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The Money Illusion Illuminates in the Medical World


Just as in medicine, psychology remains dominant over science or math, fantasy over reality.

Personal Finance, Columns, Taxes, Money

The “Money Illusion” was first described in a study out of Yale. People were asked, “What would make you happier; getting a 2% raise when inflation is zero or getting a 5% raise when inflation is 4%?” Two-thirds of those surveyed said that they would be happier getting the 5% raise in spite of receiving an actual 1% less. Go figure.

Just as in medicine, psychology remains dominant over science or math, fantasy over reality. True in politics as well, this year in particular. These kinds of illusions exist in the medical world.

• A RAND study back in 2007 found that about half of medical care was not based upon any evidence of “best practice.” In a related study, this one from Dartmouth, it was found that local physicians unconsciously adapt to empty beds in their hospital by admitting more, and less severely ill, patients. If beds are not as available, docs will look harder for stay-at-home alternatives. Being aware of this tendency sounds more like a “best practice.”

• Two-thirds of college graduates borrow to finance their degrees, leaving about 37 million in debt. Interestingly, 88% of those who default have debts of less than $50,000 and half had balances under $10,000.

• In 2012, Medicare paid 344 docs over $3 million each. One-third were ophthalmologists and one-tenth were radiation oncologists. Legitimate? Maybe. Either way, the Feds are coming.

• Speaking of America’s wealthiest, a study from Morgan Stanley found that 51% of the wealthiest among us considered donating “extremely” important. The other 49% said only “somewhat” important….

• In the Schadenfreude Department, a California study has found that 49% of entrepreneurs surveyed, winners and losers, reported at least one mental health condition, compared with 32% of non-entrepreneurs. ADHD, depression and bipolar disorder led the list. “The Madness of Genius?” Incidentally, the average age of a person doing a startup is not some fresh-faced college dropout, but 40.

• Reality Check: Healthcare takes 25% of the national budget, social security takes 25%, defense takes 25% and everything else gets lumped into the last 25%.

• Personal Money Tips: Instead of points or miles, go for cash back on your credit card. Companies can, and do, suddenly increase the number of miles or points required for a reward, but cash is still cash. There are on-line comparison sites to tell you which card has the best deal at any given time.

• Earning or saving an extra, measly 1% over 30 years can add up to hundreds of thousands of dollars in retirement. So reduce those financial fees and/or see that extra patient and keep it all in a tax-deferred vehicle such as an IRA or 401-k.

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Victor J. Dzau, MD, gives expert advice
Victor J. Dzau, MD, gives expert advice