Reasonable and Customary Charges

The American healthcare industry is carrying on a ridiculous scam: They do everything possible to obscure their prices, and then try to bill astronomical fees for services.  Anyone who has medical insurance should be amused when they see every single bill reduced by their insurer by factors ranging from three to as much as ten.  (I.e., the doctor may bill $100 for a service but agree to accept a payment of just $10 from the insurer.)  In most cases this final payment amount is known in the industry as the “reasonable and customary fee.”  And even if you don’t have insurance you should not have to pay more than that.

If you ever buy medical services without insurance, make it clear ahead of time that you will pay only “reasonable and customary fees.”  Of course your first bill will probably be for the inflated amount, not the reasonable and customary amount.  I don’t know of a realiable public source for these.  I have always had some insurance, and even when it didn’t cover a particular service I have been able to call my insurer and ask them what the reasonable and customary fee should be.  They must have a secret catalog they all share.  Because I send that amount in along with a note saying I’m only paying reasonable and customary fees, and that has always been the end of the matter.

If you don’t have access to an insurer, and the billing office isn’t forthcoming with the reasonable and customary amounts, you might try contacting one of the numerous government agencies who have become involved in healthcare to ask what they expect to pay.

And this doesn’t just apply to healthcare:  I have also learned that there are industry standard fees for automotive repairs — another area where lack of information can result in bills that are many times larger than they need to be.  Here owning an extended warranty can save you the trouble of finding and applying the standard fees.  Otherwise you need to appeal to someone with access to the industry’s “Labor Time Standards” manuals, which set out the amount of time that a mechanic should reasonably bill for every conceivable service.

The value of this billing expertise is, incidentally, why I buy extended warranties for all of the cars that I keep past the manufacturer’s base warranty.  Of course, extended warranties are often an enormous profit center, so I bargain aggressively to get them near wholesale cost.

Buy a Car with CarBargains

CarBargains is a service offered by the non-profit Consumers Checkbook.  (Checkbook itself is a less political variant of Consumer’s Union, publisher of Consumer Reports.)  For $160 (plus $30 for a subscription to Checkbook if you don’t have one) CarBargains will do the thorough comparison shopping that every new car buyer should be doing himself.

Unless you are an aggressively objective shopper, you should absolutely spend this money before completing a new car purchase.  It could easily pay for itself just in the savings you will realize on dealer-installed options.

I recently tried the service for a relative.  On my recommendation he test-drove an Acura TL and afterwards allowed a cursory discussion of price with the dealer, who said that his best price would be $700 above invoice (and that even employees pay $500 above invoice).  Then we sent away for the CarBargains report.  One week later a report arrived with detailed, binding quotes from ten separate dealers in the New York Metro area.  The report also noted two dealerships that had declined to bid.  The dealer he had talked to earlier offered it at invoice, as did several other dealers.

The report eliminated all of the gaming involved in buying a car — including obscure document and advertising fees that tend to pop-up at the last minute.  CarBargains ensures that you pay a “fair” price for a new car, and that the dealer who most wants to sell it to you can get your business.

Sedan: Acura TL

The 2008 Acura TL is the finest production front-wheel-drive sedan on the market.  Perhaps because the platform is due for a redesign next year, dealers are letting them go at manufacturer invoice — which also makes this the best bargain in premium sedans right now.

The base model is sporty and has been admirably tuned to handle like the best German cars.  The Type-S is an even sportier trim with a more powerful engine and tighter suspension.  The trade-off in upgrading to the Type-S is a slightly harsher ride, heavier steering, and heavily bolstered seats that may not appeal to all drivers.  (The steering weight may be a consequence of the amount of torque the 3.5-liter engine puts out: Barring some new torque-steer countermeasure both of these cars are at the upper limit of the amount of power that can be sent through steering wheels.)

As is the custom, Acura offers very few options.  In the base model you should definitely pay for the navigation system (which is included on all Type-S variants).  With a 7″ touch screen, voice controls, and XM real-time traffic, this is the finest navigation system available on any car.

Although its shifting program is among the smoothest and most responsive I have experienced, the TL automatic transmission has only 5 forward ratios.   (This will almost surely be increased in the next design.)  Nevertheless, those ratios span a good range, giving it excellent mileage at (real) freeway speeds and still keeping ample torque on tap at all speeds.

Online Hosting: 1and1.com

Online hosting is a crowded market.  For over four years I have used 1and1.com and have found their services to be competent, reliable, and very competitively priced.  There are probably other players out there that are just as good, but with so many questionable businesses in the mix it’s hard to be sure.

I cringe every time I hear of somebody paying $35/year for domain name registration when they can get full-service registration with privacy on an ongoing basis at 1and1.com for $7/year.  Nobody should buy web services before comparing with 1and1.com.

Don’t Send Flowers, Send SpaFinder

Paying for delivery of fresh flowers is a woefully expensive gesture, especially considering what you could send instead for $50-$100.  I have yet to find a woman who wouldn’t rather receive a SpaFinder.com certificate in the same amount.  Pick one up at Costco and you can get her a $100 credit for only $80.

Online Backup: Carbonite

Online backup of your personal data is as essential as ever. A year ago I recommended Mozy for online backup, but recently its competitor Carbonite released a new version that I believe has given it an edge. I have kept 46GB of my photos, videos, and documents backed up for several months now with Carbonite.

Drawbacks to Carbonite include:

1. It won’t backup USB drives.
2. Backups aren’t encrypted (for those paranoiacs out there).
3. After trial period you must subscribe by the year, not month-to-month like Mozy.

Drawbacks to Mozy include:

1. GUI not integrated; not as easy or convenient to use.
2. Many complaints heard about restore problems.

Note: For small amounts of data you may find JungleDisk more economical.

Bump-Resistant Deadbolt Locks

Even though you realize your home is not an impregnable fortress you probably still put locks on your doors and windows.  They won’t keep a determined intruder out but they should slow him down and/or force him to make some noise to break in.  However, if you didn’t pay a premium for your locks then odds are they can be opened in seconds by even an unskilled child using a simple method known as bumping.

Granted, locks alone don’t secure a house, but they should at least put up a fight.  If you are robbed and there is no sign of forced entry you will have a hard time getting an insurance payout.

Bump-resistant locks will cost at least $100 apiece.  I bought a set of Medeco Maxum deadbolts here at that price.

Before You Talk to a Real Estate Agent (or “Realtor”)

Real estate brokerage in America is a terrible industry. A naive consumer intending to buy or sell his house will probably sign a long contract with a state-licensed broker (a.k.a. “Realtor”) that traditionally involves forfeiting up to 3% of the transaction value in exchange for questionable services. Before you even talk to a real estate broker, please consider the following:

Buyers

As a buyer, you will be encouraged to sign a contract enlisting a “buyer’s agent” to help you find a house. In spite of all the industry obfuscation to the contrary, “Buyer Agents” do not work for the buyer. Their incentive is to close a sale with as little work on their part as possible, and with a seller who will give them as high a commission as possible. Hence, as a buyer working with a broker you must keep in mind the following perils:

• They do not have an incentive to show you the best house for your needs. Rather, their incentive is to show you a smaller set of houses you are likely to buy that pay the largest possible commission to them. This means they will typically show you full-commission houses listed for sale with them or their coworkers. Then they will show you full-commission houses listed elsewhere. They may show you cut-rate commission houses. It is very unlikely they will show you “FSBO’s” or other homes with low or zero commissions, or that would require a lot more effort on their part to close.
• They do not have an incentive to help you negotiate the best price on the house you want. Their only incentive is to help you close a sale with as little effort on their part as possible. If you buy a house, it doesn’t matter what they do or don’t do: they get paid the same rate. (In fact, it may be small but technically their incentive is to have you pay as much as possible, since 3% of a higher prices is still a little more.)

Agents may proclaim that they are licensed and that they have a fiduciary duty to their clients. However, in practice this fiduciary duty guarantees you absolutely nothing. So what service does a buyer’s agent actually provide?

1. MLS searches. They will also ask you for your search criteria and will print out listings that meet those (and their) criteria. However, you can now do this yourself on the internet (and can circumvent their filters on low-commission houses). Thus, value to you of this service: Zero.
2. Local expertise. They will be familiar with the communities in your search area. But no more so than anyone else. If you are moving somewhere new you will probably know people at the new place you are going to work, study, or recreate. Ask them instead.
3. Market expertise. Skip it: When you’re buying they always tell you it’s a very tight market and you have to bid high and close fast. When you’re selling they always tell you it’s a soft market so you should be eager to accept the first low offer that comes along.
4. Referrals. They will refer you to home inspectors, appraisers, title insurers, and any other service provider you may want. There is no guarantee that these referrals are based on quality instead of kick-backs or other conflicting interests. Value to you: Zero.
5. Chauffeur service. They will setup appointments to view homes and they will drive you to them. However, you could just as easily make an appointment directly with the listing agent and drive yourself.

Nevertheless, even if you don’t value the chauffeur and appointment services, it still pays to enlist buyer agents if only because most sellers offer them a commission. And most of that commission should go into your pocket. Did you know that it is standard practice in the real estate industry for brokers to give 40% of their commission on any sale to a referring agency? This is why there are so many banks and other services out there offering rebates if you work with a broker to whom they refer you. If you take no other advice from this article, you should at least demand up front that your broker share 40% of their final commission with you.

As a buyer, how can you avoid getting ripped off by a real estate broker?

1. Do not commit to work with only one agent. Every broker will ask you to sign a contract in which you commit to giving them the buyer’s agent commission on any house you buy within a given period. This is absurd – and unnecessary. The industry is suffering a glut of brokers hungry for your business. Visit multiple brokers and tell them you will pay them if you buy a house that they show you. Working with multiple agents can mitigate many of the risks and hazards on the buyer’s side.
2. Negotiate a share of the commission for yourself. Since the standard referral rate is 40%, make it clear that you expect to receive at least 40% of any commission. Negotiate your share upward based on the amount of work they actually do to help you find and buy a house. (Note that in a traditional sale of a $2MM house they will walk away with a $60k commission. What’s a fair wage for driving you to a few houses and sitting at your side during the closing?) Note that in 12 states commission “rebates” are illegal. So in those states don’t call it a rebate; call it a subcontracting fee, partnership share, or something else.
3. Align the incentives. If you aren’t doing your own legwork in the MLS and FSBO sites to find houses you want to look at, then ensure that your broker has an incentive to show you houses that pay low or no commissions. For example, offer to pay them an hourly rate in lieu of commission for their work. Or offer to pay them a minimum “commission” if the seller of a house you end up buying does not.

Sellers

People who want to sell a house are in a less flexible position than buyers. It is practically impossible to list your house for sale with more than one agent. (It is possible to list it with no agents, but even today that all but guarantees that 95% of potential buyers will never see your listing.) Furthermore, unless you offer buyer agents a 2-3% commission then many potential buyers will never be shown your property (due to the buyer agent conflicts of interest noted earlier).

Compounding the situation of the seller is the fact that a good seller’s agent will invest a significant amount of time and money marketing the house. This results in better visibility and, statistically, a higher selling price. Agents deserve to be compensated for this work (if they do it). But there are still many bad agents who will make you sign a contract for them to list your house – often for 6 or more months – and then do nothing to market it. And why not? Even if they don’t do anything there’s a chance someone will offer to buy it during that period, at which point they get their full commission.

Seller agents face most of the same perverse incentives as buyer agents: Namely, they would rather close a deal with less work on their part than with more. Though they get a higher commission from a higher sale price, they are only seeing at most 3% of the upside. Suppose you’re selling a $1MM house. How much harder do you think your agent will work to get you $1.1MM if at most $3k of that extra $100k ends up in their pocket?

As a seller, how can you avoid getting ripped off by a real estate broker?

1. Do not sign a long-term listing contract. An agent might invest significant time and money marketing your house. They deserve to be compensated for that. However, I know top-rated agents who offer listing contracts with a 15-day opt-out. I.e., no matter what they have invested to sell a listed property, the seller can choose to opt out of their contract with 15 days notice. A good agent should offer a contract like this, since if they are doing a good job you have no incentive to take your business elsewhere. An alternative contract would allow you to opt-out if you pay their sunk costs. I.e., if you want to take your listing elsewhere make them hand you receipts and time-logs of what they have invested, pay them for their work at a pre-agreed rate, and move on.
2. Negotiate a share of the commission for yourself. Remember the 40% referral rate and use that as a starting point. You could even insist that the listing be free of any seller’s commission, and instead offer them a fixed fee, or a time-and-materials contract, perhaps with a performance bonus based on how much the selling price exceeds a fair appraisal.
3. Do offer a full 2-3% commission to the buyer agent. Unfortunately, due to the buyer agent hazards there is a good probability that if you don’t offer this incentive you will have fewer lookers, fewer bids, and ultimately a lower selling price. However, this is not necessarily unfair: If your buyers are savvy (as suggested above) then they will be pocketing a large part of the buyer agent’s commission. In essence, you can look at the buyer’s commission as a built-in discount to the selling price. I.e., if your property sells for $1MM with a 3% buyer commission then everyone involved knows that the buyer is really only paying about $970k. (Of course, this isn’t optimal since taxes and fees are typically a function of the selling price. Ideally everyone would agree on the sale and then just reduce the price by 3%. But this is the best we can do in the present conditions.)

The market is overflowing with real estate brokers. Some are very good. Many are just out there playing the lottery – hoping to pick up a listing or a buyer on a big sale and walk away with a single commission that they could live on for an entire year. The good agents will not mind contracting with you on terms like those outlined here.

Cell Phone Contract for Casual or Emergency Use

If you don’t use a lot of cell phone minutes then you probably shouldn’t enter into a service contract.  Too many people commit to spending $30 or more per month (plus inscrutable taxes) just so they can make an occasional, “I’m running late,” or, “I’m over here” call.

The best alternative is a prepaid cell service like T-Mobile To Go.  There you buy a SIM card that you can plug into any (unlocked) GSM phone and you buy minutes in advance that are credited to that card.  For $100 T-Mobile will give you 1000 minutes that will last up to a year.  If at the end of the year you haven’t used them all you can spend as little as $10 to buy more minutes and your entire balance will carry over for another year.

Not only can you buy this service without the hassles of a credit check, but you also enjoy freedom from any future bills or charges.  If you don’t want or need the service you can just throw away your card, or sell it with its balance to somebody else.  Be aware that the cheapest 2-year cell contract will probably cost a total of $700 (hard to tell with all the taxes and surcharges they keep adding — not to mention the billing errors that always seem to be in the phone company’s favor).  In contrast you can keep T-Mobile To Go for 2 years for just $110 plus sales tax.  And in my three years with this service I haven’t had any unpleasant surprises.

The best way I found to buy T-Mobile To Go is at Costco, where last week I got an activated SIM card and a current-generation slim Samsung t219 phone for just $20 after rebate!

Steel Penetration of .223 bullets

Here is what happens when you shoot 5/16″ steel plate with various rifle rounds from 25 yards.