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Sound Advice: November 24, 2021

Medicare: A few more issues   Many people look forward to Medicare as the primary source of funding for health problems they will be facing as they get older.   No doubt, Medicare can be a big help, but there are several caveats. For one thing, physicians who accept Medicare patients may be doing so at costs that exceed the reimbursements they get from Medicare.   Those who do accept Medicare have to assume that the shortfall will be made up by other patients.   You may still be able to see a physician of your choice, but you will be responsible for payment.   Of the various medical specialties, psychiatry has the largest share of practitioners who have opted out of Medicare: 42%.   If you are enrolled in original Medicare and your doctor opts out of the Medicare program, you can find and compare health care providers near you at Medicare reimbursement rates have spiraled downward over the years and are typically even lower than those paid by private hea
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Sound Advice: November 17, 2021

FAANGs?   No, that’s not a typo.   It’s about the ongoing disparity between overall market returns and the price action of a few large tech companies for nearly a decade.   Until recently, FAANG stood for Facebook, Amazon, Apple, Netflix, and Google. Although Google renamed itself Alphabet and Facebook morphed into Metaverse, current conversations continue to speak of them as before. A distant cousin of the FAANGs emerged almost a half century ago.   That cousin was known as the Nifty Fifty, which included such names as General Electric, Coca-Cola, and IBM.   The Nifty Fifty group also included Xerox, Polaroid, and Eastman Kodak.   What the FAANGs have in common with their ancestors is extraordinarily high price-earnings ratios (i.e., valuations).   These were referred to as one-decision stocks. Wharton professor Jeremy Siegel suggested that investors could buy them and hold forever, but that suggestion didn’t turn out well.   The extreme bear market of the early 1970s crushed va

Sound Advice: November 10, 2021

Medicare 301 Beyond the basics of Medicare Parts A, B, and D lies Medicare Advantage, an all-in-one plan that includes the major parts of Medicare as well as coverage for additional services.   The additional services covered include vision, hearing, and dental.   What’s more, these plans may have lower out-of-pocket costs.   Currently, more than 40% of Medicare beneficiaries are enrolled in Medicare Advantage plans.   That percentage is increasing.   Most of these plans are provided by UnitedHealthCare, Humana or BlueCross BlueShield. Medicare Advantage plans come in several varieties, though most are Health Maintenance Organizations (HMOs) or Preferred Provider Organizations (PPOs).   HMOs are usually the least costly and require that participants receive services from assigned providers.   What’s more, certain requirements must be met in case of emergencies before the plan will pay for services provided. PPO participants are free to use the services of any provider in their

Sound Advice: November 3, 2021

Medicare 201   Coverage of outpatient prescription drugs under Medicare Part D began on January 1, 2006.   Part D is an optional plan that is available to everyone enrolled in Medicare Part A and Part B.   There are numerous plans available and there are considerable differences in ongoing plan prices as well as drug costs. Let’s begin with some basics.   One of the most important is the formulary, the list of prescription drugs (both name brand and generic) preferred by the health plan.   There are copays for those that are on the list.   For drugs not on the list, the patient may have to pay full price.   Formularies change annually and drugs that have been included in the formulary may switch from preferred to nonpreferred or be removed entirely. Within the formulary there are different tiers for the drugs included.   Tier 1 is generic drugs, which have the lowest possible copayment.   Tier 2 includes brand-name drugs that do not have a generic option.   Tier 3 consists of non

Sound Advice: October 27, 2021

Medicare 101 On July 30, 1965, President Lyndon Johnson signed H.R. 6675, more popularly known as the Medicare law, some 20 years after President Harry Truman called for the creation of a national health insurance fund.   Today, more than 63 million people get health coverage through Medicare, the cost of which runs nearly $1 trillion annually. Medicare coverage consists of two main parts.   Part A covers inpatient hospital insurance, including charges for the room, meals, and nursing services.   It also covers hospice care and home health care. Part B is medical insurance for physician’s services, whether as an inpatient or outpatient at a hospital, other health care facility or in a doctor’s office.   Lab tests, physical therapy, and ambulance services are also covered and Part B covers 100% of the cost of preventative services as well as an annual wellness visit. Part B is optional coverage for which the monthly premium amount ranges from $148.50 to $504.90, depending on inc

Sound Advice: October 20, 2021

Growth vs. Value One of Wall Street’s ongoing debates is whether to invest in growth stocks or value stocks, which probably makes no sense to most investors.   To be sure, investors favor companies that are growing rapidly and one would think that goes along with the thought that these investments represent good value. But that’s not what it’s about. Growth stocks are those of companies increasing their sales and profits at markedly above average rates.   Well-known examples of growth stocks are the big tech companies such as Apple, Amazon, Facebook, and Google.   Investors making commitments in growth stocks focus almost exclusively on growth based on their expectation that the hefty gains will continue ad infinitum (or at least for the “foreseeable” future) with little or no concern for market valuations, even if they are stratospheric. There is an ongoing risk that an increasing number of prominent growth stocks are priced for perfection.   As long as everything goes right,

Sound Advice: October 13, 2021

The U.S. Stock Market Has Been Doing Better Than Most Stocks   That’s a confusing concept, but it is reality.   Over the latest five years, as measured by the Standard & Poor’s 500 Index, the stock market has gained 106%.   The S&P 500 Index is generally considered to be a good representation of the U.S. stock market as a whole, but it most certainly is not.   Why?   Because five companies (Apple, Amazon, Microsoft, Facebook, and Google) combine to make up nearly a quarter of the index.   As these five go, so goes the index.   If this index is viewed with all companies measured on an equal basis, the net result for the period drops to 87%. The comparison is even more striking when we divide the S&P universe into large cap, midcap, and small cap companies.   (Cap is short for market capitalization, which is the total value of all shares of a company.)   Over the latest five years, the gain in large caps was 171% compared to 84% for midcaps and 77% for small caps. Thi