Environmentalists are fond of reciting the slogan “Think global, act local;” but it has relevance beyond the world of environmentalists.
The Patient Protection and Affordable Care Act (PPACA) is a huge and heavy 2,000-plus page document soaked with puzzling provisions far too weighty for any single individual to fully comprehend let alone develop a concrete plan to move forward confidently. Your goal, as a physician, should not be to understand every provision contained with PPACA but to understand and build a solid financial life plan around the following:
• The impact of PPACA on your practice, if you are an owner, or your employer, if you are employed.
• The impact of PPACA on the reimbursement stream, which is predicted to shrink over time. In fact, the decline already has been 25% between 1995 and 2008, according to an American Medical Association report.
• The impact of PPACA on your base compensation as compared to similar physicians in comparable organizations in your geographic area.
• The impact of PPACA on your variable or incentive compensation as pay-for-performance (P4P) moves out of the shadows and onto center stage.
• The impact of PPACA on your personal taxes. For example, if you are a single filer with over $200,000 in income, or over $250,000 in income as a couple, then you have to pay a new payroll tax of 0.9% on any income in excess of $200,000 or $250,000.
Not only does PPACA affect your capacity to earn income, but your current level of financial satisfaction, your current level of debt, your current habits regarding spending and your current financial life priorities will influence how you ride out PPACA. In short, you can’t control PPACA nor can you control the presidential election, but you can control your own financial house. And you should. Beginning now.
If you’re still not convinced about getting your financial house in order today, reflect on this finding in Deloitte’s Center for Health Solutions Survey, which found that only 4% of surveyed physicians believe their income will go up as a result of PPACA. And half of the respondents believe their incomes will drop. You are advised to plan for the worst but hope for the best. This is known as scenario planning.
The immediate task before you is to get your financial house in order. The benefits include preserving or improving your bottom line. You can begin by taking a snapshot of your current finances and formulating specific financial life goals for the future. After getting this baseline and highlighting your goals you are ready to develop a plan to move you from where you are now to where you deserve to be.
Remember, environmentalists and physicians need to “Think global, act local.”
To begin on your journey of getting your financial house in order, take an honest inventory of the following:
This should be more than just money issues, but money matters.
You should have the ability to pay your bills on time without borrowing money to do so.
Make a commitment to saving money for necessities and luxuries.
You should support the commons, but there’s no reason for you to pay too much in taxes.
This should reflect your total financial net worth.
You should have enough money so that you can stop working when you plan to, but also so that you’ll be secure if you have to stop working due to illness or family obligations.
Don’t forget to keep an eye on the next generation with a will, powers of attorney and trusts.
Put emphasis on a place of security, meaning and relaxation, and focus on what you consider too much, too little or just enough in terms of square feet and maintenance.
• Now goals (within the next 3 months or sooner)
• Soon goals (within the next year)
• Later goals (within the next 2-5 years or longer)
To develop a vision for the future, pause and reflect upon what you really need and desire within the next five years for your life, which is more than your career as a practicing physician. If you are in a committed relationship, then please visualize the future and set goals in partnership with your partner.
There is a myth about categorizing people as either planners or doers, but the reality is most people both plan and do. What’s important is the order: plan first, do later.
It is true that you cannot plan in all cases, such as emergencies. Yet, even in the case of emergencies, you are advised by emergency preparedness professionals to put a disaster plan in place just in case a tornado, hurricane or fire damages your home.
PPACA may be viewed as a disaster or as an opportunity. At this point, your point of view is irrelevant because you need to pay attention to your bottom line regardless of your view. After all it is your bottom line.
Marty Martin is on the faculty at DePaul University and is a financial psychologist at Chicago-based Aequus Wealth Management, a financial planning firm specializing in helping people bounce back and thrive during times of transition. For more than 10 years, he has conducted and applied research in the psychological aspects of money and how to help individuals, couples and entrepreneurs make better financial decisions. To reach Dr. Martin, email him at firstname.lastname@example.org.