Saturday, October 3, 2015

Personal Finance with Student Loans (Part 2): Loan Management

Student Loans may be the bane of our generation.  Expensive, endless, soul-sucking, predatory, possibly criminal.  At some point you realize you cannot save for your kids because you are still paying for you.  I have heard them described as "paying rent on my job." But for now, they exist, so instead of whining about it, let's get winning about it.

I think of student loans in a very specific way--they are bad to have.  They is little to no tax advantages for the interest, practically non-dischargeable in bankruptcy, and now they factor into mortgages thanks to the scumbag mortgage "crisis."  The rates are no longer low like they used to be, lenders buy/sell your loans and the websites generally suck.  Simply put, my goal is to get rid of them as reasonably fast as I can.  Forget that inflation suggests we will be paying with worthless dollars, the margins there are so slim (and the consequences of inflation are so great) that I'd rather not use that as my winning strategy.

So I see pre-paying loans as a very specific type of cash flow investment: Every month, a fixed amount of money leaves my account until some far away total.  By eliminating the loan, I get that cash flow "back."  As far as I know (but you should check), no student loans have pre-payment penalties.

Put differently, putting money towards student loans above the minimum is the equivalent of investing in a non-compounding investment at that interest rate. So if I pay a 5% loan early, I am effectively earning 5% money back (non-compounding) a gain on which I have to pay no taxes.

Therefore, my loan repayment strategy is effectively:

  1. Reduce interest rates however possible
  2. Organize your loans by interest rate, highest to lowest
  3. Order any investment opportunities you have by return rate, highest to lowest
  4. Decide on your "transition rate"
  5. Consult your budget for how much you "extra" you can spend this month and Go!

Step 1: Reduce Interest Rates

There are basically two ways to reduce interest rates, Autopay discount and Refinancing.  If you aren't already set up for Autopay, which usually has a 0.25% discount, do it.  If you can't afford to Autopay, go back to budgeting.  

Refinancing is a relatively new option in the world of student loans.  Basically someone decides to offer you better terms than your existing lender.  There are bunch of folks doing this so check it out.  We went with Earnest and have not been disappointed.  Best rate, most flexibility, great website, great service.  It is worth shopping around, but they are awesome thus far (about 3 months in). Refinancing for us took a chunk of loans around 7.5% and brought them down to 4.5%.  That is an insane amount of interest saved.  Put differently, for $100 more per month in monthly payment (which was a choice we made, not forced), we pay off the loan in 9.5 years instead of 25. 

Steps 2-4: "Transition" Rate

There are two basic strategies to choose which order to pay back multiple loans known as Snowball and Avalanche.  Snowball manages your emotions because you "win" faster and more frequently.  Avalanche requires more emotional discipline and saves you more money.  Avalanche is the superior strategy.

The "transition" rate is the interest rate/return rate at which you ought to invest rather than pay back loans.  This number is personal, there is no right answer.  It incorporates all of your loans, what investments you have available to you, your tolerance for risk on investments, and the fact that winnings both compound but also get taxed.  

So, line up your loans by rate, highest at the top. is REALLY good for this.

In my world we have a small loan at 5%, a big loan at 4.5% and a medium loan at 4.25%.  Based on that, and my risk tolerance, I decided that 4.5% is my transition rate.  Now my job is to pay the 5% loan down, and spend the rest of my time looking for investment options that I believe will return greater than 4.5%. If I can't find them then I just pay more in loans that month.  

Investment options, What investment options?

Everyone has investment options.  A 60 month CD right now returns 2.25% guaranteed.  If you have access to a 401K, just putting the money in tax free starts you at a return of your tax rate. Beyond that there are stocks that pay dividends, stocks that grow, bonds, private investments, etc. If you don't know anything about this, than your transition rate ought to be the annual CD or savings account interest rate.  Whatever it is, it is never 0.  

Step 5: Go!  
Once you have decided where to put whatever extra money you have, go decide on how much extra money you have. Make sure this money is extra (after regular and emergency liquidity planning) and don't look back. Once it is paid to loans, it is gone.  Once it is invested, it may or may not be gone.  


Friday, October 2, 2015

Personal Finance with Student Loans (Part 1): Budgeting

I am often asked by colleagues about how I manage my families money. Or more accurately, I love the discipline of personal finance to be measurably satisfying so I never stop talking about it. I'm the guy that entered receipts into Quicken for 10 years for what appeared to be religious reasons. So, perhaps being exhausted with my line of conversation, (rarely) interested people break down and ask me about it.

First if you need a good framework on what to do with what money you have, Start Here.  

If you notice, Step 0 is Budgeting & Planning.  
Fundamentally, you have to spend less than you earn.  In order to do that you have to first clearly understand how much you spend an how much you earn.  Planning/Budgeting helps you do that with precision (and accuracy).

Think of "Planning" as the words part of the plan: I want a house, I want to pay student loans with interest rates greater than 4%, I want a new gaming computer.  Think of Budgeting as the "Numbers" part of the plan:  I will spend $300 per month towards student loans beyond the minimum.  They are both fluid and mutually reinforcing, and can take your goals and make them real.

For budgeting, I HIGHLY recommend YNAB. When I got it, I hated it. I thought it was broken, terrible software.  Turns out that my budgeting practices were terrible and broken, the software was phenomenal.  So now I recommend it to everyone.  I awkwardly talk about it at dinner parties. I teach my colleagues when they ask. 

Why is it so great?
First, since YNABing for about 18 months, I now have a laser-like view into our money, and know exactly how much we can afford to spend where.  Pre-YNAB we would let money accumulate in an account and spend it on extra student loans.  Then we would forget about Disability Insurance, or Taxes. Uggh.  

Second, my wife delegated finances to me long ago.  We used to fight about her giving me receipts to enter into Quicken.  After hours of painful work, I still had no clue where we were financially.  Now she can enter expenses on a slick mobile app (or leave them on my desk) and I can show her, at any moment, exactly where we stand financially.  The amount of transparency has made conversations about money painless instead of painful. 

How long does this take?
Months 1-2 are hard.  You don't have enough money, you want too many things, You forget categories, etc.  By month 3, you can spend probably 1 hour a month on your budget and be good to go.  And remember. Earning more money NEVER solves overspending, only a budget does. 

Once you have budgeted, let's talk about Loan management...

Monday, August 17, 2015

Katrina: 10 years hence... Part 1.

10 Years.  It has been 10 years since those flood waters rained in and took away all that was, leaving with us to survive and then build something new.  I've told my stories from Katrina many times.  I even published one once.  But so much of the bravado of the times have washed away.  What has remained is a deep sadness that I could not have predicted.

I have often submitted that Hurricane Katrina, and its aftermath which left us without a school, without a home (well, with a scumbag landlord), and for the first time in this overachiever's life, without a certain future.

The story of my arrival in New Orleans goes back long before 2005.  In 2002, I first arrived in New Orleans to attend Phi Kappa Sigma's 91st biannual Grand Chapter as chapter president-elect.  It was a fantastic trip, 100 similarish dudes sweating their asses off in the August heat and humidity whilst wearing tuxedos on Bourbon Street.

Flash forward a year later when I started applying to Medical School.  My parents were quite generous in supporting my during the shockingly expensive interview process.  Knowing this and having an interest in New Orleans and Tulane as a school, I decided to apply.  At the very least I would get a weekend in New Orleans again.  It started as something as a goof.  I arrived Friday afternoon for my Monday morning interview.  I was picked up at the airport by officers of the local Tulane Chapter.  Upon getting in the car, Matt, the president, tossed me a Walmart bag with a length of fabric.

"What is this?" I asked?

"Your toga, Welcome to New Orleans," he replied flatly.

That night was awesome.

It was a little strange for me to drop in solo on a group of strangers.  To be honest, I'd never felt more welcome.  I distinctly remember starting a conversation with another partygoer who originally hailed from nearby Lafayette, Louisiana.  I confessed that I was not sure that I was ready to take the plunge to move to this strange, strange place.  Besides, I didn't know anyone in Louisiana.  She looked me with complete seriousness and said, "Well, now you know us."

The rest of that weekend was great fun, exploring what would become my new home.  Eating, walking, taking the sites, more eating.  If you've been, you know.  If you haven't been, shame on you.
Monday morning I walked into what I can only describe as a 1950s high school which called itself a medical school.  I met the students in the hallways, who to this day have the distinction of being the happiest medical students.  Think about that, happy medical students.  When I later called my sister (a physician herself) and told her how happy everyone seemed, she did not hesitate to offer advice (she is a Schutzbank).

"Go there."

"What? But it's so far." I replied.

"Andrew, no one is happy in medical school.  If that many people are that happy, they are doing something special.  Go there."

Several interviews later, one with an Episcopalian minister/faculty member with an amazingly raucous laugh who asked me to tell a story about which I was proud.  Keeping in the meathead, fraternity theme, I thought it would be a good idea to tell a story where I physically removed a MUCH LARGER individual from our house who was intoxicated and trying to steal our composite photo.  It wasn't that I enjoyed the physical confrontation.  In fact, as I shared with Father Don, I was scared shitless.  But it had to be done, and I was the person to do it.  When those around me needed me, I stood up to my own fears, to the challenge, and got it done.

Realizing how stupid it was to tell that story, I began to gather my things and conclude my short trip to New Orleans as thugs and fraternity meatheads don't necessarily make great physicians.  Much to my surprise, Father Don turned to me and said simply, "We need more people like you here."

I was hooked.  I called home to tell my parents that I had decided on my new school.  I do this.  Things like geography, distance, or even getting accepted don't seem to factor in once I have made my decision.

My father, always wise and prudent, asked simply, "What happens if the city gets destroyed in a flood?"

"Dad, you worry too much, that's not going to happen."

Thursday, May 21, 2015

Healthcare in America, just another Seldon Crisis?

When heard they were making a movie of Isaac Asimov's fantastic Foundation series, I decided it was time to reread them.  You see, as a child, my father had the brilliant idea to make reading a book of his choosing part of my monthly allowance.  Half actually.  Plenty of 28th-31sts were spent cramming in some of the best sci fi, personal philosophy, negotiation, interpersonal relations, investment and management books you could find in the mid 80s and early 90s.  It was his intention that not only do I get to learn things he considered crucial to a successful life, but that by having me read them, he would get a free rereading as I summarized my findings.  The pain of cramming also taught me about procrastination. Genius parenting.

The Foundation series, consisting of 7 books written out of order between 1942 and 1992 (the first was written was Asimov was 22!), that chronicle a future galaxy on the decline.  I won't dare do the entire series justice, but the books begin with the establishment of the Foundation on a remote planet that faces a series of existential threats.  More a collection of short stories, each story ends with an astounding resolution of each crisis.

I bring this up as I was reading this recent piece by Dave Chase the describes the disastrous effects of rising health care costs on Americans, to the tune of $1,000,000 lost per family over a lifetime with little to show for it.

For a brief moment I envisioned our current health care fiasco as nothing more than a Seldon crisis, resolved through bold and decisive action, and look forward to when the victors are hailed as heroes and we move on to the next larger, more complex catastrophe threatening our survival...

Thursday, May 14, 2015

The "Population" part of Population Health

So I tried to skip over the Population part of Population Health Management yesterday, but my incredible pediatrician wife pointed out that actually knowing who is in "your population" can be downright impossible.  

First, maintaining a list of people with accurate demographics including contact information is still very hard in 2015.  In addition to simple names, addresses and ages--all of which can change over time even with perfect data fidelity, we have to add a status to that list.  Are you a patient of Dr. Schutzbank?  Do you have Masshealth insurance?  Since when? When does or did that change?  

Outside of health care, we do this well and we call it Facebook.  Everyone ensures that their information is updated regularly.  However, Facebook is voluntary and the information is necessarily interesting to the poster.  Sharing pictures of vacation may motivate me to log in, find the photo, upload it, tag it, etc.  Updating my primary care doctor selection is just not that interesting to me.  Furthermore, this information must be kept perfectly private and secure, so crowdsourcing solutions are a challenge.  Lists of names remain hard, but fortunately perfection is not required for progress.  Instead, we can define populations for different players in health care in descending order of ease.

Government & Public Health: Geography-based populations
If your foray into health care is through government and/or public health methods, your population is likely defined geographically.  Cities, states, zip code ranges, whole countries will be in or out of your jurisdiction.  This will cause all sorts of problems when neighboring geographies have radically different services and people start to move.  Short of that, it is easy to at least theoretically know who is in your population.  

Having a criteria that can be measured makes thing easier. Furthermore, geographic constraint (which is true regardless of who you are as all health care is local), makes it a little bit easier to design constrained interventions.  If obesity is a problem and there is no place to walk in your town, you can make places to walk in your town (without worrying about making places to walk in every town). Not easy, but easier.

Payors of health care: Customer-based populations
If you are a health plan, insurance company, union, self-insured employer or some other purchaser of health care services, then you too can define your population.  Someone, somewhere, somehow, is paying for your services.  And that is your list.  You have all of the list problems, and that people die, they lose benefits, paperwork has a lag, etc.  Fundamentally though, with good list hygiene, your population is knowable.  

Since the relationship here is customary rather than geographic, the interventions will look differently.  The tend to focus on remote, scalable solutions using technology.  Once you are not in the same place as your population, you could be anywhere in the world.  Although attractive, there is a growing recognition at the importance of relationships in care and therefore a shift in intervention design. 

Additionally, Payors arguably have the most difficult regulatory challenges.  Public health and government officials have plenty of rules with which to contend, but it is the payors that have to guess if certain behaviors break the rules or not, often post hoc.  Fear of regulatory violations, especially as organizations grow large (which all regulated organizations must do), can chill innovations in the name of fraud and waste prevention.  Once we cross into care providers the game changes quite a bit.  Although mired in regulation, the truth is that a license to practice medicine confers incredibly wide latitude in the treatment of patients, especially outside of facilities.  

Specialist Care Providers: Condition-based populations
When it comes to specialty care, populations may not be fixed, but they can be predicted.  The very advantage of specialization is that by limiting what comes through the door, you can meet the needs of your population.  It is why primary care doctors claim specialists have it so easy.  Additionally, you often have some geographic limitation to your specialty, although "catchment areas" can span several states based on disease prevalence. 

Your population is guided by your conditions, and therefore your interventions are condition specific. If you are an endocrinologist specializing in thyroid disease, you better be setting up your interventions to be convenient and effective for the treatment of thyroid disease.  You have an ultrasound in the office.  You can biopsy right there and have the ability to prepare and view tissue.  However, true innovation is dependent on a deep understanding of the diagnosis, treatment and ongoing management of your conditions.  Specialists ought to be leading the way in keeping patients out of the office, but fee for service keeps getting in the way.

Primary Care Providers: Geographic, customer, condition-based populations
Primary care may very well have the hardest problem in defining population.  The typical method is empanelment--a list of patients who are supposed to under care of a given doctor.  This sounds great, but it is a particularly challenging instance of the list problem.  Patients may "establish care," but do they continue?  Do they have to break up with their primary doctor formally?  If they change insurance, change jobs or move away does the primary care physician ever get notified?  Formal empanelment via HMOs has been tried, but is arguably less effective and often rejected as too controlling.  Attribution methods are used (patient saw Dr. X. for 2 visits and Dr. Y for 1 visit, therefore they are a Dr. X patient, even when the last visit was a "switch" to Dr. Y).   

Most Primary Care practices that successfully solve this problem do it through payment reform of some kind-- HMO attribution, concierge and/or Direct Primary care customer relationship, health plan style enrollment/dis-enrollment, limiting eligibility to membership in certain organizations (employers, Medicare, etc.).  

Even without knowing your population for sure, primary care offices can go a long way to determine prevalence of disease and geographic needs.  Preparing for common conditions and community engagement outside the practice may be the only way practices can manage their population. It may mean that the measurement end is weak, that it is hard to prove interventions work, but healthy patients do not need you to prove that you helped them, only that they are helped.

Do not give up! There is a way to get your arms around your population somehow and doing so will allow you to become far more effective in caring for your patients.

Wednesday, May 13, 2015

What is Population Health Management anyway?

In thinking about my last entry on recommendations, I've gotten to thinking a little more deeply about the broader term Population Health.  Population Health is a term that has been used increasingly since the passage of the Affordable Care Act.  But what does it mean?

In a recent report from Academy Health-- the lobbying arm of Health Services researchers, they share an interesting conundrum:

"The phrase “population health” is increasingly used by researchers, practitioners, and policymakers in health care, public health, and other fields. Although their understanding of this phrase differs, many see attention to population health as a potent opportunity for health care delivery systems, public health agencies, community-based organizations, and many other entities to work together to improve health outcomes in the communities they serve."

So we don't agree on exactly what it means, but it represents a great opportunity!  As insane as this sounds, I know exactly what they mean.

Regardless of whether you are a payor, provider, public health worker, government official, or simply a thoughtful person, it has probably occurred to you that we can take better care of our population beyond the one at a time model prevalent in medical care.  Hence the idea of focusing on population health.

Past that, the term breaks down a little bit, and there may be a way to put it back together.

First of all, who is in your population?  It depends on who you are-- a payor has members, governments have constituents, public health workers have jurisdictions, primary care providers have panels (sort of).  Let's assume you can figure this out and manage all of the challenges of constantly updating a list.  (An aside--it is amazing how difficult keeping an updated accurate list of names still is in the technologically marvelous era in which we currently live.  Just look at your last formal party invite list and weep at how many people have moved, married, lost your friendship, etc.) So you have your population, how do you manage their health?

Let's start with an example from the medical system. What we have done in health care for the longest time is reactive, serial care, synchronous care.  That is to say, we generally take care of people, one at a time, as they make appointments with us.  The performance of our health care system suggests that this is not a great way to improve the health of individuals or populations.

One common suggestion in the primary care world is the "registry."  Simply put-- what if we had a list of everyone in our population with a given condition, like diabetes (it is ALWAYS diabetes).  We could work on those patients getting their foot exams, eye exams, A1cs, and other things done for their diabetes without waiting for them to come in to us.  We can shift from being reactive to being proactive.  Problem solved, population managed.

Or have we simply changed from one list of patients that we care for one at a time (appointment list) to a different, and possibly better list (diabetes registry).

On the other end of the spectrum is the public health opinion-- big changes that affect everyone at once.  For instance, great roads.  I studied medicine and public health in New Orleans and had the great fortune to learn from Larry Durante.  It turns out in nearby Metairie, we had the 9th most dangerous intersection in America in 2001.  The medical system likely worked overtime to absorb all of the car accident victims with better ambulances, trauma bays, surgeries, rehabs, etc.  But it was "fixing the damn intersection" as Dr. Durante put it, that actually solved the problem.  Here we did one thing and helped lots of people by preventing a problem.

So now we have a few ends of the spectrum here, all of which fall somewhere into population management.  In fact, there is a group out of Duke trying to marry the shockingly different disciplines of health care and public health.

But what if we dive a little deeper into the definition?

Perhaps to resolve some of the confusion, we separate Populate Health Management into its consitutient parts:

  1. Population Health Measurement or How is our population doing?
  2. Population Health Interventions or What are we doing to make them better?
Separating into these categories may begin to resolve the tension between the measurers (traditionally government and payors) and the doers (health care and public health).  

The measurement piece is crucial, because if you cannot measure you cannot improve.  Getting measurements correct, getting accurate data and in a way that does not impede the actual care of a population is crucial.  Being more in the doer camp, I'd like to come back to measurement in the future.  

When it comes to the doing then, we have a few choices on how to frame our work.  How do we reconcile population health as both a better list of patients and fixing an intersection? For that, why not a two-by-two table?  (I have no art department as of yet, and I use the word patient because, well, I am a doctor).

Population Health Intervention Types:
One PatientMany Patients
Present Patient
Absent Patient

In this framework, we can think of doing things that affect one patient at a time, like a doctor's visit vs. things that affect many patients at a time, like fixing an intersection.  However, whether or not the individual(s) are present makes a big deal in terms of the type of intervention.  For example, a doctor's visit is helps a single, present patient.  It goes in the top left.  The intersection fixing helps many patients, all of whom were doing something better with their time when the intersection was fixed--that falls into the bottom right.

What can we extrapolate from this?  Let's go back to our list of diabetics.  We can decide to see them all in clinic soon, top left.  We can decide to form a diabetes group and have a bunch in our office at once, top right. We can text each patient who is overdue for an eye exam, bottom left.  Or we can tweet an informational piece to all of our diabetics, bottom right.  

In this way we can begin to categorize interventions based on their effect size and presence requirements, and start solving problems with solutions from the proper quadrant.  Going back to Metairie, the health system built up capacity to better serve one patient at a time, at potentially huge expense and in no way decreasing the ill effects of the intersection.  We had a lower right problem with an upper left solution.  

Where else in our work can we just "fix the damn intersection?"

Tuesday, May 12, 2015

A few minutes on Primary Care Innovation from Iora Health (video entry)

For those of you not yet brave enough to watch the full 51 minute keynote (or those of you not related to me... thanks family!), here is a 5 minute interview from the same event, Maine Quality Counts.