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If there was a truth drug we could secretly administer to all politicians, you would almost certainly hear them agree the current health care services are broken. The reason is easy to state. As it stands, doctors and hospitals operate under the fee-for-service system. This gives them a direct financial incentive to do more work than may be strictly necessary. Even though they may explain everything to the patient and get “informed” consent, not all the tests are strictly necessary and many of the procedures they recommend have little chance of improving patient outcomes. So the best way to improve health care in this country is to change the incentives. Instead of paying for more care, we should be paying for better quality care.

Yet if you look at the proposals made by Rep. Paul Ryan, the Republicans are now committed to changing the cost base of health care. In particular, they want to change the entitlements our seniors have under Medicare. It’s undoubtedly true the service is buckling under the rising burden of spending. Way back in 1965 when we created Medicare and Medicaid, the government spent 2.6% of its budget on health care. Last year, our government spent 26.5% of its budget on health care. If you look at the projections published by the White House, President Obama is projecting this will rise to 30% by 2016. To give you a context, the projected spending on our defense is only 20% of the budget. Just think, all those weapons and people, fighting wars in Iraq and Afghanistan. Something has to be done to bring costs under control.

The unanswered question is how you can bring out-of-control spending under control. For Medicare, Ryan proposes introducing a voucher system in 2022. He believes that, if you give our seniors control over their own budgets, they will seek out the lowest-cost medications and treatments. If you do that to the 48 million seniors expected to be a part of Medicare in ten years time, this will either make or break the system entirely. But there’s no guarantee seniors will have the knowledge and determination to insist on less waste in the system as a whole. Take a simple example. If the effective treatment is ten pills spread over five days, will patients refuse twelve pills? Now scale that up across all treatments. It would be far better for government to regulate, setting national care standards so that our health care service only offers treatments where the evidence clearly shows them to be effective. This is the European approach where the public purse will only pay for the treatments approved by their local quality assurance departments. Read the rest of this entry »

Back in June 2010, a special-interest Proposition 17 appeared on the ballot papers. It was pushed through the electoral process by Mike D’Arelli of the Alliance of Insurance and Brokers. Before it got on to the ballot, there was a court case – a rite of passage for anything affecting consumer rights in California. Both the “for” and “against” camps pushed for changes in the wording of the proposition and of the rebuttal. Judge Allen Sumner tweaked the wording on both sides leaving no one satisfied, but the Proposition went to the voters. There was a major advertising campaign paid for by Mercury Insurance. It’s estimated it provided a war chest of $16 million. There were ads everywhere and, when the dust had settled, the Proposition was defeated by 52 to 48% – not the most convincing of rejections. So what’s the issue?

Mike D’Arelli argues insurers should be allowed to look at your past coverage history to decide on the premium rate. So, for example, if you currently enjoy a loyalty discount from your current insurer, and you are looking around the market to decide whether to switch, all potential insurers should be allowed to match that discount. The expectation is that this will improve price competitiveness and, in the long run, reduce rates for drivers. But, let’s say there’s a gap in the coverage history. Perhaps you moved into an inner city area where it was inconvenient to garage your car and there was good public transport. Giving up your vehicle while living there looked at good option. From the point of view of insurers, this means you are losing experience. When you practise a skill every day, you consolidate what you know and adapt to the evolving behavior on the road. Take a break and there’s a slight increase in the risk of an accident while you get back into the groove.

The “no camp” seized on this as an excuse to raise premium rates during a recession without having to explain or justify premium hikes. Young drivers going off to college, members of the military going overseas, and seniors could all face rate increases if there was a gap in coverage. This could be hundreds of dollars at a time when everyone was facing financial hardship.

Well, Mike D’Arelli is back again with a newly worded initiative. He claims to have listened to all the objections raised last year. The new wording will ensure more people see rate reductions than increases. If this survives a review by California’s Attorney General, the next step will be collecting half-a-million signatures from registered voters to qualify for the next ballot. Read the rest of this entry »

It’s such a headache when you have to renew your policy or pay the premiums to have your car insured. If you had the “luck” of getting an expensive policy in the first place then this process is certainly quite unpleasant for you. Paying money for what you feel is over-priced can make you think that you’re wasting your money on something you don’t really need. And this in turn results in some drivers dropping their policies altogether, driving without insurance and ending up paying all the costs out of own pocket in case of an accident. If you think that you are special and can’t have an accident because you’re good driver we have bad news for you – there are millions of drivers out there just like you who think they can handle it but still accidents take place every few minutes on US roads. And you might end up in one of those regardless of how good you are behind the wheel. Read the rest of this entry »

In the dim and distant past, someone working for the insurance industry had a good idea. Just as people pay by the minute for their telephone calls, perhaps they should also pay by the mile for their vehicle insurance. You can imagine the awed silence around the table as everyone dreamed of a world without dishonesty. Then, with a sad shake of the head, the idea was buried. No one can be relied on to tell the truth about how far they drive. You only have to look at the reality when the FBI stages a bus crash at an intersection. Half the passers-by run to the bus, climb on board and then fall down injured. At heart, everyone is open to the opportunity for a little extra cash. If this might come from a claim against the bus company for injuring its passengers. . . Well, who cares as long as the cash follows. Now translate that into people self-certifying how many miles they drive a week or month. As we said, this was a good idea that came along before its time.

Have you noticed how many computer chips are now showing up in our cars? It’s amazing how clever some of our vehicles are, deciding how to brake safely in difficult driving conditions, producing more gas efficiency and less emissions. It’s a miracle how we could ever get from A to B before all this technology came along. It’s even possible for the vehicle to tell us how to get from A to B with a computer-generated voice advising on the best route to avoid the slow-moving traffic. Now that’s a miracle.

To make all this possible, the vehicle has to be able to transmit its position to a GPS satellite and calculate where you are on a map. So the vehicle already knows when you drive, where you drive and, if the right program was written into the central processing unit, how well you were driving. It can easily record your pattern of acceleration and braking. From an insurance company’s point of view, this information is like gold. If the vehicles were transmitting this information live to the insurer’s computer, it could bill you by the mile depending on where you were driving and at what time of the day or night. So if you’re out at 2 a.m. driving fast, swerving round bends and leaving rubber on the roads, your premium rate can go up because you’re proving yourself high risk. But if you are driving gently at an off-peak time and never do more than short runs to and from school for the kids, and then down to the mall, your rates reflect your safe lifestyle. Read the rest of this entry »