Medical Expenses are Not Created Equal

by Ziva Beck in Medical Expenses

What a difference a few miles can make! In my case, the surgical facility fee for the same medical procedure performed by the same doctor was 68% higher in one location than the other.

This year, I had to undergo a medical procedure that was done in same day surgical facility on an outpatient basis. My doctor mentioned that they perform the procedure in several locations and suggested the one that was closer to my home. That sounded like a good idea until I spoke to the procedure coordinator. I have mentioned that cost is a concern and she kindly suggested that I speak to the billing manager and check the cost of the procedure in their second location as it might be lower. To my big surprise, it was lower. Indeed, the facility fee in Paramus was 68% higher than in Emerson.

This discrepancy in cost is possible because each facility negotiates the fee with the insurance company separately and there can be a big difference as I have discovered.

Another important question to ask is if the outpatient facility is in-network provider for your insurance. Just because your doctor is in-network provider doesn’t mean that the facility they use is in network. Out-of-network providers don’t have negotiated fees with the insurance company and therefore can charge higher fees that can be 2 or 3 times higher and sometimes up to 10 times higher. If you find that the facility is not in-network, you have to negotiate up front that you should not pay more than what you would normally pay for an in-network provider.

To be on a safe side, whenever I need to have a procedure done, I follow the 3 steps below:

1)      Ask if the outpatient facility is in-network provider

2)      Ask for all costs, including physician fee, facility fee and anesthesiologist fee. Sometimes there are Lab fees as well.

3)      Ask if there is more than one location and the cost for each location.

If your doctor does the procedure in several locations it is a good idea to compare which one has a lower contracted fee with your insurance. Different doctors will have different contracted fees and will use different facilities to perform the same procedure. It pays to shop and compare!


Surviving the Stock Market Crash in 2008

In January 2008, we went away for a week for a family vacation. During the week we were out, the market took a nose dive and the S&P 500 index dropped more than 5%. I didn’t like it at all!

That weekly slide got me thinking about how much down side I can really take and how would I feel if the stock market was down 10%, 20% or even more. In other words, I started thinking about my risk tolerance in the event markets go down.

Some financial advisors recommend subtracting your age from 100 to determine the percentage of your exposure to stocks. For example, if you are 30 years old and subtract your age from 100 then you should have 70% of your investments in stocks. That is all well and good until you are actually faced with a loss. Your age is a good starting point for determining your asset allocation. Additional factors to consider include your future earnings potential, how easy it is to replace the amount that is lost and when do you need the money. In general, if you expect to make more money in the future and don’t need the money for a very long time, you can take a higher risk and invest more in stocks.

To get a better understanding of your risk tolerance, you can take a look at the table below. It shows the amount of Loss based on the % of your money in stocks for total available assets of $100,000 and a market drop of 30%.

When further examining my risk tolerance, I realized I was very uncomfortable loosing more than 6%-10% of my total assets. My whole asset allocation had to be revised. I sold most of my stock funds and moved the money to safer investments.

Later in the fall of 2008, the market had a crash of over 30% in what is known one of the most painful market crashes in recent history. I lost 30%-40% in my mutual funds like everyone else. But because my overall investment in the stock market was adjusted to my risk tolerance I didn’t loose more than I was comfortable loosing. It still hurt but was manageable.


Paying for College with a Merit Scholarship

If you are a parent with a student in junior or senior year of high school, then you are probably thinking about college applications and how to pay for college. I was thinking about it a lot. The goal was to select a college that will provide with the right experience but also hope for a merit scholarship to help with the tuition.

We wanted to know what a well rounded student with extended community service and leadership activities, high 4.3 GPA, a combined SAT of 1330 for Reading and Math and 790 for Writing can expect to get in terms of merit scholarships. Since we didn’t have much information about the different schools we decided to apply to a variety of schools including public schools, private schools, Ivy Leagues, out of state schools, small colleges and large universities. In total, we applied to 10 schools below.

* SAT scores are from 2009 admission data at http://collegeapps.about.com/od/collegeprofiles/College_Profiles.htm

After almost a year and half of SAT preparation, college research, college applications preparations and essay writing, finally the results were in and our wait was over.

Based on these results, there were several interesting conclusions.

It looks like there was no need to apply to out of state public schools. Penn State didn’t award any scholarship. University of Delaware was more generous than Rutgers University and awarded a good size scholarship. Still, the $10K scholarship didn’t even cover the extra over $13K out of state tuition charged by the school.

You really need to have very high SAT scores to have a chance to get into an Ivy League school. It was a long shot. I am happy we tried.

The private schools on our list (excluding Ivy Leagues) were Match schools and we didn’t get any merit scholarships. Tuition for these schools ran above $50K per year. We couldn’t find a good reason to choose a private school that will justify the hefty price tag. It didn’t seem like an attractive option.

The decision from Dickinson College was the biggest surprise. Based on their published SAT scores, their decision to “Waitlist” was not clear to me. It only shows that it is always good to apply to more than one school.

Ramapo College offered the highest merit scholarship. You will also notice that my daughter’s combined SAT score of 1330 for Reading and Math was much higher than the 75th percentile score of 1200 for the school. That was the main reason behind the scholarship. It is a good strategy to apply to schools where your SAT scores are higher than the 75th percentile SAT score for the school. The key is to find a school that you like that fits that SAT criteria.

In the end, the choice came down to Rutgers University and Ramapo College. We had to weigh between the resources and the opportunity offered by a large university versus a small college. We attended both schools and spoke to students and faculty. It was a great help in making the final decision.

Ultimately, we have decided that Ramapo College was the best choice. There were many factors that went into this decision. The generous scholarship was an important consideration but not the only one. We loved the small college feel, the beautiful campus and dorms and the personal attention from faculty and staff. It was a winner!

There are different strategies that can help you pay for college. Getting a merit scholarship is one option if you have above average SAT scores. You might also qualify for financial aid, sports scholarships, special circumstances scholarships and other. Choose a strategy that works for your situation and go for it.


Lost Decade for the Stock Market

The S&P 500 Index is a weighted index based on 500 large-cap US companies and is frequently used to measure stock market performance.

In 2000, I decided to invest $20,000 in the Vanguard S&P 500 Index mutual fund with approximately 10 year horizon. It seemed like a reasonable approach. Many financial experts recommended using the index funds versus the actively managed funds. Vanguard is known for its low expenses fees. Really, it seemed I can’t go wrong here.

Fast forward to January, 2010. After two severe market corrections in 2002 and 2008, I sold my shares in the Vanguard S&P 500 Index fund at a loss of $2,767. This was painful! What went wrong?

In one of her shows, Suze Orman mentioned that we are currently in a secular Bear Market that started in the year 2000. That is when I learned that there are secular Bear and Bull stock market cycles. In the 80s and the 90’s we were in a great Bull market that lasted 18 years. In a secular Bull market, the general stock market tends to go up. In a secular Bear market, the general stock market tends to go down. You can find year by year summary of secular Bear and Bull markets at http://www.crestmontresearch.com/docs/Stock-Secular-Chart.pdf. The previous secular bear market lasted 16 years. The current secular market started in 2000 and is projected to last at least another 5 years.

My lesson learned is that while frequently recommended Buy and Hold strategy worked well in the secular Bull market in the 80’s and 90’s, it is not as simple during the secular Bear market that we are currently in. Certainly, it didn’t work for my 10 year investment. In hindsight, I would have been better putting that money in a 5 year CD. I believe now that more active management is needed during the secular bear market. It does require more effort and more education but is a possible option.


How to Double the Interest on Savings

by Ziva Beck in Must Read, Savings

In the past few years, the interest rates on money market and savings accounts have been dismal to say the least. My Vanguard Prime Money Market fund that once provided one of the best yields is currently only paying around 0.06%. The saving rates at the local banks are not much better.

With this in mind, I was on a mission to find the best saving rate. My first stop was checking the best rate comparison online sites like www.bankrate.com. After looking at the rates on these sites, it became obvious that online savings accounts were the way to go. You can find Online Savings accounts or Online Money Market accounts paying around 1%. This was certainly better than the 0.06% in my Vanguard Prime Money Market fund. But it was still not high enough.

Can I do better?

Next, I started looking at available CD rates. The 1 year CDs, 2 year CDs and 5 year CDs. The highest rates of around 2.4% were offered for the 5 year CD. It was higher than the 1% but you had to commit to 5 years. This didn’t look like a good option since at the moment the interest rates are very low and there is an expectation that they will go up in the future.

Further research revealed another possibility that gives you the higher rate of approximately 2.4% without the 5 year commitment. I have learned that Ally bank offers only 60 day interest penalty on their CD products (as per the information on their website https://www.ally.com/bank/high-yield-cd/#tabs=faqs). That means that you can sign up for a 5 year CD, get 2.39% APY (as of 3/6/11) and have the ability to withdraw your money when interest rates go up with only a small penalty. For example, if you withdraw your money after 1 year, your APY will be 2%, which is still higher than the current 1 year CD annual yields offered around 1.20-1.30%.

Sometimes, you can have your cake and eat it too. Bye, bye Vanguard Money Market. I am now a happy customer of Ally bank.