. There was also an increase in cases in 1989-1992 that was primarily due to a surge in the number of people with AIDS in the U.S. But for the past decade, there has been a steady reduction in cases of TB in the U.S. by about 2-3% per year between 2010-2019. But then an unexpected thing happened in 2020. There was a 20% reduction in tuberculosis.


It turns out that COVID-19 has been our most powerful weapon yet in combating tuberculosis. The COVID-19 pandemic brought with it mandates of social distancing and face mask-wearing in public. These are reasonably effective means of controlling the spread of the coronavirus but they are even more effective in controlling the spread of other respiratory infections, including tuberculosis. Prior to 2020, the main indication for healthcare workers wearing N-95 masks was when caring for patients with known or suspected tuberculosis. Hospitals throughout the U.S. maintained a small number of “negative airflow” patient rooms, primarily to house patients suspected of having TB. But TB had become relatively rare to the point that most medical students do not encounter a patient with tuberculosis during their training; in 2019, there were only 150 cases of TB in the entire state of Ohio.

Most cases of tuberculosis in the U.S. occur in people who immigrated to the United States. For the past decade, foreign-born people have accounted for about 71% of the cases of TB in the United States whereas U.S.-born people have accounted for about 29% of cases. These percentages did not change in 2020 and therefore, the drop in new cases of TB cannot be attributed to reduced immigration to the United States related to COVID-19 travel bans. Furthermore, 90% of foreign-born people do not develop active TB until they have been in the United States for > 1 year, meaning they enter the U.S. with dormant (latent) TB and only go on to develop active disease years later.

Not only have the infection control measures used to slow the spread of COVID-19 been effective in reducing tuberculosis, these measures have been even more effective in reducing influenza. The graph above is from the Centers for Disease Control showing that the incidence of influenza this season (red triangles) is by far the lowest of any year in the past decade.

With 2 billion people infected, tuberculosis will not be eliminated in our lifetime. But it appears that COVID-19 has given us an unexpected step forward in our efforts to reduce TB in the United States. Tuberculosis data reporting in the rest of the world is not as robust and in the United States so it will likely be a few years until we see if the same phenomenon seen in the U.S. in 2020 will also be seen in other countries.

Hopefully, another benefit of the COVID-19 pandemic will be the accelerated study of mRNA vaccine technology that could offer hope of future vaccines effective in preventing tuberculosis. Regardless, the reduction in TB last year has been a very thin silver lining in a very large dark cloud of COVID-19.

April 17, 2021

Medical Economics

Anti-Vaxx Is Anti-Business

In the summer of 2020, unemployment in the United States soared. People stayed home and businesses shuttered. Over the course of the COVID-19 pandemic, some businesses were affected more than others. Airlines, hotels, arts & entertainment, restaurants, oil & gas, auto parts & service, and recreational facilities were among the hardest hit.

Some people blamed business closures not the pandemic but instead on their governor’s or mayor’s public health orders. As a consequence, many politicians lobbied to pass laws restricting their governor’s or public health authority’s ability to impose these public health orders. Their argument is that if people did not have to wear masks and practice social distancing, that businesses will open back up and quickly return to normal capacity. But it is not the public health orders that are hurting businesses, it is the pandemic itself.

To get those businesses back open, customers’ fear of acquiring COVID-19 has to be eased. A person who goes out to eat at a restaurant, gets on an airplane, or spends a couple of hours in a movie theater wants to be sure that it won’t cost them their life. Customers want to feel safe and workers want to feel safe. The best way to create that perception of safety is to get everyone vaccinated against COVID-19.

Some U.S. demographic groups are suspicious of vaccination and many within those groups have stated that they will not get vaccinated. As vaccine availability increases, these vaccine hold-outs will likely find themselves at a competitive disadvantage in business. How many people would go to a restaurant if their waiter is wearing a button that says “I’m proud to be a COVID anti-vaxxer”? As a larger percentage of Americans get vaccinated, those people who refuse to get vaccinated will increasingly be viewed as the ones holding back economic recovery.

If a customer gets salmonella or hepatitis A from contaminated food at a restaurant, there is the potential for liability of that restaurant. At the least, customers will avoid it and at worst, there can be civil litigation for damages from the sick customer. So far in the COVID-19 pandemic, businesses really have not faced liability because the infection is literally everywhere. Once the pandemic is better controlled in the United States, outbreaks of COVID-19 will be able to be traced to source locations, similar to outbreaks of salmonella and hepatitis A. Civil litigation may be more likely in that situation, particularly if a business owner went on record as being opposed to vaccination. At that point, it will become very expensive to be an anti-vaxxer.

The fastest way to get business such as restaurants, hotels, movie theaters, and gyms back up to full occupancy is to end the pandemic. We cannot make the pandemic end simply by passing legislation declaring that it to be over – the fastest way to make it end is to vaccinate all eligible people as quickly as possible.

Pro-vaccination = pro-business

April 7, 2021


COVID-19 Vaccine Side Effects (and how to prevent them)

I’ve been working at our medical center’s COVID-19 vaccine clinics for the past couple of months. We vaccinate about 3,500 people per day at our OSU Schottenstein Center site (the basketball arena) and about 275 people per day at our hospital-based vaccine clinic. Because of the potential for allergic reactions, we have either an emergency medicine physician or a critical care physician on site to manage any reactions. After supervising thousands of vaccinations, I’ve learned a lot about the vaccine reactions that people can get.

Younger people have more side effects

COVID-19 infection is much more severe the older we get. For people over age 80, the mortality rate of the infection is about 25% but for people under age 18, the mortality rate is negligible. It is just the opposite for side effects from the COVID-19 vaccines: older people are less likely to have side effect than younger people. I’m always relieved when I look over the list of the day’s vaccination schedule and see mostly people over age 60 because I know that I’m going to have an easy day.

Sore arms

Most people (about 75%) get a sore arm after the vaccination. It doesn’t typically occur for several hours after the injection and goes away within 2 days. I liken it to a bit more soreness than flu shot but less soreness than a tetanus shot. As with most other vaccines, the COVID-19 vaccines are given intramuscularly, into the deltoid muscle in the upper arm. One simple way of minimizing arm discomfort after the vaccination is to be sure that the arm is relaxed as much as possible when the needle goes in. If the deltoid muscle is tense when you get your vaccination, you are more likely to have pain later on. If there is swelling and redness at the injection site, a cold compress can help. If there is significant pain, it is OK to take acetaminophen (Tylenol) or whatever non-steroidal anti-inflammatory drug (eg, ibuprofen or naproxen) you normally take. Do not take any medications preventively and only take them if symptoms develop. Avoid taking corticosteroid medications (eg, prednisone) to treat arm pain or swelling since steroids can reduce the body’s immune response to the vaccine. If you anticipate needing to do a lot of writing or some other activity that involves your dominant hand, then get the vaccine in the non-dominant arm.

Aches, fever, and chills

It is difficult to predict who will get muscle aches, headaches, chills, or fever after the COVID-19 vaccine. The good news is that most people do not get these side effects. In general, younger people are more likely to get them than older people and people are more likely to get them after the second dose than the first dose. People who have had COVID infection in the past are also more likely to get more vaccine side effects, especially with the first dose of a vaccine. Although the timing can vary, it is typically about 18 hours after the vaccination. It is a good idea to have acetaminophen on hand and then take it at the early signs of fever or body aches in order to prevent experiencing more severe symptoms. For most people, these side effects resolve by 36-48 hours after the injection. The important thing to know is that these symptoms are NOT an indication of an infection and are instead an expected reaction of the body’s immune system to the vaccine.


Many people will be tired the day of and after their vaccine. For some, this can be severe enough to stay home from work. Because of this, we tried to stagger the vaccinations for our operating room nurses and the nurses on individual nursing units since we knew that a percentage of them were likely going to call off work the next day. Similarly, if you operate a restaurant or store, try to keep all of your employees from getting vaccinated on the same day or you might find yourself having to close shop the next day. To minimize fatigue, keep hydrated and plan on an extra 1-2 hours of sleep the night after your vaccine. An afternoon nap may be in order, also.


This is the most serious side effect of the COVID-19 vaccines and it is fortunately vary rare. This is a severe allergic reaction that can cause difficulty breathing and shock. It occurs shortly after the vaccination, within the first 30 minutes. It responds very well to epinephrine injection and we keep epinephrine on hand, just in case of anaphylaxis. In my own experience, many of the people who were initially thought to have anaphylaxis didn’t actually have it – vocal cord dysfunction and vagal reaction are common masqueraders of anaphylaxis (and far less serious). The main component of the Pfizer and Moderna vaccines that can cause severe allergy is polyethylene glycol. This is the same ingredient in the laxative, MiraLAX, and the prep used for colonoscopy, Go=lytely. If a person has not had an allergy to these ingredients in the past, then they usually do not have any problem with the COVID-19 vaccine.


Less life-threatening allergic reactions can show up with a rash or itching, rather than anaphylaxis. These reactions are also quite uncommon but can be fairly easily treated with antihistamines (eg, Benadryl). Isolated rash does not warrant a trip to the emergency department but these patients should be watched a little longer than other patients to be completely sure that they do not progress to anaphylaxis.

Avoidable side effects

By far, the most common symptoms we see at the time of vaccination are avoidable:

  • Vagal reactions. This is what happens when a person faints and a lot of people faint at the sight of needles, regardless of what is inside of that needle. If a person is going to develop a vagal reaction, then they will develop it even if there was nothing in the syringe. The symptoms are feeling light-headed, clammy, nauseas, and sweaty. One of the best ways to prevent a person from having a vagal reaction to a COVID-19 vaccination is to distract them by talking to them while the nurse is giving the vaccine in order to take their mind off of the vaccine. When someone does develop a vagal reaction, have them lay down, preferably with their feet elevated. If a person tells you that they faint or get dizzy every time they get a vaccine, then put them in a reclining chair before you give them the COVID-19 vaccination. Ensuring that the person is adequately hydrated is important. The most common treatments that I give out in the vaccine clinics are bottle of water.
  • Hyperventilation. Many people are afraid of vaccinations and doubly afraid of the COVID-19 vaccine. Maybe they read something written by an anti-vaxxer or maybe they heard a horror story from their neighbor about how awful the neighbor felt after their vaccination. These patients are prone to panic attacks. The symptoms are dizziness, shortness of breath, and tingling in the fingers and hands. From a physiologic standpoint, these symptoms are caused by an acute respiratory alkalosis causing the pH of the blood to rapidly rise – this is due to breathing too rapidly and too deeply. Patients who get hyperventilation after their COVID-19 vaccination need to be talked down from it – focus on slower and shallower respirations. This can be hard to do since the rapid, deep breathing is being caused by anxiety. Reassurance and having the person breath through their nose (rather than mouth) is usually all it takes. Once patients realize that the symptoms are from hyperventilation, they usually calm down. In the past, this would have been treated by breathing into a paper bag to re-circulate carbon dioxide and prevent the blood carbon dioxide from dropping too low.
  • Hypoglycemia and dehydration. This is by far and away the most common problem that I encounter at our vaccine clinic. It is also a risk factor for vagal reactions. Many people get up in the morning and go straight to the clinic to get their COVID-19 vaccine before they have breakfast. Couple an empty stomach with the fear and excitement of a vaccine and you get a bunch of queazy, dizzy vaccine recipients. Encourage people to have breakfast before their vaccine and keep up with their fluids. This can be an especially big problem when we are vaccinating college students on the weekends who stayed up late the night before drinking beer. Being dehydrated and having an empty stomach is a set-up for getting a vagal reaction
  • Grouchiness. This is another very common symptom we see in the vaccine clinic and is usually caused by hypocaffeination. Just like skipping breakfast before your vaccine is a bad idea, skipping your morning coffee can result in having a headache, feeling tired out, and having a generally bad attitude. If you are a coffee or tea drinker, have a cup before you go to the vaccine clinic.
  • Vocal cord dysfunction. In the pulmonary clinic, vocal cord dysfunction (VCD) is a common mimic of asthma. It occurs when the muscles that control the vocal cords are under excessive tension resulting in the space between the vocal cords being constricted and too narrow. This causes shortness of breath, particularly when trying to breath in (as opposed to breathing out). Some patients will say that they they feel like air is getting stuck at the top of their neck. Anxiety can precipitate vocal cord dysfunction. One of the problems with VCD is that it can not only mimic asthma but can also mimic anaphylaxis and the treatment for anaphylaxis (epinephrine) can often make the VCD worse. In our vaccine clinic, I saw a person who was their for their second dose of the COVID-19 vaccine. With the first dose, she had developed what was thought at the time to be anaphylaxis and was given epinephrine that did not help and in fact seemed to make her breathing worse. The EMS squad was called and took her to the emergency department where a particularly bright physician obtained a blood tryptase level. Anaphylaxis causes the tryptase level to be elevated and hers was normal. For her second dose, we had a nurse sit with her and provided lots of reassurance and distracting conversation. We told her to breath through her nose (which can help reduce the tension on the vocal cords). In the end, she had no problems at all after her second dose. With all that being said, VCD is never a life-threatening problem but anaphylaxis is – when in doubt about whether it is VCD or anaphylaxis, treat the persons as if it is anaphylaxis.
  • Boredom. You can always pick out the people who are in the vaccine clinic for their second dose (as opposed to their first dose). They bring a book, newspaper, or crossword puzzle. Sitting in the clinic for 15 minutes with nothing to do except look at the other people getting vaccinated can be pretty boring and that boredom can be double the amount if you have to wait 30 minutes because of a past history of severe allergies.

The COVID-19 vaccines are safe. Period. Yes, they can sometimes have annoying side effects but no one dies from the COVID vaccine whereas more than a half of a million Americans have died of COVD-19. By getting a COVID-19 vaccination, you are saving a life – if not yours, then one of your family members or someone in your community. A sore arm or fatigue for a day is a small price to pay.

April 3, 2021