Outpatient Practice

Your Hospital Needs Palliative Care Telemedicine

One of the good things to come out of the COVID pandemic was the expanded use of telemedicine. It allowed us to provide on-going care to our patients during lock-down periods early in the pandemic and later allowed us to care for patients who were uncomfortable coming into a place where they could potentially become infected. It became clear from the beginning that some specialties were more amenable to telemedicine than others. Telemedicine was less useful for those visits that require a more detailed physical exam or required in-office procedures. Telemedicine was more useful for those visits that were mainly for counseling. A recent study in JAMA demonstrated the value of telemedicine in palliative care for non-cancer diseases.

The study involved 306 patients two Veteran’s Administration health systems between October 2016 and April 2020. Patients all had either COPD, interstitial lung disease, or heart failure. Patients were randomly assigned to either usual care or a telehealth group that received 6 phone calls from a nurse and 6 phone calls from a social worker. Patients were evaluated with a multi-domain quality of life survey (the FACT-G score) and disease-specific quality of life scores. After 6-months, the telehealth group reported significantly better quality of life than the usual care group. There are several important conclusions we can make about palliative medicine telehealth based on this study:

  1. It does not require expensive specialists. The RN and social worker who performed the telephone calls had 10 hours of training. Physicians who have completed palliative medicine fellowships are in short supply and there are not enough of them to provide telehealth services for all hospitals. Registered nurses and social workers are much more widely available (and less expensive) than board-certified palliative medicine physicians. This study shows that at least some of palliative care telehealth can be provided by RNs and social workers with a minimum of training. This would free up palliative medicine physicians (and nurse practitioners) to provide programatic oversight and to provide selective telehealth encounters when the RN or social worker identified need for advanced care and decision-making.
  2. It works for patients with non-cancer diagnoses. In many hospitals, palliative medicine is largely relegated to the care of patients with cancer. Furthermore, palliative medicine is often funded by the hospital’s cancer program. This study shows that the quality of life of patients with COPD, interstitial lung disease, and heart failure improve with palliative medicine telehealth.
  3. It overcomes transportation and mobility barriers. Patients with advanced COPD, interstitial lung disease, or heart failure generally have limiting dyspnea with exertion and are often on supplemental oxygen. This creates a barrier to traveling to an outpatient clinic site with the result that many patients who could benefit by palliative medicine do not receive it. This is especially true of patients who live a great distance from the palliative medicine clinic location.
  4. It did not affect hospitalization rates. The total number of patients in the study was small with only 154 patients randomized to palliative care telehealth and 152 patients randomized to usual care. The primary outcome for which the study was powered was for quality of life scores and a secondary outcome was hospitalization. At the end of 1 year, 109 of the palliative care group and 119 of the usual care group had been hospitalized, a difference that was not statistically significant. There was also no statistical difference in mortality at 1 year: 6 patients in the palliative care group and 5 patients in the usual care group died. Healthcare utilization, in terms of annual total healthcare costs, was not reported so it is unknown if palliative care telehealth reduced healthcare expenditures.
  5. The population studied was limited to Veterans Administration patients. Care at VA medical centers is very different than care at other healthcare facilities. There is easy access to inpatient and outpatient care. Co-pays and deductibles for medical care are relatively low or waived. Additionally, medications are free or available with a relatively low co-pay. In this study, most patients were male and Hispanic. It is unknown if the results can be extrapolated to a more diverse group of patients or patients at non-VA hospitals.

Advantages of palliative medicine telehealth

Any physician who has ever performed a home visit will tell you that you get important information by seeing the patient in their own home environment that you cannot get when seeing the patient in a clinic exam room. During a video-telehealth visit, you can often get a good idea of the patient’s environment that can clue you into home health needs. Assessment of entry ways, stairs, and bathrooms can indicate measures that can be taken to reduce falls. Assessment of home oxygen equipment can ensure adequate (and safe) oxygenation. The need for durable medical equipment can be identified.

The advantages of using telehealth to reach patients who have mobility, transportation, or geographic distance barriers cannot be overstated. Some physicians will argue that in-person visits for palliative care are superior to telemedicine visits; however, a telemedicine visit is vastly superior to no visit if the patient is unable to come to the physician’s office. This is particularly true for patients with conditions such as end-stage renal disease who are bound to their locality three days a week for dialysis, those who are wheelchair-dependent, and those who have limiting dyspnea on exertion.

During COVID, it quickly became clear that telemedicine was more effective for some specialties than others. Diseases that require the patient to undergo regular testing (blood tests, EKGs, pulmonary function tests, etc.) are not as amenable to telemedicine since the patient must come to the clinic for the tests, anyway. Similarly, diseases that require an in-person physical examination for regular assessment are not as amenable to telemedicine compared to those diseases that only require counseling. Palliative medicine is primarily counseling and generally does not require regular testing or procedures. Thus, palliative medicine is in many ways the ideal specialty to utilize telemedicine.

Telehealth has the potential to reduce palliative medicine outpatient no-show rates. When a patient cancels an outpatient appointment on short notice, there is no bill generated and no income to cover the overhead expense of the clinic or the physician’s salary for that period of time. Even if a patient is feeling too unwell to travel on the day of their office appointment or if their transportation is unexpectedly unavailable, that patient can still have a billable telehealth visit which can reduce or eliminate the financial loss of a late cancellation or no-show.

Paying for it

The recent study does not address cost of care. A disadvantage of using a registered nurse to perform palliative care telehealth is that those encounters are generally not billable. Thus, the funding must come from other sources. Alternatively, telehealth can be performed by a physician, nurse practitioner, or physician assistant who can generate revenue by making it a billable telemedicine encounter. Future studies are needed to determine if per-person annual healthcare costs are lowered by palliative medicine telehealth in non-cancer diseases. If so, then managed care programs and insurance companies could be approached for funding. Similarly, health systems participating in value-based-purchasing models and bundled-care payment models could internally fund palliative care telehealth if it is shown to be reduce hospitalizations or annual cost of care.

Palliative medicine is rarely financially self-sufficient. In most hospitals, palliative care is heavily subsidized by the hospital since it is not possible to cover the salary of palliative medicine physicians or advance practice providers on professional revenue billing alone. This study has shown that palliative medicine telehealth improves patient quality of life. However, the current U.S. healthcare system does not pay hospitals to improve quality of life. Hospitals get paid by outpatient testing, surgeries, and inpatient admissions. They use the profits from these services to cover the cost of services that they lose money on. Palliative care has to compete with a myriad other hospital services for funding. In deciding which of these services to monetarily support, hospital leaders rely on clinical research studies and publications to guide them. This recent study will help to provide needed justification for expansion of palliative care telemedicine services. Indeed, palliative medicine and telemedicine are perfect for each other.

March 8, 2024

Procedure Areas

Should Race Be A Factor In Pulmonary Function Test Interpretation?

When interpreting pulmonary function tests (PFTs), a patient’s test results are compared to a group of normal people in order to determine that patient’s percent predicted value for each result. Those normal values are based on a person’s age, height, and gender. Until recently, we also used race as one of those variables – but should we?

Height, age, and gender

Height is an important variable in PFT interpretation. Taller people have larger lungs than shorter people. In pulmonary function testing, the overall size of the lungs is measured by the total lung capacity, which is the total volume of air in the lungs. If a patient’s total lung capacity is below the 5th percentile of normal people of a similar height, that patient is considered to have restrictive lung disease. Interstitial lung disease, muscle weakness, pregnancy, and chest wall deformities are some of the common causes of restrictive lung disease. If we did not stratify normal populations by height, then shorter people would be incorrectly diagnosed with restrictive lung disease, which could trigger unnecessary expensive diagnostic testing to determine the cause of the restriction. The graph below shows the relationship between a normal person’s height and their total lung capacity. Normal for a 170 cm (5′ 6″) man is 6.0 liters whereas normal for a 190 cm (6′ 3″) man is 8.0 liters.

Age is another important variable in PFT interpretation. As a child grows older (and also taller), the child’s lung volume increases. But after adulthood, our lung become smaller as we age. For example, the average forced expiratory volume in 1 second (FEV1) at age 30 is 4.4 liters but the average FEV1 at age 70 is 3.2 liters.

We define obstructive lung disease as an FEV1/FVC ratio below the 5th percentile of normal. Once again, we see that what we consider to be normal changes with age. In addition, we see that there are also gender differences in what constitutes normal values. As people age, the normal FEV1/FVC decreases and for any given age, men have a lower FEV1/FVC than women. So, for example, the FEV1/FVC that we would define as obstructive lung disease for a man at age 20 would be 0.73 but for a man at age 80 would be 0.62. A 20-year-old woman would have obstructive lung disease with an FEV1/FVC of less than 0.76 whereas a 20-year-old man would not be considered obstructed until his FEV1/FVC is less than 0.73.

Race and ethnicity

In the past, race was also factored into the determination of normal PFT values. Not for nefarious reasons but for the simple fact that when large numbers of normal people were tested, there are racial differences in the average PFT values after age, gender and height were all accounted for. Last year, the American Thoracic Society recommended eliminating race in PFT interpretation because of a concern that it implied biological differences between people of different races and ethnicities but those changes are actually due to social and environmental factors as well as structural racism. So, should we stop using race and ethnicity in defining normal values in pulmonary function test interpretation?

What is a person’s race, anyway?

My grandmother’s mother was White and her father was Chinese. She was not allowed to attend Atlanta public schools because in the eyes of the school board she was considered Chinese if one of her parents was from China. Genetically, she was just as much White as she was Chinese. Similarly, if you ask 1,000 Americans if Barack Obama is White or Black, 999 of those Americans will say he is Black. His father was from Africa but his mother was Caucasian of Irish ancestry. Like my grandmother, he is genetically just as much White as he is Black. The point is that we assign race labels using social criteria as much as (or more than) true ancestral heritage. When those large numbers of healthy people were tested to determine normal values for PFTs, they were grouped by self-reported race and not by sending gene tests off to 23andMe to determine their genetic ancestry. In the melting pot that is the United States, the vast majority of us have very complex ancestry. Lumping everyone into categories of White, Black, Asian, Hispanic, Native American, etc. is often arbitrary and not very accurate.

But differences do exist…

There are clearly problems fitting many people into one specific race or ethnicity group. But for those people who do self-report themselves belonging to one group or another, there are racial and ethnic differences in normal values. The NHANES III normal values are most commonly used in pulmonary function test interpretation. The NHANES III data set indicates that for a 5′ 9″ 65-year-old man, the average forced vital capacity (FVC) is 4.60 liters for normal Whites, 4.52 liters for normal Hispanics, and 3.87 liters for normal Blacks. There are similar racial differences for women. The normal values were obtained by testing a large number of healthy non-smokers. A valid criticism of the NHANES III data set is that it stratified people into only three groups: White, Black, and Hispanic; other racial and ethnic groups were not included.

A second commonly used data set of normal pulmonary function test values is the Global Lung Initiative (GLI) that stratified people into five groups: Caucasian (Europe, Israel, Australia, USA, Canada, Mexican Americans, Brazil, Chile, Mexico, Uruguay, Venezuela, Algeria, Tunisia), Black (African American), Northeast Asian (North China & South Korea), Southeast Asian (South China, Taiwan, Hong Kong, and Thailand), and other/mixed. Using the GLI data set for a 65-year-old man who is 5′ 9″, the average normal FVC for Caucasian is 4.30 liters, Black 3.63 liters, Northeast Asian 4.13 liters, Southeast Asian 3.82 liters, and other/mixed 3.96 liters.

So, for any given height, gender, and age, normal people who identify as being Southeast Asian or Black have lower lung volumes than those who identify as being Northeast Asian, White, or Hispanic. But that does not mean that race biologically caused those differences. Instead, race and ethnicity may merely correlate with other factors that affect lung volumes.

Factors that correlate with race and ethnicity

When differences exist between people of different races or ethnicities, it does not necessarily mean that those differences are caused by the person’s race – it usually means that those differences are correlated with the person’s race. There is a big difference between causality and correlation. For example, say you are studying the incidence of vitamin D deficiency and you find that Whites in Norway have a higher rate of vitamin D deficiency than Hispanics from Guatemala. Race did not cause the vitamin D deficiency – living at a high latitude with little sunlight caused the vitamin D deficiency. Race merely correlated with vitamin D deficiency because of Hispanics in Guatemala live at a lower latitude than Whites in Norway. Here are some of the factors affecting pulmonary function that correlate with (but are not caused by) race and ethnicity.

Genetics. Lung volumes can be affected by a person’s genes. Just like all of the members of a family might have big ears, all of the members of a family might have big lung volumes. We often define race by skin color. But race is a poor surrogate for genetics and there is no good reason to believe that the genes that determine the amount of pigment in a person’s skin should also dictate the size of a person’s lung volumes.

Socioeconomic status. When English physician John Hutchinson invented the spirometer in 1846, he used it to show differences in lung function between people in different professions, which was a crude estimate of socioeconomic status. There are a lot of reasons why people from lower socioeconomic groups could have lower lung volumes than those from higher socioeconomic groups. Crowded living conditions can lead to more frequent childhood respiratory infections and greater exposure to environmental tobacco smoke. Air pollution in lower class residential areas can affect lung function. Poor nutrition in childhood can have a profound impact on both height and lung function in adulthood. Inadequate treatment of childhood asthma due to limited access to healthcare in childhood can result in lower pulmonary function values in adulthood. When we identify racial and ethnic differences in many health metrics, often what we are really identifying is the socioeconomic differences in those metrics, with race just being a reflection of socioeconomic status.

Maternal health. Maternal smoking during pregnancy, lower birth weight, and premature birth can all affect lung development in infancy. There are significant racial differences in access to maternal healthcare that can impact a child’s lung function.

Obesity. Body weight is not used as a demographic variable in PFT interpretation but obesity can have a profound effect on lung volumes, causing them to be lower. African American adults have a high prevalence of obesity (38.4%) compared with Hispanic American adults (32.6%) and White American adults (28.6%).

Occupation. Certain occupations can affect lung health and thus lung function. Exposure to airborne chemicals, toxins, and dusts can impact lung volumes and flow rates. These are often lower-paying occupations that disproportionately employ workers from minority races and ethnicities.

Altitude. People who live their entire lives at higher altitude have higher lung volumes than those who live at lower altitudes. Studies of inhabitants from Peru, Korea, and Tibet have found that people living at high altitudes have higher values for forced vital capacity (FVC) and forced expiratory volume in 1 second (FEV1). This is presumed to be an adaptive mechanism since people living in high altitudes with lower atmospheric PO2 levels must maintain a higher minute ventilation to maintain normal tissue oxygenation.

The danger of ignoring race and ethnicity in PFT interpretation

One of the arguments against using race and ethnicity in PFT interpretation is that by separating patients into different racial or ethnic groups, we are encouraging health disparities. However, an equal argument can be made that if we do not use race and ethnicity in PFT interpretation, we are actually causing health disparities.

Several years ago, I got a panicked call from a family medicine physician who had gotten a spirometry test that showed a low FVC interpreted as indicative of restrictive lung disease and he was worried he had interstitial lung disease. I obtained a new full set of pulmonary function tests and confirmed that both his FVC and total lung capacity were below the 5th percentile of normal, indicating restrictive lung disease. But he was from India and moved to the U.S. when he was a teenager. Our PFT machine utilized the NHANES data set that did not include a racial designation of Southeast Asian (or even just Asian) so he was compared to normal values for Whites. I told him that people from India normally have lower lung volumes compared to White people from the U.S. and that I believed that he was healthy. However, he was very anxious and ended up getting a high resolution chest CT and a cardiopulmonary exercise test just to prove that he did not have interstitial lung disease.

This case illustrates that if we do not use race and ethnicity in PFT interpretation, then we run the risk of incorrectly labeling many Southeast Asian and Black patients as having restrictive lung disease when in fact, they are normal. In addition, by including all racial and ethnic groups in the calculations of normal values, we end up with lower values for the 5th percentile of normal for White, Hispanic, and Northeast Asian patients. As a result, we can miss restrictive lung disease in these racial and ethnic groups.

PFTs are also used to determine life insurance premiums and suitability for certain occupations. I recently got an email from one of the nurses at our hospital whose son was unable to enter firefighter school because his FEV1 was too low (he is healthy with no known lung disease). Abnormal PFT values can keep a person from entering the military or becoming a commercial pilot. PFTs are used in disability determination, in pulmonary rehabilitation eligibility, and in pre-operative assessment for lung cancer surgery. By eliminating race and ethnicity, we could inadvertently prevent African Americans and Southeast Asians from getting certain jobs or getting needed lung cancer surgery. Similarly, we could make it more difficult for Northeast Asians and Whites to get disability benefits or get into pulmonary rehabilitation.

PFT interpretation is as much art as it is science

When I was a resident, one of my mentors who was a cardiologist told me that the non-cardiologist at a patient’s bedside could interpret that patient’s EKG better than the cardiologist reading that EKG who has never seen the patient. That is because tests such as EKGs are best interpreted in the context of the individual patient’s clinical presentation and the person in the best position to know that clinical presentation is the physician at the beside taking care of that patient (provided that the physician is well-trained in EKG interpretation).

Pulmonary function tests are similar in this way to EKGs. If a patient is 8 months pregnant or has severe scoliosis on physical exam and that patient’s PFTs have a computer interpretation of restrictive lung disease, I am not going to do an extensive work-up for interstitial lung disease because my physical exam shows me that the PFT changes are due to diaphragm limitation by a gravid uterus or to chest wall abnormalities caused by scoliosis. If we do not include race in the demographics entered into the PFT computer and the computer interpretation shows mild restrictive lung disease, I will be less concerned if I know that patient is from India.

Using race and ethnicity in PFT interpretation is a conundrum – we are damned if we do and damned if we don’t. At the workshop that led to the new American Thoracic Society guidelines, 30 out of 33 attendees recommended to eliminate race and ethnicity in PFT interpretation. For this reason, it is likely that in the near future, race/ethnic demographics will not be requested when entering data into PFT machines and those machines will use race-neutral data sets of normal people in the determination of percent predicted values. It will be incumbent on all of us who use pulmonary function tests to ensure that we do not create healthcare disparities in our attempt to eliminate healthcare disparities when race-neutral data sets are used.

February 10, 2024

Epidemiology Outpatient Practice

Is It Dangerous To Vaccinate Pregnant Women And Children Against COVID?

Last fall, I was hiking and birdwatching in a nature preserve in coastal North Carolina. A woman walked by talking on her cell phone loudly enough for me to overhear her conversation 50 feet away. She spoke about her outrage that children were being vaccinated against COVID and that her internet research from the Children’s Health Defense organization indicated to her that COVID was a hoax propagated by Bill Gates and that COVID vaccines cause autism. I rolled my eyes, kept my mouth shut, and went back to watching egrets.

It reminded me of another conversation that I had with one of our family medicine physicians about 15 years ago. It was October and she was pregnant. I had arranged an influenza vaccination station in the hospital physician lounge and told her about it so that she could get vaccinated. She said that she wasn’t going to get a flu shot because she believed that flu shots in pregnant women cause autism in their children. I tried to convince her otherwise but she was firm in her beliefs. That winter, when she delivered her baby, she had active influenza. Her newborn ended up in the neonatal ICU at Nationwide Children’s Hospital with an intracranial hemorrhage.

The lesson is that misinformation abounds, even among intelligent and educated people. The main defense against misinformation is scientific research. In the short-run, misinformation can persist but in the long-run, science eventually prevails. Beliefs such as the sun revolves around the earth, the earth is flat, and smoking cigarettes is beneficial to your health were all held as incontrovertible truths in the past but eventually were dispelled by science to all except the most gullible. This week, two new scientific studies were published that will help to dispel misinformation about COVID vaccines and children.

The first was a study in JAMA that looked at all newborns in Sweden and Norway between June 2021 and January 2023; in total, 196,470 infants. 48% of the infants were born of mothers who were vaccinated against COVID during pregnancy and 52% were born of unvaccinated mothers. The results are striking. The babies born from unvaccinated mothers were twice as likely to have intracranial hemorrhage compared to babies born from mothers who were vaccinated during pregnancy. In addition, compared to babies whose mothers got vaccinated, the babies of unvaccinated mothers were twice as likely to die and 50% more likely to have hypoxic encephalopathy. The benefits of maternal vaccination did not stop there. Newborns of unvaccinated mothers were also more likely to have anemia, bleeding, thombosis, lower birth weight, septicemia, seizures, heart failure, feeding problems, and necrotizing enterocolitis. This was a study that involved a huge number of subjects and made all the stronger because all children born in the two countries for a year and a half were included in the analysis.

The second study was also published in JAMA and looked at 2,959 children between ages 5-17 at 6 U.S. study sites in Texas, Arizona, Oregon, Michigan, Utah, and Washington. 25% of the children received a bivalent COVID vaccine and 75% were not vaccinated with a bivalent COVID vaccine. The results were not surprising – the unvaccinated children were more likely to get both asymptomatic COVID infections and symptomatic COVID infections compared to the vaccinated children.

These two studies will not convince all anti-vaxxers but they will hopefully loosen the hold of misinformation on some of them. For some people, beliefs are just too hard to break – there are still those among us who believe that there are bands of bigfoot roaming rural Ohio, stealing chickens and throwing rocks at passing cars. Similarly, like the woman at the North Carolina nature preserve, there are those who are ardent believers of Robert F. Kennedy, Jr. (the founder of the Children’s Health Defense organization) who publicly stated about COVID vaccines: “It is criminal medical malpractice to give a child one of these vaccines”. In 1887, Abraham Lincoln famously said “You can fool all of the people some of time; you can fool some of the people all of the time, but you can’t fool all the people all the time.” Kennedy has made millions of dollars for himself by fooling some of the people all of the time.

But physicians can now tell their pregnant patients with confidence that getting a COVID vaccination will improve their chances of having a healthy baby and improve the chances that their baby will live through its first month after birth. COVID vaccines do not provide 100% protection against the infection. But then neither do kevlar vests provide 100% protection in a mass shooting. However, wearing a kevlar vest will improve your chances of surviving and improve your chances of avoiding major injury. COVID vaccines are like wearing a kevlar vest against the virus for pregnant women and for children.

February 7, 2024

Physician Retirement Planning

Should You Contribute To A Roth IRA After Age 65?

For most of us, retirement is a time to travel and do the things we did not have time to do while working. But that means having the money in your retirement portfolio to do them and making that money last for the rest of your life. Roth IRAs are an essential component of a balanced retirement investment portfolio.

Conventional investing wisdom holds that you should preferentially invest in Roth IRAs when you are young and have a lower taxable income and then preferentially invest in tax-deferred investments (such as a 401k or traditional IRA) when you are older and have a higher taxable income. The premise behind this is that you pay income tax on the money in a Roth IRA when you contribute the money during your working years and pay income tax on tax-deferred investments when you take the money out during your retirement years. Because most people have their lowest taxable income in their early working career years, a higher taxable income in their retirement years, and the highest taxable income during their later working career years, this strategy results in paying the lowest amount in taxes over one’s lifetime.

But should you contribute to a Roth IRA after you retire? The answer is… it depends.

First, you have to have an income

In order to contribute directly to an IRA, you have to have earned income, either as a salaried employee or from contract work. With the former, your income is reported on a W-2 form and with the latter, your income is reported on a 1099 form. If your taxable income is low enough, you can contribute directly to a Roth IRA; otherwise, you can only contribute by doing a “backdoor Roth IRA” by first contributing to a traditional IRA and then promptly converting that money into a Roth IRA. The income limits are complicated so you should review the 2024 IRS rules to see how your specific situation affects your ability to contribute. But as an example, for a single person who does not have access to an employer-sponsored retirement plan, the income limit for direct contribution to a Roth IRA is $146,000 and for a married couple filing jointly, the income limit is $230,000. Many Americans over age 65 are no longer working full-time for an employer but instead are working part-time as contract workers and are thus not eligible for an employer-sponsored retirement plan.

If all of your income comes from a pension, 401(k), 403(b), 457, Social Security, and/or traditional IRA, then you cannot directly contribute to a Roth IRA – you must have annual income that you have earned during that year. Furthermore, you cannot contribute more than you actually earned. The IRA contribution limits in 2024 are $7,000 if you are younger than 50-years-old and $8,000 if you are over age 50. If you do not have any earned income, then you cannot contribute directly to a Roth IRA or do a backdoor Roth contribution. However, anyone can do a Roth conversion, regardless of whether or not they have any earned income.

Roth conversions

If you have money in a tax-deferred retirement account (traditional IRA, SEP IRA, 401k, 403b, or 457), you can convert some or all of that money into a Roth IRA. The catch is that the amount that you convert adds to your taxable income for the year of the conversion. As a result, the more you convert, the higher your taxable income will be and consequently the higher your marginal income tax rate will be.

There are two ways of doing Roth conversions: a direct rollover and an indirect rollover. In a direct rollover, the administrator of your tax-deferred retirement account delivers the converted amount directly to the financial institution holding your Roth IRA and you never touch the money. Direct rollovers are simple and low-risk. In an indirect rollover, you withdraw funds from your tax-deferred retirement account and put those funds into your checking/savings account and then you transfer that money into your Roth IRA yourself. Indirect rollovers have a minor element of risk – you only have 60 days from the time you receive the distribution from your tax-deferred account to the time you deposit it into your Roth IRA. After 60-days, you are no longer permitted to put that money into your Roth IRA.

Before doing a Roth IRA conversion, it is essential that you have an idea of when you will need to eventually withdraw the money from your Roth IRA because conversions are subject to the IRS 5-year rules.

The 5-year rules

The IRS looks at each Roth IRA as having three components: contributions, earnings, and conversions. Contributions are the dollar amount that you put into the Roth IRA each year that you do a direct contribution. Earnings are the dollar amount that the initial direct contributions grew by before you withdraw them from the Roth IRA. Conversions are the dollar amount that you either did with a backdoor Roth, a direct rollover, or an indirect rollover. Each of these components have different rules regarding when you can withdraw them from a Roth IRA. These 5-year rules can impact whether or not it makes sense for you to contribute to a Roth IRA after age 65.

  • Contributions. These can be withdrawn anytime from your Roth IRA without penalty.
  • Earnings. These can only be withdrawn after (1) you turn 59 1/2-years old and (2) at least 5-years have elapsed since your very first contribution to the Roth IRA. Early withdrawal results in significant penalties.
  • Conversions. These can only be withdrawn after (1) you turn 59 1/2- years old and (2) at least 5-years have elapsed since the amount withdrawn was converted. Each conversion has its own 5-year requirement so, for example, you can take the amount of your 2023 conversion out in 2028 but you cannot take the amount of your 2024 conversion out until 2029.

There are also separate rules regarding the timing of withdrawals from inherited Roth IRAs. The rules are complex but in general, if you inherit a Roth IRA from someone other than your spouse, you are required to withdraw all of the money from that Roth IRA within 10 years of the inheritance if you are listed as a designated beneficiary on the Roth IRA. If you are not listed as beneficiary and instead just inherit it through a will, then you only have 5 years after the date of inheritance to withdraw all of the funds.

So, I’m older than 65, should I put money in a Roth IRA?

The decision of whether or not to contribute to a Roth IRA or do a Roth conversion requires some strategic planning. Here are some situations where it can be advisable or not advisable to put money into a Roth when you are over age 65-year-old.

People who should put money in a Roth IRA:

  • You anticipate that your taxable income is going to go up in the future. In your first year or two of retirement, you may be living off of your cash or your regular (non-retirement) investments. You probably will not yet be taking Social Security. If this is the case, then you are only paying taxes on your investments’ interest, dividends, and capital gains resulting in your taxable income being fairly low. This is a good time to either contribute to a Roth IRA (if you have some earned income from part-time work) or do a Roth conversion because you will have a lower marginal income tax rate (i.e., you will be in a lower income tax bracket) than you will be in the future.
  • You anticipate that tax rates are going to go up in the future. We are living in an era of historically low income tax rates that went into effect in 2017. However, these tax rates automatically expire at the end of 2025. Unless congress passes new tax laws to extend these cuts, everyone’s income tax rates are going to go up in 2026. If tax rates do go up, then 2024 and 2025 will be good years to put money into your Roth IRA. This is especially true for Roth IRA conversions – you will pay less in taxes to take out money from your 401k or traditional IRA now to convert into a Roth IRA than you will to take that same amount of money out of your 401k or traditional IRA to spend starting in 2026. We may have a more clear picture about future tax rates after the 2024 elections.
  • Your investments have recently lost value. The goal of investing is to buy when it is low and sell when it is high. When you do a Roth conversion, then you are essentially buying shares of that Roth investment. The value of stocks and bonds goes up and goes down. If you convert a traditional IRA or 401k when it has recently lost a lot of value, then you will pay less in taxes on that conversion than you will when the value of that traditional IRA or 401k eventually goes up. In the summer of 2022, the stock market tanked and lost 27% of its value – that was a great time to do a Roth conversion. Since 2022, the stock market has regained that 27% and you will incur a lot more in taxes to convert any given percentage of your traditional IRA or 401k today than you would have in September 2022. If the stock market continues to go up in the next few years, then 2024 could still be a good year to do a Roth IRA conversion but no one has a investment crystal ball to predict the future.
  • You anticipate RMD pain. When you turn 73, you are required to take a certain percentage out of your tax-deferred retirement accounts such as your traditional IRA, SEP IRA, 401(k), 403(b), and 457. These are called required minimal distributions (RMDs) and they add to your annual taxable income. If you have a lot of money in these accounts, then starting at age 73, your annual taxable income could go up significantly. As your taxable income goes up, so does your marginal income tax rate, meaning that you will pay exponentially more in taxes. You can lower the amount of the RMDs by doing Roth IRA conversions before age 73 to reduce the overall value of your tax-deferred investment accounts. Your RMD is based on your life expectancy – as an example, the RMD on a $1,000,000 tax-deferred account for someone turning 73 this year is about $40,000 per year. Unlike tax-deferred retirement accounts, Roth IRAs are not subject to RMDs.
  • You want to maximize your estate for your heirs. If you do not anticipate needing to use the money in your Roth IRA for yourself during your lifetime then you may be able to  allow the value of that Roth IRA to increase undiminished by required minimum distributions, thus leaving more for your heirs to inherit.

People who should not put money in a Roth IRA:

There are certain situations when you want to avoid doing Roth IRA conversions in retirement. Here are some considerations

  • If it makes your Medicare premiums go up. For the vast majority of Americans, Medicare Part A is free. But we all have to pay monthly premiums for Medicare Part B and the amount of those premiums is based on your income. Medicare Part D premiums vary by the specific Part D plan level you choose but regardless of the level, the amount of the premium also increases based on income. When you do a Roth conversion, your taxable income that year goes up by the amount of the conversion and this could push you into a higher Medicare Part B and Part D premium bracket. The tax advantages of a Roth IRA conversion can be wiped out by the increase in your Medicare premiums. For example, if your taxable income is $249,999 and you do an $8,000 Roth IRA conversion, you will pay a total of $3,090 in Medicare Parts B & D premiums. But if you do an $8,002 Roth IRA conversion (just $2 more), then your Medicare premiums will go up by $1,503 to $4,593.
  • If it moves you into a higher capital gains tax bracket. Regular income tax is a marginal tax rate system meaning that your tax rate increases incrementally for every additional dollar of taxable income. Short-term capital gains occur when you hold an investment for < 12 months and are taxed at your regular marginal income tax rate. Long-term capital gains occur when you hold an investment for > 12 months before you sell it. The long-term capital gains tax is not based on your regular marginal income tax rate but is instead based on your capital gains tax bracket. The capital gains tax rate is not a marginal tax, thus if your income pushes you into a higher marginal tax bracket, you will pay that higher tax rate on all of your capital gains. If you have a lot of capital gains, either because you were selling and buying investments over the course of the year or because you were taking money out of non-tax-deferred investments, then a Roth IRA conversion could push you into a higher capital gains tax bracket and those higher capital gains taxes could erase any tax advantages of the Roth IRA conversion. Here are the 2024 capital gains brackets:
  • After age 73, things change. Once your tax-deferred retirement accounts become subject to required minimum distributions at age 73, you cannot use those RMD amounts to do a Roth IRA conversion. If you are working after age 73, you can still contribute earned income into a Roth IRA. You can also so a Roth IRA conversion on any money you take out of your tax-deferred retirement accounts over and above your RMD for that particular year. But for many people over age 73, doing a Roth IRA conversion on top of RMDs can push them into a higher marginal tax rate that erases any tax advantages of the Roth IRA conversion.
  • You plan to give a large amount to charity. Once you turn 70 1/2, you can donate up to $105,000 directly from your tax-deferred accounts to charity via a qualified charitable distribution without having to pay income tax on the amount of those donations. And as a bonus, if you are over age 73, the amount of those donations count toward your RMDs! In this situation, Roth IRA conversions when you are younger can be counterproductive to your future tax-minimization strategy of charitable giving after age 73.

Diversify, diversify, diversify!

One of the most important reasons to have a Roth IRA (or Roth 401k or Roth 403b) is to have a diversified retirement portfolio. Ideally, you should have money in four buckets: tax-deferred accounts, Roth accounts, regular investments, and fixed income sources. Each of these different types of retirement income sources have different income tax implications. By strategically adjusting how much you withdraw from each of these different sources every year, you can keep your income taxes to a minimum. In a year during your retirement when you have a lot of expenses (for example, buying a vacation home), you can withdraw more from your tax-free Roth IRA and avoid having a high taxable income that year. In a year in retirement when you do not have a lot of expenses, you can leave your Roth IRA alone and instead withdraw from your tax-deferred retirement accounts. Your retirement portfolio withdrawal strategy should be based on minimizing taxes over your lifetime and that strategy requires having the flexibility of a diversified portfolio. For this reason, I believe that everyone needs a Roth IRA (or Roth 401k or Roth 403b). The challenge is determining when is the best time to put money into that Roth IRA. For many people, putting money into a Roth IRA by contributions or conversions after age 65 can make sense.

January 15, 2024

Hospital Finances Medical Economics Physician Finances

Beware Of Health Care Sharing Ministries

Health care sharing ministries are an alternative to regular health insurance but they are a poor substitute for most patients and an annoyance (at best) for most hospitals and physicians. The basic idea is that people of similar religious beliefs pool their money in order to help each other pay for their medical bills. The concept arose from Amish and Mennonite communities that do not normally participate in programs like health insurance.

As an example, a number of years ago, I was the attending physician in our medical intensive care unit when a young Amish man was transferred from a rural hospital with a cardiac sarcoma, a rare malignant tumor of the heart muscle that is usually incurable and fatal. He lived on a mechanical ventilator for a couple of weeks before dying and in the process, generated a huge medical bill. Like most Ohio Amish at the time, he did not have health insurance. A few months after his death, an older Amish man walked into the MICU carrying a bundle of cash and handed it to the unit clerk. Their community had taken up collections to pay for his hospital charges. This was their normal practice to pay for medical bills.

About 30 years ago, this concept expanded to other Christian communities in the United States and became known as health care sharing ministries (HCSMs). When the Affordable Care Act was passed in 2010, it was estimated that about 100,000 Americans participated in HCSMs but that number has grown to now more than 1.7 million Americans. Participants are attracted by the like-minded religious beliefs of other members and by the lower monthly costs compared to regular health insurance.

Any time the word “ministries” is included as an attributive noun, it implies that the other noun that it is describing is virtuous, righteous, and morally principled; however, all too often, HCSMs are anything but. Instead, HCSMs can limit patient access to healthcare, burden patients with unexpected healthcare costs, and leave physicians unpaid.

What is a health care sharing ministry?

There are currently 107 HCSMs certified by the U.S. Department of Health and Human Services. HCSMs are registered as 501(c)(3) non-profit charity organizations. Rather than paying monthly health insurance premiums, participants pay monthly membership fees. These fees are usually less expensive than health insurance premiums. Membership is limited to people who share a common religious faith and often must attest to regular attendance at a specific church. Because they are not considered to be regular health insurance companies, HCSMs are not regulated by state insurance commissioners in most states. When participants incur medical bills, they then submit those bills to the HCSM for payment.

There are a number of coverage restrictions. HCSMs can decide what conditions they will and will not cover and frequently do not cover healthcare expenses for conditions that they find morally objectionable, such as abortions, out-of-wedlock maternity expenses, contraception, sexually-transmitted diseases, obesity-related conditions, or smoking-related diseases. HCSMs are also not required to cover pre-existing conditions or cap out-of-pocket costs.

The problem with health care sharing ministries

On the surface, HCSMs sound like a fabulous idea – it is like getting health insurance without having to pay for all of the bureaucratic overhead costs. Furthermore, it eliminates having to pay for other members’ healthcare costs that are incurred by “immoral” behavior. But there is a dark side of HCSMs that can be financially ruinous to patients. Here are some of the specific problems with HCSMs:

  1. They do not have to cover pre-existing conditions. Most HCSMs will have definitions of pre-existing conditions such as any disease that you have had to be treated for anytime in the past 3-5 years. As a result, participants tend to be young, otherwise healthy individuals whereas older people who are more likely to have diabetes, hypertension, or high cholesterol can be denied. Some HCSMs will cover the care of certain pre-existing conditions (such as hypertension) but those participants are charged a higher monthly fee.
  2. Many conditions are not covered. Each HCSM can decide what conditions will and will not be covered. Some of the common uncovered conditions include those that result from tobacco use, drug abuse, alcohol use, obesity, or “non-Biblical lifestyles”. Most HCSMs do not cover mental health expenses. Durable medical equipment is often not covered. Most HCSMs will have a limit on the number of months any new medical condition will be covered – for example, only covering the first 3 months of prescription medications for newly diagnosed diabetes.
  3. Maternity care is often limited. Pregnancy is considered a pre-existing condition by most HCSMs and so they will not pay maternity expenses for the first 10 months of a participant’s membership. In addition, maternity costs are often only covered for married women. Abortions are generally not covered, with no exception for rape.
  4. Preventive care is generally not covered. This can include regular physical exams, check-ups, health screenings, cancer screenings, well-child visits, and vaccinations.
  5. Provider network restrictions. Some HCSMs will only cover expenses from in-network physicians and hospitals. These are usually very limited in number, making it difficult for participants to find a participating doctor. This is especially true if the participant requires hospitalization and may not have a choice in their ER physician, surgeon, hospitalist, anesthesiologist, radiologist, or pathologist. Other HCSMs will allow participants to see any physician and then the HCSM will attempt to negotiate fees with the physician or hospital after the fact.
  6. Participants get charged “standard charges”. Every hospital and every physician group has publicized standard charges for every service and procedure. The thing is that the only people who have to pay standard charges are those who are uninsured – patients with health insurance always pay less. The reason is that every health insurance company will negotiate contracts with every hospital and every physician group and those contracts will include an agreement for the maximum amount that the insurance company will pay for every service and procedure. If the hospital’s “standard charge” is less than the insurance company’s contractual limit, then the patient and the insurance company only has to pay the standard charge. However if the standard charge is higher than the contractual limit, then the patient and the insurance company only have to pay the amount of the contractual limit. Because of this, every hospital and every physician group in the country sets their “standard charge” higher than the most that they can get from their highest-paying insurance company contract. To put this in perspective, most hospitals and physician groups set their standard charges at several times higher than the maximum amount that Medicare will pay. In other words, no one with health insurance pays the sticker price – only the uninsured pay the sticker price. HCSM participants are considered to be uninsured so they have to pay the standard charge amounts. The result is that HCSM members get charged a lot more for any given service or procedure than people with health insurance are charged.
  7. No guarantee of payment. The HCSMs are not legally obligated to pay for medical bills. In months when the member fees are less than the members’ health expenses, the members may only receive a prorated amount of the funds to cover their healthcare bill. As a result, the members never know up front how much of their medical bill will be covered by the HCSM and how much they will be responsible for themselves.
  8. The maximum coverage amount is usually capped. Most HCSMs will have a maximum amount that will be paid for any given participant’s healthcare costs – for example, a $50,000 per year and $1,000,000 lifetime limit. Any healthcare costs above these limits are the responsibility of the individual participant. When being billed “standard charges” by the hospital and the physicians, few patients can get through an ICU admission for less than $50,000.

HCSMs are bad for doctors and hospitals

One of the most basic metrics in healthcare finance is the number of days in accounts receivable (AR). This is how many days it takes to get paid after a bill is sent out and generally ranges between between 30 – 70 days. If your average days in AR is greater than 50 days, it is a sign of problems in your revenue cycle department. As the treasurer of our Department of Internal Medicine, I would monitor our days in AR every month. For insured Americans, the hospital (or doctor) first sends the bill to the insurance company (or Medicare) and then bills the patient for the amount of their co-pay or deductible. Medicare and insurance companies are generally pretty quick in getting those bills paid. But with HCSMs, the patient gets billed and not the HCSM. The patient then submits their bill to the HCSM to have the their bill “shared” with the other HCSM participants. This process can take months and as a result, days in AR can skyrocket.

The patient is responsible for the doctor bill or hospital bill and will be charged the amount of the “standard charges”. This is often tens of thousands of dollars that most people do not have sitting in their checking accounts. HCSMs will often advise their members to request that the bill get written off as charity care or to set up a payment plan with the doctor or hospital rather than pay the full amount of the bill. That way, the member does not have to pay the full amount of the standard charges all at once and can spread out payments until the HCSM determines whether it will cover the bill and if so, how much of the bill it will cover. If the patient does not initially pay their medical bill on time with out-of-pocket funds, then the hospital or physician group typically sends that bill out to a collection agency which takes a percentage out of whatever money it collects on that bill, reducing the amount that the doctor or hospital ultimately gets paid. If the patient sets up a monthly payment plan, then the hospital or physician group’s cash flow suffers since payment may be spread out over a year or longer. In addition, the hospital or physician group has to pay someone to send out the monthly payment plan bills to the patient and monitor whether or not the patient actually pays those bills – this adds additional overhead expenses in the revenue cycle department.

For catastrophic illnesses, the HCSM will have a limit on the amount that it will cover, for example, $50,000.Once that limit is exceeded, the patient becomes responsible for everything over that amount. This can often be considerably more than patients have in savings with the result that they have to sell some of their assets in order to pay their medical bills. This can result in very late payment to the hospital or physician group and can result in legal fees incurred by the hospital or physician group. As an example, I had a patient who was a healthy farmer in his 40’s that decided to go without health insurance. He unexpectedly developed pancreatitis complicated by respiratory failure and was in the ICU for several weeks. If he had health insurance, the negotiated charges would have been about $300,000 and he would have had out-of-pocket co-pay expenses of a few thousand dollars. But since he was uninsured, we legally had to bill him the hospital’s standard charges which totaled more $1 million. He eventually had to sell the farm that had been in his family for generations in order to pay his medical bills and it took the hospital 2 years to finally get paid.

Many HCSMs will negotiate fees on behalf of their members, but only after the member submits their medical bills. This can result in a lot of frustrating haggling between the HCSM and the hospital or doctor. It would be like trying to run a restaurant and having the customers trying to negotiate a lower price for their meal after they have finished eating. Any business prefers to negotiate the price of a service before they provide the service rather than several months after they provide that service; doctors and hospitals are no different.

HCSM lessons from Ohio, Missouri, and Colorado

Liberty Healthshares is an HCSM based out of Ohio. It served 70,000 Christian faith families between 2014 and 2020. It had an annual budget of $56 million and employed 470 workers. Members sued Liberty alleging failure to pay for medical bills and that Liberty funneled money to the company’s founders. The State Attorney General additionally reached a settlement agreement with Liberty agreeing to pay thousands of dollars in fines. Last year, ProPublica reported that the family that founded Liberty used tens of millions of dollars of members’ monthly fees to buy the family a marijuana farm, $20 million in real estate, and a private airline company. Since it was an HCSM, it was not subject to the regulatory oversight required of traditional insurance companies and as a result, it got away with misuse of funds for years.

Medical Cost Savings was an HCSM based out of Missouri. Last year, its founder pleaded guilty in federal court to an $8 million wire fraud conspiracy that cheated hundreds of members. Medical Cost Savings paid only 3.1% of healthcare claims and in some years paid none of its claims at all. The founder and his co-conspirators pocketed more than $5 million.

Colorado is unique among states in that it requires financial reporting by HCSMs operating in the state. In the most recent annual report by the Colorado Department of Regulatory Agencies, Colorado HCSMs collected $78 million in annual membership fees in 2022 and paid out $66 million to cover members’ medical bills. However, in that same year, members submitted $180 million in healthcare bills to these HCSMs. In other words, the HCSMs only paid 37% of submitted medical bills. In Colorado, HCSMs used advertising, social media, and “producers” (independent brokers) to recruit new participants. Four of the 16 HCSMs operating in Colorado reported the amount they paid these producers, totaling $1.8 million. HCSMs also reported marketing themselves to employers to offer to their employees. Some HCSMs required members to first request charity care and financial support from local governments and consumer support organizations in paying the member’s health care bills before the HCSM would consider paying those bills.

Caveat emptor

Let the buyer beware is nowhere more pertinent than health care sharing ministries. Operating outside of the insurance regulatory environment, they can pretty much cover whatever healthcare costs they choose to cover and are particularly susceptible to fraud and abuse of funds. Although most HCSMs are legitimate non-profit organizations run by well-meaning members of religious faiths, some are run by scammers who prey on the devout by appealing to their faith-based values.

So, are HCSMs appropriate for anyone? The only people who should even consider using an HCSM instead of health insurance are those who are young, have no medical conditions, take no medications, are not obese, do not have sex outside of marriage, are non-smokers, non-drinkers, and are willing to pay for their preventative healthcare out-of-pocket. Even then, if you are hospitalized for a serious injury, diagnosed with a chronic disease like cancer, or hospitalized with an unexpected serious infection then it could still cost you hundreds of thousands of dollars and result in financial ruin. Using an HCSM is better than being totally uninsured, but not by much.

For hospitals and physicians, taking care of patients who use HCSMs causes an additional overhead expense and often results in no payment at all. In the best of circumstances, the HCSM results in a delayed payment for services rendered that puts an added burden on the revenue cycle staff. As a doctor, I’ll take a patient with regular medical insurance over a patient with an HCSM any day. Even Medicaid beats an HCSM.

January 13, 2024

Physician Retirement Planning

Here Is How To Make Your Medicare Premiums Tax-Deductible

Health insurance in the United States is expensive and Medicare premiums are no exception. If you are a physician or in another high-income profession, you are going to pay even higher Medicare premiums. Fortunately, there are three ways that you can make those premiums tax-deductible.

The vast majority of Americans enroll in Medicare when they turn 65-years-old, regardless of whether or not they are still working. For most Americans, Medicare Part A (inpatient care) is free. But there are monthly premiums for Medicare Part B (outpatient care). There are additional premiums for Medicare Part C (Medicare Advantage plans) and Medicare Part D (Medicare drug coverage). For those who do not enroll in a Medicare Part C plan, purchase of a Medicare supplemental policy (Medigap) is advisable to pay for those charges not covered by Medicare Parts A & B. All of these additional coverage plans have their own premiums and consequently, most seniors pay far more for health insurance than just their monthly Medicare Part B premiums.

But amount that you pay for Medicare Part B and Medicare Part D premiums is based on your income. As a result, if you are still working after age 65 or if you have a lot of retirement income from a traditional IRA, 401(k), 403(b), or 457, then you are going to pay more for your Medicare premiums than other seniors. Medicare will check your most recent federal income tax return to determine your income-based premiums. For example, to determine your 2024 premiums, Medicare will look at the tax return you filed in 2023 which would cover your income during the 2022 tax year. Here is how your 2022 modified adjusted gross income will affect your annual Medicare premiums in 2024:

In the table above, the annual Medicare Part B premiums are listed. Part D premiums vary depending on which specific policy is purchased but for any policy, there is an annual add-on amount based on your income that is listed in the table. Your income does not affect premiums paid for Medicare Part C (Medicare Advantage plans) or supplemental Medicare insurance (Medigap plans).

Options to make your Medicare premiums tax-deductible

Many Americans will find themselves paying more for health insurance premiums after they go on Medicare than they did before going on Medicare. This is because during your working years, employers will generally pay for part of the cost of health insurance as an employment benefit. The employee will usually pay a share of the cost of the premiums but for most employer-sponsored group health insurance plans, those premiums are paid out of your pre-tax income, which is equivalent to making these premiums tax-deductible. Once you go on Medicare, you have to pay for the entire cost of premiums yourself. Unlike employer-sponsored group health insurance, what you pay for Medicare premiums is not automatically tax-deductible However, there are three situations that will allow you to take a tax deduction for your Medicare premiums: (1) using health savings accounts, (2) itemizing deductions, and (3) having self-employment income.

Use a health savings account (HSA)

As an investment, HSAs are a true triple threat when it comes to tax advantages. When you put money into an HSA, those contributions are tax-deductible. You don’t pay any annual taxes as the HSA accrues in value. And then when you eventually take money out to pay for health expenses, you don’t pay any taxes on the withdrawals.

However, not all Americans are eligible to have an HSA. First, you cannot make contributions to an HSA after you enroll in Medicare at age 65. For those people younger than 65, only those who purchase an “HSA-eligible health plan” can contribute to an HSA. These health plans are also called high-deductible health insurance plans – they come with lower annual premiums but have higher out-of-pocket costs compare to other plans. Unfortunately, most employer-sponsored HMO or PPO health insurance plans do not qualify. But, if you are self-employed and purchasing health insurance through the Health Insurance Marketplace or if your employer offers high-deductible health insurance plans, then you may elect to enroll in an HSA-eligible health plan. High-deductible health plans are defined by the IRS. For example, for 2023, the IRS defined these plans as having a deductible of at least $3,850 for individual HSAs with maximum out-of-pocket spending of no more than $7,500. If married, both spouses can have their own HSA. There is a limit to the how much you can contribute to an HSA each year – for 2024, that limit was $4,150 for an individual HSA ($5,150 if over age 55). 

For those people who are eligible to contribute to an HSA, they are truly a great deal. Even if you never get sick or injured a day in your entire life, you will still have to pay Medicare premiums after age 65 and you can use HSA withdrawals to pay for those premiums. Note, however, you cannot use HSA withdrawals to pay for Medigap premiums.

Itemize deductions

Most Americans do not itemize deductions. The income tax cuts resulting from the 2016 tax law increased the standard deduction (currently at $14,600 if filing single and $29,200 if filing jointly for the 2024 tax year). The standard deduction increases after age 65 by an additional $1,950 if filing single or $3,100 if filing jointly. You can only itemize your deductions if the total deduction amount exceeds the standard deduction amount. Things that can be itemized include charitable deductions, certain taxes (local, state, and property taxes up to a maximum of $10,000 in total), business expenses, and mortgage interest. Healthcare expenses can be itemized only to the extent these expenses exceed 7.5% of your adjusted gross income for the year.

If you have a lot of out-of-pocket healthcare expenses, then it may make sense to itemize those expenses, including the expense of your Medicare premiums. One strategy to increase your deductions over the standard deduction amount is to make charitable deductions every other year. By contributing twice as much to charities in one year, those charitable deductions can push your total deductions above the standard deduction amount, thus allowing you to deduct healthcare expenses (to the extent that they exceed 7.5% of your income that year). Then the next year, you do not make any charitable deductions and instead take the standard deduction. If you really want to be able to contribute to a charity every year, then consider opening a donor-advised fund. You can contribute a large amount to the donor-advised fund one year and and take a tax deduction on the amount contributed as an itemized deduction. Then, you can make contributions to individual charities each year from the donor-advised fund and on those years, just take the standard deduction.

The current tax cuts expire on December 31, 2025 and unless there is new Congressional legislation to extend those cuts, income tax rates will increase and the standard deduction amount will fall in 2026. At that time, more Americans may be eligible to itemize deductions, including their Medicare premiums.

Have self-employment income

If you have income that is reported on Schedule C, then you have self-employment income. This could be from consulting, from honoraria, or any other employment income that is reported on a 1099 form. This does not include Social Security income, pension income reported on a 1099-R form, or investment income reported on a 1099-DIV or 1099-INT form. You can deduct your Medicare premiums from your Schedule C self-employment income. However, you cannot deduct more than you earn so your Medicare premium deductions cannot exceed the amount of your Schedule C income. If you have any Schedule C income then you should definitely deduct your Medicare premiums.

If you are self-employed, you can deduct Medicare Part B premiums, Medicare part D premiums, Medicare Advantage plan premiums, and Medigap premiums. There is an important caveat, however. You cannot deduct your Medicare premiums from self-employment income if either you or your spouse is eligible for an employer-subsided health plan.

Healthcare is expensive

It is unavoidable – healthcare is expensive. And the older you get, the more you are going to end up paying. CMS reports that the average male child (under age 18) generates $4,415 per year in healthcare costs; female children are slightly lower at $4,009. A man during his working years generates $8,3,13 of healthcare costs per year. Women in their working years generate $9,989, considerably more largely due to reproductive expenses. After age 65, annual healthcare costs increase to $22,597 for men and $22,162 for women. After age 85, per capita healthcare costs increase further to $35,995 per year. Because of this, commercial health insurance during one’s working years has to cover a much lower healthcare cost per person than Medicare has to cover after age 65. We pre-pay a portion of our Medicare premiums via payroll taxes during our working years, otherwise, the annual Medicare premiums we pay after age 65 would be exorbitant. But even so, Medicare premiums for seniors are very costly and can account for a significant amount of one’s disposable income after age 65.

Before age 65, everyone pays the same for health insurance premiums but after age 65, your Medicare premiums are based on your income. So, if you have saved diligently into tax-deferred retirement accounts, or if you have a pension, or if you continue working after 65, then you are likely going to have a relatively high income in retirement. That’s a good thing overall but it does mean that you are going to pay more for Medicare. But careful planning can allow you to make your Medicare premiums tax-deductible and thus take some of the bite out of those premiums.

January 3, 2024

Intensive Care Unit

Your ICU Needs More Toothbrushes

Hospital-acquired pneumonia is disturbingly common, affecting about 1% of hospitalized patients. Hospitals have adopted all sorts of strategies to reduce these infections but we have overlooked what is arguably one of the simplest – brushing patients’ teeth.

A new study published this week in the journal JAMA Internal Medicine examined the effects of brushing patients’ teeth on the outcomes of hospital-acquired pneumonia, hospital and intensive care unit mortality, duration of mechanical ventilation, ICU and hospital lengths of stay, and use of antibiotics. This was a meta-analysis that included 15 published clinical trials in 8 different countries. There were 10,742 patients (2,033 ICU patients and 8,097 non-ICU patients); however, after adjustment for cluster analysis (by one study that randomized hospital wards, as opposed to individual patients, to intervention versus control), the total number of patients included in the meta-analysis was reduced to 2,786.


Pneumonia. Overall there was a significant reduction in hospital-acquired pneumonia in all patients randomized to toothbrushing with a risk ratio of 0.67. A similar benefit was noted in reducing pneumonia in ICU patients (risk ratio = 0.64) and patients on mechanical ventilators (risk ratio = 0.68). To put these statistics into perspective, brushing 12 patients’ teeth prevented 1 ventilator-associated pneumonia. There was no benefit to brushing teeth more frequently than twice a day. 

Mortality. There was also a statistically significant reduction in ICU mortality in patients assigned to teeth brushing, with a risk ratio of 0.81. 

Lengths of stay. There was a significant reduction in average duration of mechanical ventilation in patients randomized to toothbrushing (1.47 fewer days on the ventilator). There was also a significant reduction in average ICU length of stay (1.36 fewer days in the ICU).

Other outcomes. There was no significant reduction in total hospital length of stay but only 2 of the 15 studies reported this outcome. There was also no significant reduction in antibiotic use but only 3 of the studies reported this outcome. 


It has long been believed that oral hygiene is important in ICU patients. To date, most studies have focused on the use of chlorhexidine mouthwashes and older guidelines recommended the routine use of chlorhexidine mouthwashes in order to reduce ventilator-associated pneumonias. However, more recent studies and meta-analyses have not demonstrated a significant benefit of chlorhexidine and newer guidelines have not made recommendations regarding the use of chlorhexidine. In addition, concerns have been raised about the potential harm from drug allergy, chlorhexidine aspiration, and development of resistant bacteria.

Dentists mostly focus on the importance of toothbrushing after eating in order to reduce dental caries. But most patients in the ICU (and all intubated patients) are NPO and thus not eating. The reason to brush teeth in ICU patients is not to prevent cavities but to prevent pneumonias. Because teeth carry a large burden of oral bacteria, toothbrushing can be seen as analogous to hand washing to prevent infections.

Any study of toothbrushing is by necessity non-blinded since it is obvious to the ICU staff whether or not they are brushing their patients’ teeth for them. Therefore, this new data is not as strong as data from randomized, double-blinded, placebo-controlled clinical trials, for example in clinical trials of new experimental medications. Also, it is unclear if there is an advantage to having dental assistants versus nurses do the toothbrushing or an advantage of using a regular toothbrush versus an electric toothbrush. Similarly, it is unclear what kind of toothpaste (if any) is best. In all likelihood, any method of reducing the amount of gunk on patients’ teeth will be effective.

Toothbrushing is simple. And in the ICU, we should do it more often.

December 20, 2023

Medical Economics

Helping Patients Understand Medicare Part D

Health insurance in the United States is confusing… really confusing. And it gets even more confusing once a person is eligible for Medicare. In the past, Medicare did not cover outpatient prescription medications. However, in 2003, President George W. Bush signed the Medicare Modernization Act that provided a mechanism for prescription drug coverage for American seniors by the creation of Medicare Part D. Today, 50.5 million Americans receive prescription drug benefits through Medicare Part D. But navigating the Part D options can be difficult – and even treacherous.

Categories of Medicare Part D

Overall, 88% of Medicare enrollees have some type of prescription drug insurance. Most have a Medicare Part D plan but about a million Medicare enrollees have drug coverage through employer-sponsored retiree plans and a few million have coverage through federal plans such as the Veterans Administration or TRICARE. Medicare itself does not administer Part D plans – instead, Medicare contracts with various commercial insurance companies to sell and oversee Part D plans. There are four ways of obtaining Part D coverage:

  • Non-employer Prescription Drug Plans. These are “stand alone” plans that seniors electively sign up for. Medicare divides the country into 34 different prescription drug plan regions and insurance companies must offer coverage to all Medicare beneficiaries in the given region that it serves. Each insurance company is given an identifier code consisting of four numbers preceded by the letter “S”. This is followed by a hyphen and then a three digit code that corresponds with each of the various prescription drug plan options offered by that particular insurance company. So, for example, United HealthCare sponsored the AARP Preferred Plan and is coded as S5820-004.
  • Non-employer Medicare Advantage Prescription Drug Plans. These are Part D plans that are provided to seniors enrolled in various Medicare Advantage Plans (“Medicare Part C”). This essentially combines Medicare Part C with Medicare Part D. Seniors who enroll in these Medicare Advantage Plans are automatically enrolled in the corresponding Part D plan and generally cannot opt out. In fact, if a senior enrolled in a Medicare Advantage plan signs up for a separate Part D drug plan, they will be disenrolled in the Medicare Advantage plan and returned to basic Medicare parts A and B. These drug plans have a similar identification code but start with the letter “H” instead of the letter “S”. Making things even more confusing is that some organizations will have both a Medicare Advantage plan (without drug coverage) and a separate stand-alone Medicare Part D plan. The best way to determine which one a person has is to see if the drug plan starts with an “S” or an “H”.
  • Employer-only Group Prescription Drug Plans. These are only available to a specific employer’s (or union’s) employees so seniors not working for that employer cannot enroll in these drug plans.
  • Employer-only Group Medicare Advantage Prescription Drug Plans. These are also only available to a specific employer’s (or union’s) employees. Their identification code starts with the letter “E”.

When Medicare Part D was first rolled out in 2006, most Part D prescription drug plans were “stand alone” plans, accounting for 73% of all Part D plans. In 2023, most Part D prescription drug plans were provided through Medicare Advantage plans (56%) and stand-alone plans fell to 44%.

In the past, prescription drug coverage was available through some Medicare Supplemental Insurance policies (also known as “Medigap” policies). These were sold by private health insurance companies to cover what Medicare does not cover. However, Medigap policies can no longer be sold with drug coverage so seniors who purchase a Medigap policy must also purchase a separate Part D prescription drug plan.

When can seniors sign up for a Part D plan?

There are only certain times of the year that a Medicare enrollee can sign up for a Part D plan or switch to a different Part D plan:

  • At age 65 when initially enrolling in Medicare Parts A and B.
  • During the annual open enrollment period between October 15 and December 7.
  • During the annual Medicare Advantage open enrollment period between January 1 and March 31. This is only for seniors who are already enrolled in a Medicare Advantage plan and want to switch to a different Medicare Advantage plan or switch from their Medicare Advantage plan to basic Medicare Parts A and B plus a stand-alone Part D drug plan.
  • During a “special enrollment period”. This is only for certain life situations, such as moving to a new address, losing or changing one’s current health insurance coverage, or getting Medicaid.

During the regular open enrollment period, seniors are inundated with phone calls, emails, and letters from insurance companies that administer Medicare Advantage plans and Part D drug plans. These are sales pitches to try to get seniors to enroll or switch to that company’s plans. This is where I have seen many of my patients make costly mistakes – often switching to a lower cost Part D plan only to later find that the new plan does not cover their particular prescription medications.

Choosing a Part D prescription drug plan

Fortunately, Medicare has a very good on-line tool to help seniors choose a Part D prescription drug plan. These are the instructions to tell your patients:

  • First, enter your zip code.
  • Next, choose whether you want to see Part D plans (stand-alone) or Medicare Advantage plans (the Medicare Advantage plans may include their own Part D drug coverage).
  • Next, enter all of the prescription medications that you take including dose and the number of pills used per month.
  • Next enter your pharmacies. Because different Part D plans will have different “in-network” and “out-of-network” pharmacies, it is best to enter all of the various pharmacies in your area and also include mail-order pharmacies. Costs for medications at out-of-network pharmacies can be thousands of dollars more than in-network pharmacies.
  • This will then bring up a list of all of the Part D (or Medicare Advantage plans) in your area. Each plan will show the monthly premium, the annual deductible, and the monthly drug cost at each of the pharmacies that you previously entered. For many patients, trying to weigh the amount of the monthly premium against the amount of the deductible and the cost of the drugs can be very difficult. The good news is that the on-line tool shows the patient exactly how much they will pay each month for their medications when the costs of the premiums, drugs, and deductibles are all factored together. This “bottom line” amount is very helpful when choosing a specific Part D plan.

Overall cost is an important reason but not the only reason to choose one Part D plan over another. Each plan is also given a star rating score ranging from 1 to 5. This score is based on customer service, enrollee satisfaction, enrollee complaints, ease of getting prescriptions, and drug safety measures. Many patients will place greater value on a high star rating than a low overall cost.

The best plan for one person may not be the best plan for another person, depending on their different drug prescriptions. Therefore, every member of a household who is enrolled in Medicare should do their own search for Part D plans or Medicare Advantage plans. In many cases, it is prudent for spouses to each have plans from different insurance companies.

Drugs that are not covered

Each insurance company sponsoring a Part D prescription drug plan has its own formulary of covered drugs. A drug that is covered by one insurance company’s formulary may not be covered by a different insurance company’s formulary. Moreover, insurance companies change their formularies every year. Many patients do not factor this into their decision-making when switching to a different Part D plan and every January, physicians scramble to change their patients’ prescriptions from a previous medication to a new similar medication that is on the patients’ new formularies. But in addition to insurance company-specific formularies, there are certain classes of medications that are not covered by any Part D plans including:

  • Over-the-counter drugs.
  • Drugs for weight loss or gain, even if used for non-cosmetic purposes, such as to treat morbid obesity.
  • Cough and cold preparations, when prescribed for symptomatic relief only.
  • Fertility drugs.
  • Erectile dysfunction drugs.
  • Cosmetic and hair growth drugs.
  • Drugs purchased in another country.
  • Vitamins and minerals, except niacin products, Vitamin D analogs (when used for a medically accepted indication), prenatal vitamins and fluoride preparations.
  • Drugs that are covered under Medicare Part A or Part B (see below).

And to add to the complexity… In certain situations, medications are not covered by Medicare Part D but are instead covered under a different part of Medicare or covered by the patient.

  • Inpatient hospitalization. Medications given during inpatient hospital stays are covered by Medicare Part A (and not Part D).
  • Skilled nursing facilities. These stays are considered as inpatient stays. Thus, medications are covered by Medicare Part A.
  • Hospice. Medications given for symptom control or pain relief when a patient is enrolled in hospice are covered by Medicare Part A.
  • Observation status. When a patient has a hospital stay that is considered “observation status”, it is covered by Medicare Part B (and not Part A). Medications given during an observation stay are covered by Medicare Part D. But medications given while in the hospital are administered through the hospital’s inpatient pharmacy and inpatient pharmacies are considered out-of-network for Medicare Part D. Because of this out-of-network status, patients typically have a significant out-of-pocket cost for medications they receive in the hospital during an observation status stay.
  • Outpatient intravenous drugs. Medications that are typically administered in a physician office (rather than being self-administered at home) usually fall under Medicare Part B. These include intravenous chemotherapy drugs given for cancer and intravenous biological drugs given for rheumatologic diseases.
  • Drugs delivered via DME (durable medical equipment) devices. Medications given via a home infusion pump or a nebulizer are covered by Medicare Part B. These include insulin when given by an insulin pump and albuterol when given by a nebulizer.
  • Vaccines. Most vaccines are covered by Medicare Part D plans. However, four vaccines are covered by Medicare Part B instead. These include vaccinations for: influenza, pneumococcal pneumonia, hepatitis B, and COVID. There are a few other uncommon exceptions where vaccinations are covered by Medicare Part B, such as rabies vaccinations if a person is bitten by an animal. Regardless of whether a vaccination is covered by Medicare Part B or Part D, there is no out-of-pocket co-pay for any vaccination recommended by the CDC.
  • Miscellaneous drugs covered by Part B. There are numerous other carve-out exceptions to Medicare drug coverage. In these situations, mediations are covered by Part B (and not Medicare Part D), even when self-administered in the patient’s home. These include:
    • Intravenous immunoglobulin
    • Blood clotting factors for hemophilia
    • Injectable osteoporosis drugs
    • Renal dialysis drugs
    • Oral chemotherapy drugs
    • Oral anti-nausea drugs used for chemotherapy nausea
    • Immunosuppressive drugs for organ transplant
    • Leqembi (a new Alzheimer’s drug)
    • Intravenous feedings and tube feedings

These exceptions are important because they will fall under the Medicare Part A or Part B co-pay and deductibles. For patients with basic Medicare Parts A and B, these costs can be considerable. For patients who additionally have a Medigap policy or who are enrolled in a Medicare Advantage plan, the out-of-pocket costs will vary depending on the terms of their specific policy.

The “donut hole”

This is often referred to as the “coverage gap”. This happens when some patients have a temporary limit on how much the Part D plan will pay for prescription medications. The coverage gap begins after a patient and their drug plan have spent a certain amount for covered drugs ($5,030 in 2024). When the patient enters the coverage gap, drug costs get complicated. While in the coverage gap, the patient is responsible for 25% of the cost of a brand name drug, the manufacturer is responsible for 70% of the cost of the drug, and the insurance company is responsible for 5% of the cost of the drug. In addition, there is a dispensing fee for each drug – 75% of this fee is covered by the insurance company and 25% is covered by the patient. Generic drugs are handled differently in the coverage gap – the patient still pays 25% of the cost but the Part D plan covers the other 75% of the cost.

Once the total out-of-pocket amount paid by the patient exceeds $8,000 (for 2024), the patient moves out of the coverage gap and into “catastrophic coverage”. This means patients only have to pay a minimal copayment (generally 5% or less) for covered Part D drugs for the rest of the calendar year in 2024. However, in 2025, the Medicare Part D out-of-pocket costs will be capped at $2,000!

Once again, the good news is that Medicare’s on-line Part D tool factors in the coverage gap (if any) to show patients how much they will pay for each of their medications for each month of the year.

Some drugs will be cheaper in the future

In 2024, all Medicare Part D plans will include a cap on the price of insulin of $35 per month. Beginning in 2026, Medicare will negotiate prices directly with manufacturers for ten common (but expensive) Part B and Part D drugs:

  • Eliquis
  • Jardiance
  • Xarelto
  • Januvia
  • Farxiga
  • Entresto
  • Enbrel
  • Imbruvica
  • Stelara
  • Fiasp; Fiasp FlexTouch; Fiasp PenFill; NovoLog; NovoLog FlexPen; NovoLog PenFill

Medicare will expand the number of Part B and Part D drugs subject to subject to price negotiation each year thereafter. By having Medicare negotiate these prices (rather than individual health insurance companies), Medicare can leverage its buying power to lower the cost of these drugs to enrollees.

It’s complicated…

During a person’s working years, health insurance is fairly straight forward – you either get insurance through your employer or purchase it through the federal government’s Health Insurance Marketplace. These health insurance plans are comprehensive and cover outpatient care, inpatient care, and prescription medications. However, once a person turns 65-years-old, health insurance becomes much more complex. Seniors have to sign up for basic Medicare Parts A and B. But basic Medicare only covers some healthcare costs, in particular it does not cover outpatient prescription medications. So, seniors have to decide whether to purchase an additional Medigap policy plus a stand-alone Part D plan or to purchase a Medicare Advantage plan that includes drug coverage, which is essentially a Medigap policy bundled with a Part D plan. Or, patients who are lower income may qualify to have both Medicaid plus Medicare. Or, patients may elect to just go with basic Medicare Parts A and B and then pay for any additional costs out-of-pocket. Given the high costs of healthcare and given that healthcare needs are often unpredictable after age 65, most seniors either opt to purchase a stand-alone part D plan or a Medicare Advantage plan with drug coverage.

As physicians, it is our responsibility to advise patients in a fiduciary manner. Frequently, we are the only ones who provide unbiased advice when it comes to choosing between different Medicare Part D plans or Medicare Advantage plans. Therefore, it is incumbent on all physicians to understand how these plans work and how various plans differ.

December 19, 2023

Hospital Finances Medical Education

What Hospitals Need To Know When Hiring Foreign Medical Graduate Physicians

International Medical Graduates (aka, foreign medical graduates) account for 325,000 of all practicing physicians in the United States or about 25% of the U.S. physician workforce. However, not all specialties are equal. In the most recent internal medicine fellowship match, the majority of endocrinology and nephrology positions were filled by international medical graduates, indicating that in the future, most endocrinologists and nephrologists in the U.S. will be international medical graduates. Almost every hospital in the nation has at least one international medical graduate on the medical staff and in many hospitals, there are more international medical graduates than U.S. medical graduates. As a result, hospitals must be familiar with the visa requirements when hiring an international medical graduate.

First, and I cannot stress this enough, get legal help. If the hospital’s in-house attorney does not have the expertise, then hire an outside immigration attorney. The cost of overlooking a seemingly minor piece of paperwork or failing to meet a filing deadline can result in the hospital no longer being able to employ a particular international medical graduate. Furthermore, immigration laws are subject to the vagaries of Congress and the U.S. Presidential office. So, the rules one year may be different than the rules the next year.

First, some definitions

There are dozens of different types of visas in the United States but only a few of them apply to physicians. Here are the most common:

J-1 Visa sample

J-1 visa. This is the most commonly used visa for non-U.S. citizens who went to medical school in another country. The J-1 visa is a training visa and is used by international medical graduates who do residencies and fellowships in the United States. This visa is only valid during residency and fellowship – the physician must return to his/her own country within 30 days of completing training. In addition, the physician holding a J-1 visa cannot be have any employment other than their residency or fellowship. In other words, they cannot moonlight. The maximum duration of the J-1 visa is 7 years, which allows completion of most residencies and subspecialty fellowships. After completion of their training program, the J-1 visa holder must return to practice medicine in their own country for at least 2 years, after which time, they are eligible to apply for a U.S. H-1B visa that would permit them to return to the United States to practice medicine. There is an important exception to this requirement, the “J-1 waiver”. This waiver allows the physician to stay in the U.S. to practice medicine without having to return to their own country after completing training (see below).

H-1B visa. This is a work visa and allows a foreign national physician to practice medicine in the United States for a maximum of 6 years. Requirements to obtain an H-1B visa include (1) passing all three USMLE exams, (2) meeting state medical board licensure requirements, and (3) obtaining certification by the Educational Commission for Foreign Medical Graduates (ECFMG). The physician must have completed an ACGME-certified residency and/or fellowship in the United States. Canadian physicians are unique in that completion of a Canadian residency and/or fellowship is acceptable in most states. A physician on an H-1B visa must have a sponsoring employer that files an H-1B petition on behalf of the physician and that completes a Labor Condition Application (LCA) attesting that the employer will fulfill Department of Labor prevailing wage requirements. Physicians with H-1B visas can only practice in the specific geographic location listed on the LCA. H-1B visa holders can apply for an immigrant visa which is the next step in obtaining U.S. citizenship.

Green Card sample

Immigrant visa (“green card”). This visa allows a foreign citizen to remain permanently in the United States. After 3-5 years, an immigrant visa holder can apply to become a naturalized U.S. citizen. To obtain an immigrant visa, the international medical graduate physician must have a sponsoring employer. The employer must first submit a Permanent Labor Certification (PERM) attesting that the physician will be hired for a permanent full-time position and then the physician must file an I-140 form ($700) followed by an I-485 form ($1,140). Although there is no cost to file the PERM, there is a requirement that the physician’s job be advertised to ensure that no U.S. citizen physician is willing to take the job and a need for an attorney to complete the process – this can total an additional $4,000 – $5,000. There is no specified amount of time that the physician must remain employed by the sponsoring employer however the law’s intent is that it is a permanent job.

O-1 visa. These are less commonly used and are reserved for non-citizens possessing “extraordinary ability” in the sciences, arts, business, education, or athletics. This can be applied to physicians with unique skills, particularly in medical research. The advantages of O-1 visas is that there is no annual limit to the number that can be approved, there is no requirement for the physician to return to their home country (unlike the J-1 visa), there is no need to do a comparative wage attestation (unlike the H-1B visa), and there is no time limit to the O-1 visas which can be held indefinitely. The standards for the O-1 visa are quite high for physicians and generally require publication of research that demonstrates exceptional ability.

NAFTA TN visa. This visa is reserved for physicians from Mexico or Canada. The TN program was established by NAFTA as a temporary work authorization. Mexican citizens must obtain a TN visa. Canadian citizens do not require a TN visa but can elect to obtain one at a U.S. port of entry. A TN visa permits employment in research or teaching. Direct patient care is allowed only when it is incidental to teaching or research. Canadian or Mexican physicians who intend to mainly perform patient care should apply for an H-1B or O-1 visa instead.

The J-1 waiver

Many international medical graduates on a J-1 visa during their residency and fellowship will return to their home country for the required 2-year period after completion of training. However, some elect to stay in the United States without returning to their own country by obtaining a “J-1 waiver“. This generally involves working for a government organization or working in an underserved area of the country. Physicians must also obtain a “no-objection” statement from their home country. The J-1 waiver then allows the physician to apply for an H-1B visa without having to return to their own country for 2 years. There are several pathways to get a J-1 waiver:

  • Persecution waiver. If the physician believes that he/she will be subject to persecution based on race, religion, or political opinion if he/she returns to their home country, then the physician can apply for a persecution waiver. These are uncommon.
  • Veterans Administration (VA) waiver. The VA will sponsor waivers for both primary care and specialist physicians. Because of this, the VA is generally the J-1 waiver of choice for specialists. There is a 3-year commitment.
  • Health and Human Services Administration (HHS) waiver. The HHS will sponsor waivers for only primary care physicians (family medicine, internal medicine, pediatrics, psychiatry, and OB/GYN). Physicians cannot have performed a fellowship. There is a 3-year commitment and physicians must practice in a Health Professional Shortage Area (HPSA) with a score of 7 or higher. The HPSA areas are shown in the county map to the right (click on the image to enlarge). The authorized employers and their HPSA scores can be searched for by county on the HPSA Find website.
  • Conrad 30 Waiver Program. Each state is allocated 30 Conrad waiver positions every year and each state has its own state-specific application requirements. Positions can be offered to both primary care physicians and specialists although in many states, primary care applicants are given preferential treatment. Applicants must work in a Health Professional Shortage Area, in a Medically Underserved Area, or serve a Medically Underserved Population. Medically Underserved Populations are those that face economic, cultural, or linguistic barriers to health care such as people experiencing homelessness, low-income, Medicaid-eligible, Native American, and migrant farmworkers. Medically Underserved Areas/Populations and their index of medical under service scores can be searched on the MUA Find website. Specific areas are designated by their GEOID number. Physicians must work full-time for at least 3 years.
  • Appalachian Regional Commission (ARC) waiver. This is limited to specific counties in the Appalachian area (click on the map to enlarge). Although designed for primary care physicians, specialists are sometimes accepted. Full information can be obtained on the ARC website. The physician must work full-time in a Health Professional Shortage Area.
  • Southeast Crescent Regional Commission (SCRC) waiver. This is limited to states in the southeastern United States. This waiver is designed for primary care but specialists are sometimes also accepted. Full information can be obtained on the SCRC website. Physicians must work in a Health Professional Shortage Area, in a Medically Underserved Area, or serve a Medically Underserved Population for a minimum of 3 years.
  • Delta Regional Authority (DRA) waiver. This is limited to states in the Mississippi River basin. Both primary care and specialists are accepted. Full information can be obtained on the DRA website. The physician must work full-time at a site in a Health Professional Shortage Area, Mental Health Professional Shortage Area, Medically Underserved Area, or Medically Underserved Population.

There is a substantial cost to the employer to obtain a J-1 waiver. The ARC, SCRC, and DRA each require a $3,000 application fee. There is no fee for the Conrad 30 or HHS waiver application. However, all of these programs have a requirement that the employer advertise the position nationally and demonstrate that no American physician is available to fill the position. Advertising expenses and legal expenses typically run about $8,000 – $10,000.

Academic medicine and international medical graduates

Foreign medical graduates at academic medical centers are treated slightly different than those employed by other hospitals or other clinical employers. First, they may be eligible for an O-1 visa or a TN visa, both of which are generally only used by physicians at academic medical centers. Most academic medical centers have experience employing foreign medical graduates because of the large number of these physicians who are residents or fellows in training programs. In the most recent internal medicine and pediatrics fellowship match, 26.2% of physicians matching to an available fellowship position were foreign medical graduates. In last year’s residency match, 14.5% of physicians matching to a PGY-1 position were foreign medical graduates.

Board certification/eligibility is usually required by hospitals for employment in order to perform patient care. In addition, health insurance companies may require physicians to be board certified or board eligible in order to participate in their insurance plans. In order to be board eligible, a physician must have completed a U.S. residency and/or fellowship. However, for some specialties, an exception can be obtained by foreign physicians practicing at an academic medical center who completed their residency or fellowship in another country. For example, the American Board of Internal Medicine permits foreign physicians working at a U.S. academic medical center to be eligible to take the board examination if they have an academic rank of at least assistant professor and are employed full-time for at least 3 years supervising medical trainees in clinical settings. The American Board of Surgery had a similar pathway for foreign medical graduates at academic medical centers however they did not accept applications for this pathway in 2023.

A complex process

As state above, legal counsel is essential when employing a physician who is a foreign medical graduate and not a U.S. citizen. If required documents are not submitted on time, it could result in the physician being sent back to their own country or not being eligible for the next step in the process of obtaining U.S. citizenship. Because of the need for an attorney with expertise in immigration law, as well as the need for job advertisement and various application fees, it can be costly to hire a foreign medical graduate. However, it can be hard to attract U.S. physicians to practice in medically underserved parts of the country, leaving hospitals with no other option than hiring foreign medical graduates. An advantage of these physicians is that the employer sponsorship requirements for work visas makes them less likely to resign than U.S. physicians, thus reducing physician turnover. Because of this, the added cost of hiring a foreign medical graduate may actually be less than the recruitment costs of a revolving door of U.S. physicians.

Given the high demand for foreign medical graduates, sending your hospital’s in-house attorney to attend a course in immigration law could be the best investment you will make this year.

December 18, 2023

Physician Finances

Your Parents Were Wrong – A House Is Not Your Best Investment

With every monthly rent payment, you think to yourself: “Why am I just throwing my money away when I could be building equity if I buy a house?” Indeed, home ownership is often considered a core part of the American dream. On the surface, it does seem like it is financially wiser to buy a home rather than rent. After all, house values rise with time and when you eventually sell your house, you get all of that appreciated value back as an investment return. Plus, you’ll get back a lot of the monthly mortgage payments you made before selling the house and you get to write off interest and property taxes from your income tax. Well… not so fast. Buying a house as a primary residence is usually not a good idea from purely an investment standpoint. When we bought our first house in 1988, the conventional wisdom was that you have to own a house for 3 years in order to break-even on the sale of your house. But that number was probably incorrect in 1988 and it is definitely incorrect in 2023.

This year, the median price of an existing home in the United States is currently $416,100. There is tremendous geographic variation, however – the median price in Ohio is $219,903 whereas the median price in California is $750,080. The average size of a house in both states is 1,630 sq ft and 2 bedrooms. Newly build homes are generally more expensive and larger. Houses lose value in some years and gain value in others but on average, homes appreciate at 3-4% per year. The average cost to rent a 2 bedroom house in Ohio is $1,250/month and in California is $2,795.

So, let’s use Columbus, Ohio as an example. We’ll use the following assumptions based on the current Columbus median costs and tax rates:

  • Purchase cost of a 3-bedroom house of $285,000
  • Rental cost of a 3-bedroom house of $1,745 per month.
  • Rental inflation rate 2.5% per year
  • Appreciated value of the house at 3% per year
  • Real estate sales commission of 6%
  • Property tax of 2% of appraised value per year
  • Down payment of 20% ($57,000)
  • Mortgage interest rate of 7% on a 30-year loan
  • Homeowner’s insurance rate 0.4% of appraised value per year
  • Closing costs of 1.5% when buying
  • Closing costs of 0.75% when selling
  • Standard federal income tax deduction (married filing jointly) of $27,700
  • Average home repair and upkeep costs of 2% of appraised value per year
  • Cost to prepare house for sale of 1%
  • Average annual return of mixed stock/bond mutual fund of 7%

There are many costs that most homebuyers do not consider when purchasing a house. Yard maintenance, landscaping, and home repairs. Homeowners insurance. Property tax. Realtor’s commission when selling. Closing costs when buying. Closing costs when selling. The cost of staging and preparing the house to be sold. All of these hidden costs add up, often unseen at the time of purchasing a house – and they significantly erode the return on the investment of the value of the house. Furthermore, as the appraised value of the house increases each year, so does the amount of property tax, homeowner’s insurance, upkeep/repair costs, realtor’s commission, and closing costs.  In addition, there is another hidden cost – the lost income had the amount of the down payment been invested in stocks or bonds instead of used to purchase a house.

The difference between buying and renting

Using the numbers for Columbus, Ohio above, let’s look at what happens when you buy your own home and then sell after different numbers of years versus renting for the same number of years. We will include all of the various costs associated with the initial purchase, annual homeowner expenses, and sale of the house after that number of years, minus the equity in the home at the time of sale. For rent, we will compare the total amount of rent paid over those years minus the investment income had the amount of the house down payment been invested in stocks and bonds.

Year 1. Selling the house after only one year of ownership is very costly with a net expense of $43,859 compared to a net rental expense of $17,474. By doing the math, this means that you would spend $26,115 more to buy a house rather than rent a similar house.

Year 3. Selling the house after 3 years results in a net expense of $77,448 compared to a net rental expense of $53,199. This means that you would spend $24,249 more to buy a house rather than rent a similar house.

Year 5. Selling the house after 5 years results in a net expense of $110,394 compared to a net rental expense of $89,908. This means that you would spend $20,487 more to buy a house rather than rent a similar house.

Year 10. Selling the house after 10 years results in a net expense of $187,525 compared to a net rental expense of $185,411. This means that you would spend $2,115 more to buy a house rather than rent a similar house.

Year 11. We finally break even. Selling the house after 11 years results in a net expense of $201,832 compared to a net rental expense of $205,040. This means that you would spend $3,208 less to buy a house rather than rent a similar house. In other words, it requires owning a house for 11 years before it is more financially advantageous to buy versus rent the house.

But you might ask “What about those tax write-offs?” The changes to the federal tax code in 2016 included a significant increase in the standard deduction. In 2023, if you file single, the standard deduction is $13,850 and if you are married and file jointly, the standard deduction is $27,700. You can only take a tax deduction on your mortgage interest and your property tax if you itemize your deductions and you can only itemize if your deductions total greater than the standard deduction amount. On a $285,000 house, the mortgage interest plus the property tax would be $20,616 in the first year, falling substantially below the standard deduction amount of $27,700. Itemizing deductions is only advantageous if you have a lot of other deductions (such as charitable deductions) or if you buy a more expensive house (with higher annual mortgage interest and higher property taxes). The bottom line is that most people cannot deduct their mortgage interest and property tax on a $285,000 house.

These calculations are based on today’s economy. If and when mortgage interest rates fall, it may take fewer than 11 years to break-even on owning a home versus renting. Also, if Congress changes the tax code and reduces the standard deduction it may take fewer than 11 years. If you live in a state where the average housing costs are more expensive (such as California or Hawaii), then it may take fewer than 11 years for home ownership to be financially advantageous compared to renting.

The value of home ownership can be more than just money

There are plenty of reasons to buy a house other than financial. Maybe you want to re-do the landscaping or put in a basketball pole by the driveway. Maybe you want to paint the walls a different color or replace the kitchen counters. Maybe the neighborhood you want to move into has a lot of houses for sale but few houses for rent. Maybe you worry that your landlord will terminate your lease after a year or two in order to sell the house that you have been renting. Maybe owning your own home is just psychologically important to you.

But buying a house has risks. In 2007, the housing market crashed and home prices plummeted. It took years for home prices to recover to their pre-2007 prices. Many people who sold their homes during these years lost a lot of money. No one can predict what the housing market will be in the future and it is possible that if we have another crash in the housing market 10 years from now, it could take even longer than 11 years for buying a house to be financially more advisable than renting. There is also the risk of unexpected major expenses such as a new roof, new furnace, repairing damage from a broken water pipe, etc. These expenses can be tens of thousands of dollars that if you rent, your landlord has to cover but if you own the home, you’ll be stuck with the bill.

Your “forever home” won’t be

In past generations, many people bought a house and then lived in it for their entire life. When you are in your 20’s or 30’s, it is easy to think that the house you are buying will be the one you will stay in forever. But life happens and things change. Maybe you have a kid or have more kids. Maybe you or your spouse get a new job in another city. Maybe your income goes up and you want something nicer.

The average American expects to live in the home that they buy for 15 years. However, reality is very different – the mean duration of home ownership in the U.S. is only 8 years. For first-time home owners, the duration of ownership is even shorter at 3-5 years. The duration of home ownership increased after 2010, largely due to the housing market crash that resulted in people holding onto their homes rather than selling them for less than they bought them for. Prior to 2010, the median duration of home ownership was only 5-6 years. The bottom line is that most people do not live in their home for as long as they think they will.

So, should I buy or should I rent?

Based on the current interest rates and tax laws, you are financially better off renting if you stay in an average sized house in Ohio for less than 11 years. This is especially true for residents or fellows who do not know where they will be practicing in 3-5 years, when they finish their training. For people who anticipate living in a house for less than 11 years, the decision to buy a house should be because of the non-financial reasons of home ownership but with the realization that that those reasons come at a monetary cost. Each person should decide for himself/herself whether home ownership for less than 11 years is worth it.

December 6, 2023