The Oil Change Co-Pay

July 6, 2012
By eric

If using insurance to pay for everything is such a marvelous idea, why not expand the concept? How come, for example, we tolerate paying for tire rotations and oil changes out of pocket?

Why not carry Car Maintenance Insurance (CMI) instead? Wouldn't this make owning a car more affordable? More fair?

Is it not outrageous that so many millions of Americans aren't covered?

I've asked people who defend Obamacare about this. They immediately see the silliness of using insurance to cover minor routine car maintenance. But somehow, they don't connect the logical dots and grasp that the same reasoning applies to minor routine maintenance of one's body, too. People in this country didn't always whip out an Aetna or Blue Cross card – and fill out myriad Byzantine forms – when it was time to settle up with their doc. They opened up their wallet or their purse and handed the man (or his nurse/office manager) a $20. There was no need for an entire staff of sour-faced fraus to handle the endless reams of paperwork – each paper-rustling sour-faced frau costing the doc (and thus, you) a considerable chunk of change.

There was no army of cube workers down the line processing your paperwork – and doing all in their power to dodge the bill and send it back to you.

It was a pretty good system. It still works pretty well, too – when it comes to fixing our cars. We carry insurance for catastrophic – or at least, major – events. But we don't - yet – expect – CMI to cover our next $29.99 oil change or tire rotation. Because most people still seem to understand that it would drive up costs – and not just a little bit – because routine maintenance is, well routine. It's going to be necessary. One hundred percent certainty. Which in the context of insurance means it would be madness to use insurance as a way to pay for it. Because the whole point of insurance is to reduce the cost of the relatively isolated catastrophic event by pooling resources. One hundred people pay in – in relatively small amounts – to defray the cost (at a reasonable cost to each person paying in) of a loss or damages incurred by a relative handful. Most of the people paying in don't take out – collect a payment. They pay in to insure themselves against the possibility of having to deal with a huge bill for something unexpected – something they hope will never happen. And which very probably won't happen.

This is what makes insurance make economic sense.

But if it is known going in that everyone paying in will also expect a payment – that the insurance will be used to pay for everything, no matter how minor and not just the unexpected exceptional event – well, now you're just playing a variant of musical chairs.

Only when the music stops playing, none of us have a place to sit.

What good does it do me to use insurance to pay for an oil change when the cost of that insurance is much higher than the amount I'd be paying if I just paid for such routine maintenance out of pocket? Sure, I'm "covered" – but that's not much security (a treasured thing in the Age of Clover) when said coverage is unaffordable. And as a consequence of which, the services rendered are inexorably rendered less often as those rendering them do their best to staunch the financial hemorrhaging.

Which is precisely what has happened as regards "health care" – precisely because people have become accustomed to not paying for "routine maintenance" directly, out of pocket, as they would – as they still do – when it comes to their cars.  They see the seemingly inexpensive $20 co-pay and think happy thoughts about affordable care. That they are "covered."

They universally neglect to consider the annual fee – typically in the many thousands of dollars – for the insurance itself.

It never occurs to them, apparently, that it might be a better deal to pay $50 out of pocket when Junior has the sniffles – instead of $4,000 a year for the covers-it-all insurance. That they'd have money in the bank – as opposed to their money in the insurance company's bank account – if they paid for the small stuff themselves, directly – cutting out the expense of all the middlemen involved in the transaction when insurance is involved. If they only used insurance in extreme circumstances, to cover the big ticket items – the unforeseen, unlikely occurrences that may occur – but which usually (for most people) don't.  Then, their overall costs would be much lower – simply because they're not paying for everything for everyone -  just some things for some people sometimes.

They get it when it comes to their cars.

They pay their wrench directly. He gives them a bill, they settle up – it's done. The wrench does not need a front office full of sour-faced fraus – each frau costing him $40,000-plus a year in wages and benefits – to deal with make-work paperwork over an oil change or a tune-up. As a result, he is able to charge less for the work he does – because there's much less overhead.

Specifically, there are fewer useless eaters to feed.

Just imagine how much an oil change would cost if your mechanic had to have that office full of fraus. If he had the overhead that your doctor has. If every little thing launched reams of paperwork – as opposed to a simple invoice, a receipt – and a thank you for your business.

If  oil changes were "covered" – a la routine visits to the doctor – people would probably avail themselves of oil changes more often as opposed  to when necessary. And they would probably be more likely to abuse – or at least, neglect – their cars.

After all, the repairs are "covered."

But it'd cost us all a small fortune – for even the small stuff.

This is exactly what's happened with regard to health care. And instead of addressing this fundamental – and should-be-obvious – problem, the problem has been institutionalized and made the very basis of the whole sorry program.

Math skills – and common sense – are in short supply these days.

Which is why we got HMOs. Which led inevitably – inexorably – to the idea of Obamacare for the innumerate and economically illiterate.

Just wait until the idea is applied to car "health care."

Because it's coming, too.

Throw it in the Woods?

http://ericpetersautos.com/2012/07/06/the-oil-change-co-pay/