Life Lessons Learned the Hard Way: What Doctors Must Take Away from the January 2019 Government Shutdown.
As I write this in January 2019, the US Federal Government is entering the longest partial shutdown in history.
By the time you find and read this blog, the shutdown may be long over and forgotten. The Federal Government will probably kick the can down the road and we’ll have to deal with it again sometime soon.
The important lessons from the January 2019 shutdown is not the policies, politics, or outcome.
It’s how deadlock has become a norm in politics and that both parties seem to have little concern about how the actual citizens are affected. Sure, you may side with one political view or the other, but any fair outside observer would state with confidence that neither is truly concerned with the plight of the constituents. If they truly did, a compromise would have been forged easily.
Let put all politics aside and focus on what this shutdown may mean to health care providers.
There were a few remarkable events that occurred in this shutdown and several other shutdowns that have happened in the recent past.
- The shutdown was mainly over a single policy. This has happened several times in the recent past.
- The opposing parties dug in and refused to negotiate, setting a future precedent.
- Several groups of highly trained and vital personnel were not paid during the shutdown. These include TSA agents, FAA air control specialists, IRS staff, and members of some military branches along with the FBI.
Medical care, insurance coverage, care of the under-insured and uninsured, drug costs, and physician salaries are among the current most polarizing political discussions.
Look at what is commonly discussed in the news, traditional, and social media.
- Doctors are greedy pawns of the pharmaceutical companies.
- Doctors are the cause of the opiate epidemic
- Drug prices are too expensive, and the Pharmaceutical companies are holding lives at ransom
- Medicare for all or some other centralized social medical insurance plan
- “Penalties” for being non-insured
- Dramatic Instability of the Affordable Care Act pricing
- Various ongoing legal cases declaring one part or another of the Affordable Care Act unconstitutional
- The imposition of controversial social issues on the health care system such as birth control, gender transition therapy, abortion, male and female circumcision, and vaccine concerns. No matter where you fall on these issues, the use of the health system for social change places all doctors at risk for government impasse.
Putting this all together, there is an undefinable but real risk that Government Medical Systems such as Medicare or Medicaid could potentially undergo a partial shutdown in the future.
What would this shutdown look like?
Well, obviously they will not stop providing to medical care to those who need it. A reasonable scenario would be something towards the effect that you are required to provide medical care, but you won’t be paid until the shutdown is resolved. And, since there will be a huge backlog of claims, it could be six months or more before the claims are finally paid out.
As a doctor, it would be career suicide to refuse patients no matter how unfair this may seem.
All of this is speculative. None of these scenarios may ever come true.
In the past, it would be inconceivable to shut down the government in a way that vital providers are unpaid. Now, I’m not so sure. I can easily imagine politicians “going to the mattresses” and refusing to fund medical programs until one provision or another is altered. I never imagined a scenario where TSA agents are unpaid putting the airline industry at risk, but here we are.
There are two unexpected things we learned from the shutdown.
First- Many people are living under the illusion that their jobs are secure.
What is more secure than a Federal Government job, right? Isn’t that the longstanding joke with some basis in reality- the government worker who’s hired to do a job that only purpose is to create that job. Or the idea that becoming a worker for the post office is for life? Certainly, joining the TSA, FBI, or Coast Guard would be considered a safe job, although with personal risks.
This illusion of safety lead to poor decision making and underestimation of risk.
Why bother creating extra streams of income, having “rainy day” savings, or investing in retirement when your paycheck will always come on time and your pension is “guaranteed”?
Secondly- The extreme hardship that was caused by missing a single paycheck.
The news is filled with stories of federal employees who are already in financial extremis from missing a single paycheck! They live absolutely from month to month, with no savings in reserve. It’s just so crazy!
The thing about it is, missing a paycheck is just one way to just into financial trouble. You could be hit by so many unexpected costs. Your transmission goes, your kid gets arrested for a DWI, your parents need help paying for medical expenses. You could list a million things. If you can’t handle going a few weeks without a paycheck, you are a financial house of cards ready to collapse.
What are the take-away lesson for physician for the January 2019 government shutdown?
- Doctors and the Federal Government funded medical system is not immune from disruption risk. If you accept any government payments for medical care, there is a small, indeterminant, but real risk of a shutdown affecting you. Like all potentially catastrophic risk, you need to actively manage this even if the risk is small (like flooding or earthquakes).
- If a shutdown occurs, it could go on for an unexpectedly long time. This could mean digging deep into your savings, surviving staff furloughs and hospital closings, and having to sell your assets into a deep bear market. In the old testament, Joseph told Pharaoh to prepare for 7 years of drought and famine. If they could do it then, you can certainly prepare for 6 months or more.
- Having streams of income outside of your “sector” of employment would be a lifesaver. The Federal employees who have second jobs driving Uber or mowing yards and with spouses who work in the private sector will survive just fine. The folks with all their hopes tied into one job, one branch of the government, one sector, or one income stream could really suffer. I know several physicians who fit this model.
- You absolutely must not live paycheck to paycheck. Learn how to spend less than you earn. Ideally you are living off half to three-quarters of your post-tax income and saving 40%.
How can Physicians mitigate future Government Shutdown risk?
Since the absolute likelihood of government shutdown seems indefinite and small, but real. And the outcome is potentially catastrophic to your finances, you’ll be wise to take some action. You won’t need to go overboard- at least not at this moment. Most of these actions will help reduce your risk from other unanticipated threats, so you probably should consider doing these things even if your concern of a government shutdown is very low.
- You need a well-financed emergency fund. I personally keep a years’ worth of expenses in my emergency fund. In my career, I’ve had to tap it three times. Each time, it was very welcomed. I can’t imagine the stress that I would have felt without having these emergency savings to fall back upon. I would consider six months of expenses for a physician to be the reasonable minimum but more is better. I post about physicians and emergency funds here.
- Invest outside of your sector. Don’t make the mistake Enron, GE, and Radio Shack employees made by investing most of their retirement in their company. Invest outside your company, region, and sector- Modern Portfolio Theory and chill. So many physicians own their medical building and only biopharma stocks. Big mistake- if the medical industry takes a hit your whole portfolio will collapse.
- Have separate income streams outside of your main job and outside of your sector. Have your spouse work in an unrelated field. Buy non-medical real estate. Have some of your investments produce dividends. Start a business or side-gig not directly related to patient care. Grow an Airbnb business on your property. Invest in your hobbies and turn them into a value producing business.
- Establish and maintain a large network of contacts inside and outside of your sector. Could you find rapid temporary employment if your hospital or practice had to shut down? Do you have mentors that can give you solid advice or possibly inside information? Do you know people who could advise you in real estate investing or help you design a website to promote your business?
- Invest in growing your proportion of income from third-party payers and reduce your reliance on government payment sources. Depending on your specialty, location, or demographics this may not be possible. But, it should be a constant goal as you develop and expand your practice.
Of course, earning more money is the easiest way to prepare for the future.
The more you earn, the more you can invest and save.
And the best way to earn more is to unleash your inner physician negotiator.
Learn how to interview, develop market value, develop a negotiation strategy, and bargain like a pro, all while maintaining your future relationships- NegotiationMD.com just may be the missing piece your need to succeed, really succeed in your medical career.
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So, what do you think?
Do I sound like one of those paranoid conspiracy theory guys talking about the government controlling the aluminum market or whatever? Have I raised some concerns that you’ve never considered? Do you really think things will improve within the government in the foreseeable future, regardless of future election cycles? Do you have an emergency fund? Let us know your thoughts in the comment section.