Financial Literacy

by Ouida on May 29, 2010

Yesterday I Tweeted an article that I found on the NY Times site:  Placing the Blame as Students are Buried in Debt the article is shocking.  A couple of weeks ago I asked, should parents pay for their child’s education? The post generated a number of comments.  The NY Times article has generated over 400 comments mostly laying blame on the student and her family for amassing $100K in debt so that the student, Courtney Munna, could get an undergraduate degree in women’s studies and religion.  She now works as a photographer’s assistant in San Francisco.

I believe we miss the point when we blame the Munna’s and people like them who accrue debts they cannot repay.  Blame does not help and it certainly does not get the debts re-payed.  It is scary that the Munna’s are in the position they are in.  It is scarier that they are not alone and it scarier still that unsecured student loan debt is being securitized and sold as bonds similar to subprime mortgage loans.  I have spoken to people who bought homes during the last boom.  Mortgage payments are 40 and 50% of gross income.  When I share that the age old rule in mortgage finance, that mortgage debt should not be more than 28% of gross income and total debt no more than 33% of gross income, I usually get incredulous looks back.

The problem is the lack of financial education and financial literacy.  Back in 2001 my mother gave a series of lectures for the Georgia Consortium of Financial Literacy.  Her topic, the growing debt burden of undergraduate students.

In the mid 1990s Robert Kiyosaki self-published Rich Dad, Poor Dad.  He made three bold claims that have gotten him labeled as a heretic or a lunatic:

1)  that the nature of the economy has changed from a manufacturing base with old age pension ideas to an information base with workers responsible for their retirements.

2) that because of the lack of financial education that many average Americans were destined to lose fortunes in the stock market.

3) that a home is not an asset.

Financial literacy refers to an individual’s ability to make informed judgements and effective decisions about the use and management of their money (from Wikipedia).  The United States is one of four nations who have nation wide, government- sponsored financial literacy programs and offers a free 162 page financial literacy document: Taking Ownership of the Future. The national website dedicated to financial literacy is mymoney.gov.  April is financial literacy month.

With all of these efforts what happened?  Subprime lending accelerated in the 1990s.  The US government put in place financial literacy programs in 2003 and you can’t swing a dead cat in a bookstore without hitting a personal finance book. So what has happened?  I suppose I could launch into the fact that wages have actually decreased for middle income Americans over the past decade.  I could decry the availability of easy credit.  I could decry the apparent widening gulf between rich and poor in America or that CEO incomes, traditionally about 50 times median household income are now about 500 times median household income.  But that is not it either.  I got my first credit card when I was 22 and had no job, that was over 20 years ago.  Unsecured credit has been easy to come by.  No, somewhere in the last 30 years we seem to have lost the ability to say to ourselves that we don’t have the funds to pay for that trip.  Or that item X is something we should save for.  It has become unfashionable to save and this has occurred at every level from our government on down.  I cannot tell you the number of books published in the last two years that discuss ways to trick people into saving.  Our national consciousness has simply shifted away from saving and toward spending and now it needs to shift back.  Recognizing that it is important to start somewhere, Bank of America has a keep the change program in which they round your debit purchases to the nearest dollar and transfer the change to a no-fee savings account.  Considering that I began saving as an adult by saving the resultant change whenever I broke a dollar into my home piggy bank, Bank of America’s program is probably a good idea.  The B of A program is based on a two simple premises, that people in general don’t value their change which is why it ends up under the cushions on the couch or under the floor mats in the car and that saving must be easy in order for people to do it.  There is a whole school of thought that saving has to be automatic in order for people to do it.  I don’t know that I believe that.  My savings plans are automatic now, but they did not start out that way. Once I got into the habit of saving, I took pleasure in manually moving the money from my checking into my savings account.  For me, I got into the saving habit because I could no longer tolerate the crushing burden of debt.  Surely more Americans feel that way.  So what will it take for us to return to a culture of saving.?

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The Vegetarian Dilemma

by Ouida on May 27, 2010

I am a bit late writing this post because, well, because I was watching Lady Gaga’s Bad Romance video on youtube. I didn’t even know what a Lady Gaga was until Glee.  I have discovered I am a Gleek.  See, I was in chorus in school when I was a kid and I loved it.  I loved the holiday shows and the competition.  We even won regionals.  But no cool costumes….uh-uh.  I guess back then Elton John was today’s Lady Gaga.  At any rate, wrapped up in my youthful reverie I got to working on this post late.

When I was in medical school I had a friend, Abigail, she showed me the city of New York, on foot.  Said it was the only way to see the city and I think Abs was right. We’d walk from the West Village to 92nd street.  I did that trek probably twice a month and traversing the city east to west was no big deal.  Abs and I went on a great many errands together in support of her vegetarianism.  We went someplace on the West side to get Miso, for its B12; we were always going somewhere to get something.  I ate raw broccoli for the first time at a Farmer’s Market that Abs took me to and thought it was awesome, but of course I then had to get a slab of cheese to eat it with.  My favorite sandwich in school was a rye, raw broccoli and swiss sandwich.  Pretty good eats when you are a student on a budget.  Abs was thin and healthy looking and I was chubbing up by the day despite all the walking, because I also had a weakness for the abundant New York city food carts.  So becoming a vegetarian would have appealed to me except that it seemed so hard.

The summer before I got to medical school I landed a teaching position at a summer school.  The school cafeteria leaned toward vegetarian cooking.  I ate walnut burgers, tabbouleh, salads, fresh fruits and vegetables, seafood, chicken, some lean meat and, I a have to admit, an occasional kielbasa.  I decided I could be a vegetarian if I could just get someone to cook for me, because otherwise vegetarian cuisine seemed to consist mainly of tofu and the green salad.  My experience with Abs, as wonderful and educational as it was for me did nothing to change my mind.

Concerned that the Southern diet might be putting Black folks in the ground early, the National Institutes of Health got together with several Black chefs in the early 1990s and reworked some favorite Southern recipes. My mother sent me a copy of the resultant cook book.  The recipes were horrible.  No, red pepper is not an adequate substitute for ham hocks in greens!  These folks reworked favorite recipes and made them unpalatable.  I still have the cookbook as a reminder that some things are best left alone.  I just assumed I would be an inveterate meat eater stopping at every street cart I could find.

In 2003 I went to Gobo in New York.  OMG! outstanding vegetarian cooking prepared by kids!  I decided that enjoying vegetarian cooking was as much about texture as flavor.  Some of the food was so well textured that I thought I was eating meat.  Alas, Gobo doesn’t publish a cook book so I was left to enjoy a one-time eating experience thinking that I would never be able to incorporate more vegetarian dishes that I enjoy into my life.  Then a friend of mine, Artemis, had a business conference in her home in 2006.  Artemis is a former Body for Life Grand Champion and she had a friend cater the conference.  Her friend provided salads with barley, potatoes, beans, nuts, wheat berries, quinoa, apples, pears.  There was meat for those who felt they had to have it,  but those vegetarian dishes contained such nutrition, texture and flavor that I felt I wasn’t missing anything by passing up a serving of meat.

That’s the vegetarian dilemma, that good vegetarian cooking is so inaccessible that much of what passes for vegetarian cuisine leaves a person feeling that they are missing something and just have to add a juicy slab of meat to get a complete meal.

While we were in Peru, I learned about quinoa, nature’s complete protein, the food of the Incas.  Quinoa contains all 8 essential amino acids, calcium, Iron, vitamins B and E.  Quinoa can be substituted for rice and easily incorporated into a daily cooking regimen.  When I got home from Artemis’ I resolved to do better and found the whole grains council website.  This is a great educational website and contains easy-to-duplicate, delicious recipes that can be incorporated in to everyday eating.

Today I visited the Huffington Post.  I don’t know why.  During the last presidential election, I lived on that site practically visiting it several times a day.  I haven’t been on the site in months, but decided to go today.  There, on the front page, was “Meatless Monday & the Protein Principle”. As you might guess the article talked about the amounts of protein we consume.  Nearly twice the amount that we need daily to keep us alive.  Most of that protein is consumed as animal protein with all of the attendant fat that goes with it.  The great thing is that the article came with quick, easy and tasty-appearing recipes.  I am going to try the spiced potatoes with lentils and barley recipe in the article this weekend and report back to you.

Have you gotten stuck on the Vegetarian Dilemma?

What are you doing to increase the percentage of lean foods in your diet?

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Why Everyone Must Pay

by Ouida on May 26, 2010

I don’t know why this happens but every tax season there are disturbing articles about how much one group of people pays versus how little another group of people pays.  This year did not disappoint.  Yahoo finance published the article, “Nearly half of US households escape fed income tax.”  What I learned when reading the article was that a family of 4 making $50,000 may pay no taxes and that tax credits intended to zero out taxes for low income families are actually refundable.  This is an extreme example but if you are low income and qualify for a $2000 tax credit and have $1000 in tax liability you will get $1000 back in federal income tax.

All this wouldn’t matter except living in America is not free and everyone drives on the roads, attends the schools benefits from the public services.  It is not reasonable that one segment of society should pay all while another segment pays nothing.

I do believe we should have an alternative minimum tax. A tax that is imposed on low income households if income tax burdens are zeroed out through tax credits.  The minimum tax could be say 1% of income.  For a person making $30,000 that would amount to $300 dollars but for a country in which half its residents pay no taxes that 1% would amount to tens of billions of dollars.

The fact is that our society is is free society but it is not a FREE society.  Living here comes with rights and responsibilities and just as in any civilized society costs money.

In order to claw ourselves out of the current mess taxes are going to have to rise for all.  I finally finished reading the Big Short.  The whole world, literally, went crazy.  Wall Street bankers simply tapped into the increasingly prevalent desire in our country to buy now and pay later, if at all.  Something for nothing, a home for a song.  Am I excusing the bankers?  Uh-uh.   I have some choice words for the bankers, but without us, they would not have been able to do what they did.

An article in the Times spelled it out.  We want to be mad at Wall Street otherwise we’d have to be mad at ourselves, our sisters our brothers, our parents and grand parents for buying homes and taking out loans they could in no way afford to repay.  A home isn’t free, society is not free and everyone must pay.

We are all in the same boat and living in a civil society requires sacrifice that is why everyone must pay.

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Why Medicare Sucks Part 3

by Ouida on May 25, 2010

In part 2 we 3 concepts: 1) no two doctors are alike and consumers cannot make informed choices about their doctors because certain data is not generally known 2) attempts to reduce costs have actually increased costs by spawning additional industries deemed essential to make sure that providers are paid for the work they perform 3) physicians are not reimbursed 100 cents on the dollar.

Now here is the kicker.  Medicare is almost always the low payer.  Several years ago, I went to visit friends both in private practice in Southern California.  One of them, an orthopedic surgeon, told me what the reimbursement was for her to see a patient with a fractured hip in her office.  The number was so low, I hesitate to repeat it, but let’s just say it was low double digits, about as low as you can go  and still be in double digits.  My friend had $14,000 per month in overhead.  She asked a reasonable question, how many patients do I need to see at this reimbursement rate to cover my overhead?  There is a difference between the number of patients a physician has to see at a given rate of reimbursement to meet their overhead and the number of patients a physician can see and have a safe medical practice.  Guess which number is lower.  I had an open and frank conversation with my friends while sitting on a beach in Santa Monica.  It is hard for any number of physicians to get together and not have a conversation like the one we had on the beach that day.  Our conversation was impassioned and as a result some beach goers edged in a little closer to overhear our conversation.  When we realized that we had a small audience we made a move to leave.  One guy actually said that he had no idea that health care was as fragmented as it is and payment for services rendered so difficult.

In the first post in this series I said that America suffered from a Walmartization of its very consciousness.  We want to get as much as we want and pay as little as possible.  In so doing we forget that quality costs.  We complain about crowded physician waiting rooms and busy physicians who spend little time with their patients, but we forget that if that physician is being paid $30 dollars for a visit, he has to see a lot of patients to make sure his coding and compliance departments, office staff, office rent, equipment leases and malpractice premiums are paid.  Physician reimbursement can be ratcheted to zero and health care would still be expensive.  Paying $80 dollars for a procedure that really does cost $100 dollars is not controlling health care costs.  It is cheating physicians, hospitals and ancillary staff.  The only thing that will control health care costs is the one thing that we as a society do not want to do:  Restrict access to care, specifically new technology, until that technology has been proven through appropriate study to be cheaper in the long run and at least as effective as proven technologies already on the market.  Until we do that, we will simply commit theft in an attempt to control costs and costs will continue to spiral upward.

The physicians that drop Medicare do so because 1) Medicare is the lowest or one of the lowest payers in their payer mix and 2) the costs of compliance outweigh the benefits of accepting Medicare payments into their practices and 3) Medicare is a relatively small percentage of their practice.  These criteria will in general apply to sub-specialists.  Primary care physicians who may not be able to depend on the influx of patients under 65 to offset the impact of Medicare on their practices are likely to continue to accept Medicare.  Some physicians feel it is their duty, despite the hassles, to accept Medicare. I still reflect in wonder on a conversation that I had with a physician who practiced in Oklahoma many years ago who told me that the happiest day in his practice what when he started refusing to accept Medicare and Medicaid.  I had just begun my medical practice and I was actually offended by his attitude.

Today, I am forced to conclude as I did recently in dinner conversation with friends, that if the majority of physicians could exit Medicare they would.

What we need to do in America is start over.  If we are going to have a single payer system, then we need to fund that system and everyone must pay into it in the form of a designated tax.  We need to define a very basic level of care that system will provide.  Then if people want additional coverage which they will, they need to go to the private sector to get that coverage.  The woman that I mentioned in the first post in this series who wants the experimental procedure to address her uterine fibroids and abnormal bleeding should have to shoulder a significant burden of that cost and she should do that through a supplemental plan that spells that out.  In our current system, everyone is spending someone else’s money and there is little incentive to cut costs.  My concern with our current reform plan is that it is paid for by a tax on the top 2% of income earners rather than the costs being shared by all, the penalties for remaining uninsured are not sufficiently onerous to encourage people buy insurance and the tax on Cadillac plans a tax that might actually impact rising costs is not due to take effect until 2018.

So the concepts here are that

1) Medicare is the low payer and the costs of compliance outweigh the benefits

2) The way to control costs is to restrict access to care and one way to do this is to have consumers shoulder a greater part of the burden for some care

3) New technology should only be adopted when it is adequately studied and proven to be just as effective and cost less than established technology

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