One of the great paradoxes of our nation is that we spend far more, by a great margin, than any other country on healthcare yet we don’t live the longest. According to a report from the NCHC [PDF], which was based on other research, we spent $2.3 trillion on health care in 2007 or about $7600 per person. (that article lists a lot of other sobering statistics).

Part of the reason is because the system is so complicated and convoluted. When a doctor orders a battery of exams, it he or she motivated by expertise, fear, or greed? Is the test what is actually needed because the doctor needs to rule out a particular condition, or does the doctor fear malpractice suits so he orders every possible exam, or does the doctor need to up his pay this month because he has a vacation soon? While I’d say that most medical practitioners operate out of expertise, there is a subset that operates, if only sometimes, in the other two groups too.

That’s where Stay Healthy, Live Longer, Spend Wisely by Davis Liu comes in. It’s a guide to help you navigate the complexities and vagaries of the American healthcare system.

About Dr. Liu

Who is Dr. Davis Liu? He’s a board-certified family physician with the Permanente Medical Group in Northern California, graduate summa cum laude and Phi Beta Kappa from the Wharton School of Business and the University of Connecticut School of Medicine and has written several opinion pieces that have appear in the San Francisco Chronicle and the Sacramento Bee.

Do Your Homework, Question Everything, Pay Nothing (At First)

That’s the subheading of a section in which Dr. Liu explains how you can be a smarter consumer of medical care, specifically with respect to the billing process. He tells one story about his brother who saw a general practitioner and specialist for a throat issue. His brother confirmed with the insurance company that the visits would be covered yet was billed anyway. Fortunately, due to diligent note taking which included which representatives they spoke to, the issue was resolved and the brother didn’t have to pay anything.

The lesson here is that you should question everything, since most medical bills contain errors, and confirm with the insurance company as to whether something is covered (unless it’s a true medical emergency).

The book has a lot more in it than I explained so here’s a listing of what’s included in each of the eight parts:

1. The Most Important Policy You Will Ever Own: This part discusses health insurance in general from how much coverage you need to what an HSA is, from COBRA to health care costs.
2. Mastering the Ten-Minute Doctor Office Visit: Every aspect of a typical visit with a physician is covered including how to be a “wise patient,” versus a typical one. It stresses the importance of knowing your medical history and making each visit count.
3. Do the Right Thing Regularly and Repeatedly: This part stresses the importance of routine checkups and preventative medicine, such as routine screening, immunizations, and age specific checks.
4. Meet Your Medical Team: Any and every medical professional you’ll meet is discussed in this chapter along with anything you may need to know about their profession. Do you know what a Rheumatologist or a Nephrologist or a Ophthalmologist is? If you said you did and you’re not one, you’re probably lying.
5. The Truth About Medications: It’s hardly a hard hitting expose on branded medicines but he discusses branded vs. generic (and points out studies of the placebo effect, a topic discussed in Predictably Irrational too) and even goes through over the counter drugs.
6. Caveat Emptor, Or “Let the Buyer Beware”: This section talks about all the unproven, untested remedies from body scans to herbal remedies. He’s a little apprehensive about them but does recognize that some provide benefits.
7. Twenty-First Century Medical Care: Dr. Liu is looking forward in this chapter, looking at new and different techniques that may play a larger role in medicine in the future.
8. Take Control: Excellent Health Pays: In this last part, he talks about how you can be proactive about your health such as using the internet for research (which can be counter productive, depending on your mentality) and being active.

Stay Healthy, Live Longer, Spend Wisely is far more comprehensive than I gave it credit for when I first opened it. I expected a book that discusses health insurance, government plans like HSAs and FSAs, and medical expense related ideas but this one really went above and beyond that. The sections discussing all the specialists, the various medications, and even looking to the future of medicine was a nice bonus. Another nice bonus was Dr. Liu’s style, I can see why he would be asked to write opinion pieces in the newspaper because he has a very easy style that likely translates into a comforting bedside manner.

If the whole world of medicine intimidates you, this book can help by giving you a good basic understanding of the whole breadth of the medical world.

The first company I worked for had a dedicated department, of maybe two or three employees, focused entirely on “employee wellness.” They offered services like body fat analysis but didn’t go as far as this company in requiring them. Personally, I think the motivations are good but I can see how people would think that’s invasive.

My company didn’t require you to participate in their programs but they did provide incentives for doing so. The medical insurance provider was called Lumenos and they offered a program in which you were given $1,500 a year to cover your medical costs. If you didn’t use the funds, it was rolled over into the next year. If you did and your costs exceeded $1,500, you covered the costs up to $2,000 (an additional $500), and then traditional health insurance would kick in (10% co-pays, etc.) beyond $2,000. It worked fantastically well for young professionals who, in general, have little in the way of medical costs. They incentivized participation in wellness programs by offering medical coverage money. Fill out a health survey and get $20. Participate in this program, get $25. It wasn’t required, you didn’t really get “paid,” but it boosted participation and got people thinking about wellness.

I think requiring it would’ve caused a backlash.

Either way, wellness programs are boosting the bottom lines at businesses by cutting medical costs. Everyone knows preventative care is cheaper than treating illnesses or conditions on the other end, everyone including prescription drug and treatment companies (fire away!). This was the topic of a Marketplace segment a couple weeks ago and they found that at Gilsbar, costs are lowered when you introduce preventative care measures. Here’s a quote from the segment:

Doug Layman (executive VP at Gilsbar): Our health plan costs are 6 percent lower than they were five years ago. Our prescription drug costs, which everybody complains about, is 45 percent lower than they were five years ago. And 85 percent say their benefits package is better today than it was five years ago. Yet we’re paying less, and we have happier, more productive people.

That’s one of the reasons why countries with nationally subsidized health care programs pay far less than we do - preventing something is cheaper than curing something. It’s a big joke that Americans pay the most for health care yet don’t find themselves with the best care (in fairness, I’ve heard the argument against that is that our best of the best is far superior to other countries but the “average” care received any one member of the population is below other countries).

Getting back to the wellness programs, does your company offer something like this? If so, do they require anything or is everything optional? What would you think about being forced to do a body fat analysis? What if you had to pay more based on the status of your health?

Last winter, I did a fair amount of driving in the outskirts of Washington D.C. and on one of those occasions, hit a pretty nasty pothole. I was only about a mile away from my destination so continued onward and then checked on the tire after I parked. I looked at it and, fortunately, no big deal. After my meeting, I drove back to my office. It was an uneventful, leisurely (stop & go traffic) thirty minute drive. After parking, I didn’t check the tire and just went inside. I didn’t notice I had a flat until I came back out, three hours later, at the end of the day to go home. Sonofa… fortunately, I had a spare and I had Costco tires, so I drove over to the local Costco and had the tire repaired for free (a great reason to get your tires from Costco if you can stand the wait).

One of my friends, he wasn’t so lucky. In fact, he saw the same pothole day after day after day (even calling it into the Virginia Department of Transportation, or whatever agency is in charge of roads in Virginia) on his commute and one day, by freak accident, caught the edge and it tore up his tire’s sidewall. He was furious. He saw that pothole every day, even reported it, and still it persisted and he wanted to know if he could get reimbursed for it.

Apparently it’s not a common problem. According to TRIP, a national transportation research group, “deteriorating urban pavement conditions cost the average driver more than $400 annually.” Four hundred dollars! The worst offenders are major metropolitan areas such as New York, San Francisco, Los Angeles, and even Baltimore, but TRIP estimates that 23% of major metropolitan roads are in poor condition.

Did you know that damage caused by a pothole may be reimbursable by the county, city, or state depending on the circumstances? Until my friend mentioned it, I didn’t.

Can You Win?

Governments aren’t as good at paying back money as they are about taking it in the first place, so you probably want to be pretty confident that you’ll win before going through the arduous process. The transportation authority is responsible for the damages if you suffered damage after they knew about the existence of the pothole. In some places, the transportation authority doesn’t even need to know about the existence of the pothole for you to be reimbursed. In those areas, it’s assumed that the responsibility of road maintenance falls on the transportation authority at all times. It’s pretty much a crapshoot.

How To File A Claim

First, you need to get your documents in order. You will need to provide repair bills, record of the location of the pothole, as well as the time and date of the accident.

Next, you need to determine who is responsible for the road. If it’s a city road, you’ll want the city’s Department of Transportation. If it’s a county road, you’ll want the county’s Department of Transportation. Lastly, if it’s a state road, then go to the state’s Department of Transportation. Some governments have online forms for you to fill out, otherwise require a phone call, but ultimately you might want go the route of the telephone so you talk to someone and get the full story on what the rules are for your jurisdiction.

Your claim may not be paid out but it’s worth a shot, sure beats filing a claim with your insurance company and getting your rates jacked up.

(Photo: rudiriet)

Wow, June was a little rough. Net worth fell approximately 5.0% on account of two major reasons: quarterly estimated tax payments and retirement accounts. Outside of those two, which really consists of not much else, everything is progressing as expected. Neither income nor expenses, outside of the roof, had drastically changed. We don’t track our expenses as closely as we probably should but we have, at least qualitatively, gone out to eat less.

Eating Out

We’ve gone out to eat at restaurants less frequently for numerous reasons. First, gas prices have increased the cost of my wife’s commute, which is mitigated by my commute. Second, it’s far healthier to eat home on all accounts. You eat less and what you eat is healthier for you. Third, we need to learn how to cook better which only comes with practice. Eventually, whenever we have kids, eating out will no longer be an option (again, from the health and cost perspective) so it’s better to learn how to cook now than learn under the gun.

Estimated Taxes

Estimated taxes are paid quarterly, for the most part, and so the month in which those payments come due will be times when my net worth will see an “artificial” drop. Technically, that’s not accurate, it’s the other months that are artificially inflated, but you know what I mean. This is one of those cases where understanding the underlying cause explains away any concerns I might have, at least with this reason. Retirement is a totally different issue.

Retirement

Everyone knows that retirement accounts are long term. I know that when I log into my IRA’s, I can’t touch that money, unless I wish to pay a penalty, for another 40 years. However, it’s really difficult to look at the Dow drop 300+ points and not think about how one of our largest account balances is in an account pegged to that metric.

Retirement accounts took a 4.41% cut across the board, the largest single month change in my short adult life. I will do exactly nothing in response, though Todd Harrison, founder and CEO of Minyanville.com, who was a former trader at Galleon Group, Cramer Berkowitz, and Morgan Stanley, is in all cash. (there’s more to it but that’s the headline idea) A lot has happened in the last 10 years, there’s a lot more that will happen in the next 40.

The one thing I won’t be doing is adding to positions outside of the regularly scheduled retirement contributions. I think we already have enough invested in the stock market for our comfort level and unless we settle on our other long term investment goals (kids, college, home), we won’t be adding to our taxable brokerage account.

Actions from May

In May I listed three “action items,” I merely said it was looking towards the future, and I think it’s important to revisit them to see where we’re at. Think of it like my own little checklist of important things to do and where we’re at with them. I want to thank everyone who leaves comments with advice, suggestions, etc. because it definitely helps me out in many of these areas. I don’t have experience in a lot of these things and your insight, even if it’s what you did or what you’ve, is a tremendous help.

• Jewelry Insurance: A year after first discussing it and a few weeks after putting it into a monthly review, I finally got jewelry insurance for my wife’s engagement ring. If you read the article when it first was posted, I invite you to go back and read the comment Tim left as it covers many points I missed or misunderstood.
• Auto insurance: I mentioned earlier this week that being married doesn’t affect car insurance premiums and readers pointed out it was the multi-car discount, not the marriage aspect, that decreased premiums. The process will now be to get car insurance and register the car in Maryland, which includes paying the 5% tax. There may also be a penalty involved because you’re supposed to register a car within 60 days of moving to Maryland (you get a credit for taxes paid elsewhere), so we will see how that plays out.
  One interesting point, when I requested a quote, they lowered my six month premium from $282.60 to $203.30 even though it was a sample quote. This reflects something Dedicated said in a comment: “The discount comes from the wife expectance to drive a portion of the time on the mans vehicle. Thus, his rate goes down.” Cool! The addition of the new car only increased the six-month premium to $355.40. The insurance doesn’t include collision and comprehensive coverage.
• Water heater, Roof: The roof replacement is complete and the charge is sitting on our Citi CashReturns card, due next month. We opted for the 1.2% cash back over the six months 0% financing. 1.2% cashback is $53.40, 6 months 0% financing in a high yield savings account earning 3.50% is about $56 - not worth the effort. Water heater is still pending… the prospect of a tankless option is more and more attractive as energy prices increase.

Looking to the future:

• Further Consolidation: My wife and I still has some accounts floating around out there that have since outlived their usefulness. I made a big push to the last few months to consolidate as many accounts as I could, so we will have to keep plugging along. Consolidation sounds easy enough, they’re just activities that take longer than you expect.
• Getting A Pet: Every once and a while my wife and I watch my parents-in-law’s two Scotties. They’re adorable, lots of fun, and they poop everywhere (most of the time outside). My wife thinks I need more companionship during the day, the SAHMs at the gym don’t count, and so we’ve discussed getting a dog. Right now we’re leaning towards adoption from a local pound because there are so many there, it makes no sense to look elsewhere. An added benefit is that often those dogs have had their shots and are current on everything. Before pulling the trigger, we think it’s important to look at the finances just to be sure.
• Continuing Education: One of the longer term goals we have is for my wife to return to college and get her Masters or a Ph.D. Many programs offer tuition assistance or funding, but some don’t. Plan for the worst, hope for the best. This is one of those farther in the future type things, but one of the reasons why we bought those Series I bonds was because earnings are tax free when used for education. Just something to keep in the back of our minds.
• Kids: Ahhh just kidding, not yet.

When I was younger, I always thought that there were two things that really made a big difference in your insurance premiums:

• Turning 25,
• Getting married.

Everyone always told me that my premiums would drop when either one of those things happened because they were strong indicators of safety. Right before I turned 25, I recorded my premiums and then compared them to the premiums after I turned 25. I discovered that my premiums fell by a whopping 20% just for turning 25.

So, when I got married to the most wonderful woman in the whole wide world this year, I thought my insurance premiums would fall as a reward for making her an honest woman. As I went to make adjustments to my policy last week, I discovered there was no field for marital status! I’m not a rocket scientist but something says that I won’t be getting another insurance discount because I can’t even tell Geico I got married.

I went to Kanetix, where I did a series of comparisons to see how personal details affected your premiums, and that form had marital status (quite detailed options too) so I’m surprised Geico didn’t care. Is this true for other insurers as well or was I looking in the wrong place?

Over a year ago, I wrote about how we were going to get my lovely wife’s engagement ring appraised and insured that weekend. Well… ha ha, as all things are, it took a little longer than anticipated but we finally got it appraised in May and insured last week (yeah yeah, over a year later).

We eventually had it insured through Jewelers Mutual Insurance, recommended by the appraiser at Edward Arthur (where the piece was appraised). I had called up Traveler’s, our homeowner’s insurance policy underwriter, and received quotes that were similar priced. The logic was that, given the same premium, we should go with a company that deals with jewelry related claims on a regular basis rather than a general insurance company. Another reason was that in this case, a jewelry loss would have no effect on our homeowners insurance premium.

Replacement vs. Dollar Value Coverage

The type of insurance we purchased was for replacement coverage. That meant that if we did suffer a loss, JMI would replace our covered jewelry with something similar or better. The other option is where you get the dollar value of the appraisal. So if your piece was appraised at $5,000 and you somehow lost it, you would be compensated $5,000 for your loss.

Premiums

As I was filling out the form, I started playing with the deductibles, coverage amounts, and “other factors” to see how they would affect the premium. For the sake of simple math, I put in the dollar value of the piece of be $10,000 and found that the difference between a $5000 deductible and a $1000 deductible was a mere $7 a year (8%). The premium went from $84/year for the $1000 deductible to $77/year for the $5000 deductible, though that does represent an 8% difference. This may seem like very little but the reason is because the item covered was an engagement ring/wedding band set that is worn daily. You could have no safe or an 80 lb. anchored floor safe with a digital lock, sharks with lasers, and your premium would not change because the piece is worn daily. (I made up the sharks part, but it’s likely that would have no effect)

That’s when I decided to have some fun and put in a $10,000 necklace that is worn only for special occasions. If you had no alarm, no safe, and just kept it in a hiding place while you weren’t wearing it, the premium would be $131 for a $1000 deductible and $120 for a $5000 deductible (9% difference). However, in changing the “other factors,” the premium didn’t change at all. Keeping the necklace at a safe deposit box at a bank still had a $131 premium. You could have an armed killer robot guard wear your necklace while you weren’t wearing it and it would still cost you $131 a year. It could be that those factors don’t affect the application’s calculator, since they are subject to verification, but it seemed like they should add a note if that was the case.

Unscheduled Jewelry Insurance

The items that you specify for coverage go on a “schedule.” Usually you have your more valuable or expensive pieces put on the schedule because you’ve had them appraised and would like insurance. Unscheduled is everything else and you can get a catch-all coverage for all those. At JMI, the coverage was $1000 with a $100 deductible for $15. If you wanted more coverage, it’s essentially at those intervals ($2000 of coverage with a $100 deductible cost $30/year). We didn’t elect this coverage.

Application Process

The application process was a piece of cake. You can submit all the details online through a slick Flash-like form and then email, fax, or postal mail your appraisal forms to JMI for verification. Within ten minutes we had coverage, very technology friendly so far.

Knock another one off the checklist, albeit a year-plus from when we put it on.

(Photo by dbking)

I had a meeting with my accountant last week to discuss some business related items and we got on the topic of insurance, specifically life and disability insurance. He told me that his personal philosophy was to keep insurance and investments separate. The reason for this is that when you start mixing insurance and investment, you start muddying the waters and things become much more difficult to keep track of.

When it comes to insurance, he buys term life insurance. Term life insurance is the simplest type of insurance, you pay a premium for a set period of time and they pay out if you die. There is not an investment component and it’s a very simple concept. When I looked at four types of life insurance (term, whole, universal, variable), it confused me to no end. Generic terms, that are barely descriptive because they are so generic, tied to specific plans really mess me up.

Is this the most financially efficient method? I don’t know enough to know. Is it a clear, easy to understand, easy to execute plan with little room for error? I believe so. I prefer a plan I fully understand and can execute without problems over one that is half a percentage point more efficient that I could potentially screw up.

You don’t have to be married to take advantage of a multi-car discount with a car insurance company.

One of the best ways to save money in car insurance is to insure multiple cars with one company. Two cars with one company often costs less than if they had their own individual policies. Up until now, I had always thought that doing so required the owners of the two cars to be related in some way, such as through marriage, but that’s not the case.

Two of my friends, who are dating, had been living together in a rowhome and recently bought a house together a few blocks away. They recently changed insurance companies when they were researching homeowners insurance. One of them had a GEICO auto insurance policy and when he called to cancel, GEICO wanted a shot at keeping his business. He told him his situation and GEICO offered the multi-car discount despite them not being married but couldn’t offer a break on the homeowners (its through Travelers and they don’t offer a discount), so they went with Erie Insurance anyway. It appears that you didn’t have to be married to take advantage of the multi-car discount, though I suspect sharing an address may be necessary.

Does anyone else have experience with this?

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On an unrelated note, the 156th Carnival of Personal Finance is available at PT Money and my post on Best Gasoline Cashback Credit Cards was included.

Last month was the return of these monthly net worth reviews and the first time, probably since when we bought our house (closing costs are brutal), that our net worth decreased across the month (taxes are brutal too). This month, we saw our net worth increase by a healthy 8.6% helped along by a mild recovery in the stock market (1.39% increase in retirement assets).

Last month I talked about three things in the future - roof replacement, water heater, and diversification of our investments. The roof is set to be replaced on June 16th, contingent on good weather, at a cost of $4,450. The roofing company offers a six month same as cash option but I think we’re going to put it on the Citi CashReturns card for the 1.2% cashback since interest rates are so low (it’s nearly a wash after taxes, so we figured for simplicity the credit card option was better). We knew the roof needed to be replaced so we were prepared, there won’t be any other financial impact (other than the -$4,450 to the bank account).

As for diversification, my lovely wife and I had a chat about the future on a recent walk around the lake. We plan on outlining major milestones over the next thirty years, as best as we can guesstimate, and then adjust our financial plan to meet those milestones. I’ve come to the realization that after you’ve maximized your 401(k) and Roth IRAs, you have to begin saving for specific goals. We already have a house so that’s one significant goal achieved, so we have to determine the other milestones on the list (such as education) so we can chart a path forward. One idea I had was to use target retirement funds to simplify saving for specific goals.

Looking to the future:

• Jewelry riders and homeowners insurance. We got an appraisal for my wife’s engagement ring and need to add a jewelry rider to our homeowners. I called them up and got a quote for $100 a year for total coverage from our current insurance provider, Travelers, and a quote of $105 from an independent jewelry insurer, Jewelers Mutual Insurance Company. Why haven’t I pulled the trigger? I actually wanted to contact Erie Insurance and figure out whether it’s worth it for us to go with them for homeowners. In thinking about it, I should probably mail off the independent jewelry insurance form and then talk to Erie.
• Auto insurance for my wife may be a little tricky. The title for her car lists her and her father as co-owners, which allows her to be on her parent’s auto insurance. The auto insurance now has four vehicles listed, which probably isn’t good. We should be on the same policy, now that we’re grown ups :), but the sticking point is that putting the insurance in Maryland may force her to register the vehicle in Maryland - that’s a 5% tax on the blue book value of the car ($500). We will have to investigate further.
• Water heater is still on the radar but now on the back burner with the roof. We actually just bought a really nice Fridigaire dishwasher (to replace this old Whirlpool dishwasher) for $150 thanks to a find by Fred at One Project Closer. It was a rush sale by a guy who was being foreclosed on and moving out of state in two weeks (yikes), but a great deal. Getting a new dishwasher wasn’t a priority, I had been looking around, but $150 for something worth around $500 was too good to pass up. Quite fortuitous!

One nice benefit of these net worth monthly reviews is that it forces me to think about what we’ve done this past month and what we need to accomplish in the next month. As I was writing, I was forced to think about things I had set off to the side. In looking back, the net worth portion is really a minor part (I mentioned the increase, what was a main contributing factor, and then moved on to more “strategic” level ideas) but I think that’s a good way to approach it. Please let me know what you think!

On Sunday, I reviewed Gotcha Capitalism, a powerful and comprehensive guide for consumers, and gave it glowing reviews. Today, I want to talk about a couple stats Bob Sullivan shares with the reader about complaining to companies and success rates (Keep in mind that the book was published in 2007).

The point of the section was to illustrate that the places where you are more likely to succeed are exactly the places that people don’t try. The success rate at a grocery store is 57.1% but only 14% of people ever try, whereas the success rate with a television company is an abysmal 20.2% yet 84% of people complain. If you want to make the most out of your time, go after credit card companies. Ask to have fees removed, refunded, or waived because you’re such an awesome customer.

Here are the numbers:

1. Credit card companies: 64.6% success rate
2. Airlines: 60.0% success rate
3. Grocery stores: 57.1% success rate
4. Retirement: 52.2% success rate
5. Internet: 51.5% success rate
6. Hotels: 37.0% success rate
7. Banks: 33.3% success rate
8. Insurance: 28.9% success rate
9. Cell Phones: 26.8% success rate
10. Television: 20.2% success rate

Here are the rates at which people actually complained:

1. Television: 84% complaint rate
2. Credit card companies: 79% complaint rate
3. Cell Phones: 71% complaint rate
4. Hotels: 54.0% complaint rate
5. Insurance: 38% complaint rate
6. Internet: 33% complaint rate
7. Retirement: 23% complaint rate
8. Banks: 18% complaint rate
9. Airlines: 15% complaint rate
10. Grocery stores: 14% complaint rate

If you have all the time in the world, complain to everyone!

(Photo by aturkus)