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Saturday, November 12, 2011

Why is insurance so expensive? Or, where does all of the money go part 2.

I don’t think that anyone will argue that insurance is expensive.  The idea of insuring something is not new; the Chinese understood the concept as much as 4,000 years ago, the Babylonians codified it in 1750BC as part of the Code of Hammurabi, and Benjamin Franklin helped to popularize and standardize property insurance in the 1750s. 

The insurance business has (probably) always had a companion industry – insurance fraud.  It is estimated that over $30 billion dollars are lost every year due to either hard fraud, which is a fabricated claim or a fake injury, or soft fraud, occurring when claims are padded or businesses misrepresent work done to get lower premiums.  All of this costs the average, honest person by the overall rise in premiums to offset the losses.  Now, assuming that every US citizen is paying for their own insurance, this would cost an extra $100 per person per year.  Since we know that not everyone has, or can afford, insurance it is much higher.  Here are six humorous but, poor attempts at fraud brought to you from Cracked.com.  Here is an article explaining the different forms of insurance fraud.  If everyone worked together to help stop fraud we would all benefit from lower premiums.

I no longer think that the insurance industry, as a whole, is evil, but I also don’t think that they ignore the opportunity to make the most money possible.  It seems like the different plans are overly complicated with; deductibles, co-pays, out-of-pocket expenses, coinsurance; and different plans for health, vision, dental just to name a few health related items.  It gets even more complicated when you add in life, disability, home, auto, renter, and probably ten more areas that I can’t imagine. 

Another issue I see is that you don’t really have the right choices available when you go to purchase your insurance.  It seems more like a fast-food franchise instead of a nice restaurant, where you have to order a number 2 and you don’t get to add onions or leave off the mayo.  Or, another analogy might be cable packages, which have never made sense to me – why can’t I just get the exact channels I want?  Who makes up those packages?

[/Rant] Another insurance area that I have never understood is the various disaster policies.  It must be horrible to have your home, car, possessions all destroyed by a hurricane.  I have friends and family that were affected by Katrina and Rita, so I know it can be bad.  But, no one forces people to live on the coast, they choose to do so.  It seems unfair, to me, that my insurance rates are increased to help pay for replacing all of those homes and businesses, right where there is likely to be another hurricane in just a few years.  The same thing goes for people living in the flood plain of a major river.  I can see why it is attractive for farmers – the soil is rich BECAUSE it is on a flood plain.  Don’t get me started on people buying mobile homes in Oklahoma! [/Rant]

But what can we do?  Although it is possible to live without insurance it is a huge risk.  A single hospital stay can devastate your finances, the loss of transportation can mean the difference between having a job and not, and losing your home...

Most of the experts suggest that if possible, shopping around for the best deal can save money.  Although this is not as easy for health insurance, it is possible to do for home and auto policies.  Many of the larger companies offer reductions for coverage on home and auto bundled together.  For those people who don’t have health coverage through their employer, you can save a lot by getting exactly the coverage you need based on your current health and lifestyle.  This link has some articles describing what some of your options are.

In the auto insurance world there are more choices, but the buyer needs to know some basics about the kind of coverage they will need.  This WSJ article has some information and links that will help fill in the blanks.  There is more info and some suggestions for lowering your auto insurance expenses in this CBS News article.  If you are interested in finding out how much money you could save every year by NOT owning a car, see this calculator based on Bureau of Labor Statistics data.  Most people need a vehicle so it makes sense to buy one that costs as little to insure as possible.  This Kiplinger article lists the top ten (or bottom ten) choices for 2011.  There is also a link to older cars.

With home insurance costs can also be lowered by a number of factors described in this article from the Insurance Information Institute.

To summarize:
  • Protect yourself and others by reporting fraud
  • If possible, shop around for the best policy for your needs
  • Bundle home and auto insurance
  • Prepare for home or auto purchases with insurance in mind



Friday, November 11, 2011

Where does all of the money go?

I had originally planned for my second post to be on the topic of lawyers as politicians.  I had planned for several future posts to be on balancing the federal budget.  In a few blogs that I have recently started following I have seen some posts on budget and spending, which prompted me to change tacks.

As I said in my first post, I am not trying to imply that I have the answers to the questions I ask.  I certainly have suggestions, ideas, or proposals, but my primary interest is in stimulating discussion among the readers.  I would hope that these discussions might eventually come to the attention of someone who can make a difference, or enough someones that changes can be made by our representatives.  On to the question.

I looked up how our tax dollars are distributed because I wanted to be sure of where I pointed my finger.  According to the Center on Budget and Policy Priorities (CBPP) the breakdown is as follows:

Medicare, Medicaid, CHIP            21%        $740B
Defense & Security                         20%        $705B
Social Security                                20%        $705B
Safety net programs                       14%        $493B
Federal benefits                                7%        $246B
Interest on debt                                 6%        $211B
Transportation Infrastructure       3%        $105B
Education                                            3%       $105B
Sci & Med research                           2%         $70B
Other                                                    2%         $70B
Non-security International              1%         $35B


There seems to be a lot here to discuss, so I will just start at the top and work my way down.  I think that there is enough here that I will break it into several posts.  I want to make sure that I have sufficient time for research.

I don’t want to become a pariah by suggesting cuts to Medicare, etc. but it is the largest single expense.  Perhaps cuts are in order but I don’t feel qualified to make that sort of decision (am I even qualified to type this?).  Rather than just cutting this portion of the budget wouldn’t it make more sense to attack medical costs?  Below is a link to an MSNBC article describing what drives health care costs.  In brief they are: Doctors being sued; Administrative costs of insurance; Being female (I’m not touching this); Treatment vs. prevention; More treatment for less care.

Number one on this short list is probably the largest contributor to overall healthcare costs.  I don’t think this is at the behest of the doctors, rather I see it as greed of lawyers (over time you might note my lack of respect for lawyers in general).  Even if patients that have been hurt by medical procedures were to receive exactly what they deserved the costs are jacked up by having to use expensive lawyers and insisting on excessive punitive damages (which drives up number 2, insurance).  If the doctors and hospitals were to be forced to “do the right thing” in regard to patients we would likely see fewer lawsuits.

A second problem I have with these lawsuits is that in no other field do we see the performer of a service being sued even though they gave the best service possible.  Can you imagine suing your plumber for a mistake installing a sink, even if the sink leaked?  What about punitive damages awarded to you for the pain and suffering for not having use of your sink?  If you have an ailment, regardless of if it is treatable using medication or if it requires surgery, you must be willing to accept some level of risk in your cure.  There are no guarantees in life and you certainly don’t have one in regards to your health.  If you have two choices when you go to see a doctor – do nothing and perhaps die or do something and possibly live – what exactly are you out if you try for the cure and then die.  YOU WERE GOING TO DIE ANYWAY, and I would like to add, everyone is, eventually.  Maybe we place too much value on an individual life or maybe we aren’t willing to accept risk.

Number two on the list is the cost of insurance.  I don’t see why this is so complicated to administer, in fact it seems to me that it has been made overly complicated just to justify increasing the cost.  Sure there is a lot of paperwork (what happened to the idea of paperless offices?) but I’m not sure that this tells the whole story.  I think I will pass on this and come back to it in a later post (I don’t like insurance much either).

Number three was being female and I don’t want to address that before I have done more research.

Number four is very interesting and also ties in (in my opinion) with number five.  The idea that doctors aren’t interested in prevention is probably fallacious, but they definitely make more money over the long term on treatment.  The old saw states that “an ounce of prevention is worth a pound of cure” and I think it is as true today as it was whenever it was first uttered. 

We are certainly an overweight country and it costs us in dollars and other ways.  A recent study by George Washington University suggests that obesity costs a person on average $3,762 per year, approximately $1,600 of that in medical or insurance costs ($231 per year for extra gasoline!).  Read the full report here.  Obesity is nearly 100% preventable so why are we wasting so much money on it?  One report by ABC news discussed preventable illnesses and the attendant health costs.  Of the 10 most common chronic illnesses, five of them are, or could be, linked to obesity: Type 2 diabetes, high blood pressure, high cholesterol, heart disease, and strokes (probably tied to hypertension).  I’m not suggesting that all of these ills could be completely cured simply by losing weight, but how could it hurt?

The second part of this issue is that doctors seem to spend more of their time (and thusly more money) performing tests and trying new drugs rather than in actual care of the patient.  Is this because of the fear of lawsuits?  Some of what I have read says that this is at least one of the causes, but the other may also be true.  If a patient is not in obvious need of emergency care, it could be argued that an accurate diagnosis should take precedence over a quick one.  I also suspect that many of the complaints presented are not serious, rather the patient just wants reassurance.  If the doctor can “put them off” for a while, while running tests, they get better on their own.  I am not suggesting that this is the most common case, but I suspect that it happens more than occasionally.

Back to the Medicare…I think that the increasing age of Americans is certainly a factor in the cost of healthcare, but that does not explain why the costs keep rising.  An extra year or two of expenses shouldn’t increase the costs for everyone else, should it?  And I can’t see how this affects my, or your, insurance costs.  And there should be economies of scale that apply as we increase the number of people requesting and receiving some form of care.  And…

Wow, this turned into a rant more about healthcare than about reducing expenses at the federal level.  But, maybe that is where we have to start, at the bottom, and work our way up.  If we can solve some of the smaller problems, maybe the larger ones will be solved by default.

I hope that this will start some discussions whether they are part of this blog’s comments, or you discuss it offline.  Remember, if you want to add to, or correct my logic, point out sites with more or better information, please let me know.

Wednesday, November 9, 2011

Why should anyone read another blog?

This is my first blog and first rant (in public, although I have gotten up on a soapbox for family, friends, and coworkers).  To start off, I want to say that I think that the United States of America is a really good place to live, arguably the best place in the world.  It’s not perfect, but who can say what perfection is – the definition or qualities that make it so will depend on who is asked – but it is better than most.  I want to have some discussions about why the US is good, and more importantly, what WE can do to make it better.

We live in a country that is defined by law: that is to say, that we have a common set of rules to live by, a process to create and regulate those rules, and several organizations that ensure that we uphold them.  We live in a large country made up of 50 individual states and several territories, that get along with one another without much strife.  If any one of these states is threatened by another state, or by another country, we have the greatest military on the planet to protect us.  We have, for the most part: places to live, work, and relax; enough food (too much in some cases), clean water, and adequate medical care; places to meet, learn, worship, and be entertained.  If you don’t like or agree with these things you can move, even to another country, because you are free to do so.

This paragraph stated another way is:  We the people of the United States, in order to form a more perfect union, establish justice, insure domestic tranquility, provide for the common defense, promote the general welfare, and secure the blessings of liberty to ourselves and our posterity, do ordain and establish this constitution for the United States of America.

For an excellent site about the “Charters of Freedom” see:   US Constitution


This document, the U.S. Constitution, is not utterly unique but is one of few documents that has been upheld for so long, and still works in favor of the people.  Some other countries with constitutions, but without the resolve to live by them are: Afghanistan, Algeria, Bosnia, Colombia, Cuba, Ethiopia, Iran, Korea (North), Lebanon, Mexico, Rwanda, Somalia, Sudan, and others.  I’m not picking on these countries for any particular reason; just pointing out that just having a constitution is not enough.  It has to work for the people not just the rulers.  Remember the first three words – WE THE PEOPLE.

You can find a list of the countries with constitutions here:   National Constitutions


Follow the links to pages about the individual countries’ constitutions and think about the differences between what each country SAYS it will do for the people and what actually goes on there.

One of the reasons that the US will never seem perfect is that it can’t be all things to all people.  There will always be someone who is dissatisfied with the way things are.  Someone will always want to get ahead of the other guy, by whatever means necessary.  Some people are just never happy and want to complain.  All of this is alright because of our freedoms, and not necessarily a bad thing, but as Spock said in The Wrath of Khan, “The needs of the many outweigh the needs of the few”.  This is one of the purposes of a centralized government – to try to do the best we can for the most people: to ensure that a small, self-interested group can’t have their own way at the expense of the whole population.  Sadly, this is not always the case.  I’ve got more to say about government, in general, and our rights, liberties, responsibilities, and duty, but today’s specific topic is politicians.  This comes to mind because of the ramp-up in campaigning for the 2012 presidential elections.

Some careers have more of an effect on the general population than others.  The consequence of a customer service representative making a mistake is far less than that of a doctor.  If your personal accountant makes an error on your taxes you could be out some money, but if an international financier makes similar mistakes thousands of people could lose everything.  There are dozens of examples possible here: Car mechanic vs an airline mechanic; house plumber vs city water engineer; or lawyer vs law maker.  It’s this last one I want to think about, not that I am marginalizing the work that anyone does.  I appreciate my mechanic, my plumber, and my accountant, as I’m sure most of you do, but I think that some professions need to be held to a higher standard than others.

We don’t force anyone into politics – they general want to get into it (why, I have no idea) – but we do get to help choose who it will be.  To get there they make promises about what they, and no one else, can do for us, if only we will elect them.  To make sure that we know that they are the best choice we are bombarded with advertisements in every form of media available.  Also, to make sure that we know that the other guy is not suitable for office, we are gently and kindly made aware of their faults.  Once the best of the limited choices has been elected, we can look forward to several years of news reports about how it is not their fault that they can’t keep the promises; it’s the other guy’s fault for…blah, blah, blah, …fill in the reason du jour.

This is one of the things for which I think politicians should be held accountable – their campaign promises.  I understand that sometimes things seem possible or more probable than they really are, but let’s be realistic.  In 2008 the cry was for immigration reform, universal healthcare, closing Gitmo, letting tax cuts expire, and others (to be fair to Obama, these were some tough nuts to crack).  In 2004 it was personal investment accounts for retirement, big tax cuts (“No new taxes”), public education, and (surprise) healthcare. I could go on, but at least two studies have shown that the presidential promises are kept (for certain values of kept) more than half the time.  I just want to see more realistic promises and for the politicians to keep trying to up the average.

Here is an interesting essay on campaign promises.  Campaign Promises

Recently, the negative ad campaigns (which sounds ever so much better than mudslinging), are not produced by the candidate, but by “friends of …”.  I’m not sure that this is any better, but if the candidates don’t decry this action, it makes me believe that they were in favor of it.  This is not a new phenomenon – Benjamin Franklin said in 1789,

“If by the liberty of the press [it] were understood [to be] merely the liberty of discussing the propriety of public measures and political opinions, let us have as much of it as you please: But if it means the liberty of affronting, calumniating and defaming one another, I, for my part, own myself willing to part with my share of it, whenever our legislators shall please so to alter the law and shall chearfully consent to exchange my liberty of abusing others for the privilege of not being abused myself.”

This is another of the things for which I think politicians should be accountable: no more mudslinging.  If the friends of the politician are saying things that he disagrees with, then he should publicly say so.  I see this as a tricky way of keeping up the ‘slingin’ without being seen as responsible for it.

It also seems to me that there are too many scandals, which at the very least, detract from REAL problems.  Today it’s Herman Cain and harassment, who knows what it will be tomorrow.  But, if you expect to enter into politics I would think that you would be on familiar terms with all of your skeletons.  You probably shouldn’t have mistresses waiting in the wings, you definitely shouldn’t Tweet pictures of yourself, and trying to sell a Senate seat is right out.  If you want to play in politics you should be a better person than average – these are the “Leaders of the Free World” – and I don’t think it is too much to expect that their behavior is better than most.  There are so many scandals that there is a Wiki page for both Federal, and State/Local.


Finally, I think that more effort should be made for the political parties to work together for the common goal.  I don’t think that a particular person is evil or a saint because of membership in one party or the other.  Since there are only the two choices (my mind may change if any third party becomes more dominant), you have to affiliate with one of them to gain office.  There aren’t middle-ground candidates, you are either: hard-right or far-left, conservative or liberal, pro-government or anti, us or them.  This also detracts from the real problems, when we spend more time demonizing one party or the other, instead of balancing the budget, or reducing waste, or increasing employment, or whatever the problem is.  Not everyone has always been in favor of political parties.

However [political parties] may now and then answer popular ends, they are likely in the course of time and things, to become potent engines, by which cunning, ambitious, and unprincipled men will be enabled to subvert the power of the people and to usurp for themselves the reins of government, destroying afterwards the very engines which have lifted them to unjust dominion.
-- GEORGE WASHINGTON, Farewell Address, Sep. 17, 1796

Now, this could be true even if there were no parties, or dozens.  It just seems to me, that since we are limited to the candidates that each party promotes, that more choices would be nice.

That’s all of the ranting for today, but tomorrow I will have another question, and I have a lot of them.  I may try and answer some of them myself, but I don’t necessarily think that it’s THE answer, just a possible answer, and maybe someone reading this will have a better one.  At the very least I hope to raise awareness of issues and stimulate some discussion.  Think of it as a nationwide brainstorming session.

One other thing – I will try and provide cites for information I use, but if you know of a better one, or know of one with dissenting views, or if you have something that needs discussion, let me know.  Comments here are more than welcome but if you would like, you can email me at oneamericansrant@gmail.com.