Buy Now, Pay (or regret) Later

Usually on Black Friday I write about perspective – that any deal on electronics is not worth the life of the person trampled in the stampede. Another aspect of perspective is appreciating what we have and not constantly yearning after more or bigger or newer. The problem is that understanding the difference between wants and needs is only a first step. It must be followed by the discipline not to ignore reality by buying something anyway, especially something you can’t afford.

What seems to be catching on today is a new gimmick called point-of-sale installment loans. “This holiday season, it's not enough to spot a great Black Friday deal on a big screen TV or a sweater. You need to consider whether you want to take out a loan at the checkout, too.” 

That’s right; shoppers no longer need to go to a bank for a loan to buy something they can’t pay for. An installment loan at checkout breaks the cash register receipt into a number of easy monthly payments. That service is now available at Wal-Mart and at many other retailers, both brick-and-mortar and on line. And installment loans are expected to be “hot this holiday season, as retailers attempt to drive sales and shoppers demand easy-to-understand credit.” Retailers are partnering with finance companies to give shoppers these loans, even to people who might not qualify for regular credit cards. Instead of paying at the time of purchase, shoppers can take the items home and pay in 3, 6 or 12 monthly payments.

This is not a new idea, but was usually limited to big-ticket items. Furniture stores have used it for years. The problem is that the eventual monthly payments add up to more than the original price – sometimes 20% or 30% more. 

Not paying cash at checkout is not new either. Credit cards made that possible years ago, and both arrangements involve interest. But shoppers generally ignore the interest in light of the convenience and recognize some advantages over credit cards. Installment loans have no late payment fees, which are a big revenue source for credit card companies, and people tend to like the idea of a predictable, fixed amount each month.

It really is the same idea as a mortgage or car payment, but now the idea is moving downstream to less expensive purchases. Another source says installment plans have a “wide appeal but resonates most strongly for debit users. Four-in-ten would consider using an installment plan for everyday purchases like groceries and household items.”

An American Banker article has another explanation for the trend; “many younger Americans are uncomfortable carrying credit card balances, partly because they saw their parents struggle with debt during the financial crisis and prefer the more certain repayment terms of installment loans.”

This brings up a few issues. First, the financial problems of the parents of younger Americans were not the fault of the credit card. They were problems of discipline and perspective. Going into debt in a different way is no guarantee of success. Since installment plans have no late fee, what do they do instead, send debt collectors or repossess the sweaters and Christmas toys? (This is not addressed in any of the stories.)

In effect, this is just another marketing ploy to get people to spend money they don’t have. The example in one of the articles was of a woman who bought tires from Wal-Mart. She was all right with paying the $644 in three monthly payments of $224, but she “doesn't remember the interest rate.” (It’s about 18% APR.) In this case, tires were probably a necessity, but sweaters, purses and toys?

All this is happening while U.S. household debt, according to Motely Fool, reached $13.54 trillion earlier this year, “an amount that has risen for 18 consecutive quarters.” 

Wake up America; debt is debt! Have a happy Black Friday, but don’t do anything foolish.

Food Labels are Confusing

It began with a local health-news report that led me to the Consumer Reports website. The problem: Food labels are confusing. Not all claims and seals on food packaging can be trusted. 

Consumer Reports wants to help shoppers by making sense of some of the more common labels. But the labels they refer to are the ones designed to lure uninformed shoppers, enticing them to pay more for imaginary benefits like all-natural, non-GMO and organic.

I’ve written before about the science behind GMO foods and organic growing practices. Genetic modification acts as a short cut to the crossbreeding that has been practiced in farming for thousands of years. In some cases it will be the only way to save certain crops from going extinct due to diseases or pests. Organic produce has been tested and found to be marginally cleaner than traditionally grown crops, but if you wash your fruits and vegetables before preparing them, as everyone should, it makes no difference. (See the links for a fuller explanation or enter GMO or Organic in the search box in the upper left of this screen.)

Consumer Reports lists 6 seals of certification rated from fair to excellent: Grass Fed, Certified Humane, Animal Welfare, Non-GMO Project Verified, United Egg Producers, and USDA Organic. A deeper dive tells more about the certification process of each. For example, United Egg Producers Certified is rated fair overall for being very good in terms of verification but poor for animal welfare. Three labels are rated poor: Natural or All Natural, No Antibiotics, Non-GMO.

At a local grocery store I found seven different varieties of large eggs. Prices ranged from $1.09 for one dozen generic eggs in a gray container to $5.79 for a dozen labeled as organic and pasture raised. Priced between them were the cage free; cage free brown; free range; and the no-hormone, no antibiotic eggs. Apparently people will pay five times more for eggs to be reassured that the hens were leading a happy life, frolicking in a pasture. Of course, there is no label to tell how the hens are treated after they reach their 5- to 7-year period of peak production.

These decisions are mostly made by people who have never seen a chicken, pig or cow close up or visited a farm. They get their news from websites like this one that claims “rearing of farm animals today is dominated by industrialized facilities…that maximize profits by treating animals not as sentient creatures…” Each animal, according to them, is a “social, feeling individual capable of experiencing pleasure. The vast majority, however, are only familiar with deprivation, fear, and pain.” (Perhaps they called in an animal psychic or Dr. Doolittle to confirm this statement.)

Another site, with a more realistic and less of a concentration camp concept of farms, contradicts the factual part of the above statements. “About 98% of U.S. farms are operated by families – individuals, family partnerships or family corporations (America’s Diverse Family Farms, 2018 Edition).”

 Is this another form of virtue signaling, paying almost $6 per dozen for eggs because we care so much about chickens we will never meet? It’s no wonder that earlier this month the headline read: Consumer debt reaches record-high of $14 trillion.” As long as the cows, pigs and chickens are happy, what’s five dollars here and there?

Perhaps instead of trying to make sense of the seals and claims to help you understand the meaning behind them, Consumer Reports should have published the fact that most of those are simply marketing tactics playing on the egos, guilt and fears of consumers following the popular sentiment of the day.

What comes in the next issue, how to buy the right saddle for your unicorn?

It Doesn’t Take Much

A number of weeks ago, one of my loyal readers sent me an email with this excerpt of an article on homeopathy saying I might find it interesting. 

“Something like 5 million adults and 1 million children use homeopathy, remedies that, in fact, contain no discernible amounts of the active ingredients…. Analysts project that the global market for homeopathic treatments will rise 12.5 percent by 2023, and already it’s a $1.2 billion industry. People are beginning to feel cheated: a nonprofit suing Walmart and CVS for hawking such snake oil conducted a survey that found 41 percent of people feel negatively about homeopathy when they learn about the pseudoscience behind it.”

I did find it interesting. I was familiar with the lawsuit mentioned and had referred to it earlier. But this time what struck me was the data from the survey. If 41% are willing to change their minds (and feel cheated) when presented with the fact that there is no science behind homeopathy, that means 59% were unmoved even in the face of good evidence. They were that strongly committed to their opinions. From a critical thinking standpoint, this is very disturbing. Why look for evidence just to ignore it?

My reader thought that those 59% were in trouble, but I responded that we are all in trouble. When more than a majority hold any particular opinion, it is so easy for that to become policy. Cowardly politicians, primarily interested in job security, will go along with any crazy idea.

This phenomenon is not limited to homeopathy or alternative medicine. When I looked through articles on the Post Truth Culture and ignored those that spin the erroneous notion that it began with the Trump presidency, I found this interesting opinion piece arguing that the source lies in the ideas of individual freedom and the trend toward personalizing every experience: especially things like clothing, entertainment and tattoos.

“If you take this culture of hyper-individualism to its extreme, one might come to believe that we have the right to believe whatever we want, to – even if those beliefs are immediately provably untrue… Freedom to believe in one's own, individual universe; freedom to pick and choose facts, and discard those that are disagreeable.”

So we continue to see headlines like this one from last month: “Kindergarten Vax Exemption Rates Up – Again.” The science doesn't matter when people can personalize reality.

Likewise in politics, some recent research shows that “party identification bests ideological identification. And most people will stick with their party long after they’ve abandoned their ideology.”

Critical thinkers would work out their ideological beliefs first and then support the party or candidate that best fits them. They would begin by deciding where they stand on issues before committing.

“The truth, it seems, is closer to the reverse: We choose our party for a variety of reasons – chief among them being the preferences of our family members, core groups, and community – and then we sign on to their platforms.” 

What’s even scarier than this total disregard for information and facts by vast numbers of people is that it takes only a few people, not close to a majority, or a few incidents to incite calls for new laws or even mob action.

In one example, in response to the death of an Indiana woman from strangulation by her pet boa constrictor, the Humane Society of the United States called for legislative action. The news item tells, “at least eighteen people have died from large constrictor snake related incidents in the United States since 1978 – 13 of those since 1990. If less than one death every two years calls for a new law, what of the 350 children who drown in swimming pools each year? 

Another is the legal battle between Oberlin College and a local bakery featured on CBS Sunday Morning. A shoplifting incident by an African American student led to protests and accusations of discrimination and white supremacy, resulting in a substantial loss of business for a local family-owned store. All it took was a few activists using social media to spread a slanted story.

There are so many other examples where a minor action, incident or comment gets people up in arms, demanding changes, revenge or satisfaction, often based not on the facts or intention, but on the firm beliefs of the group. No amount or logic, reason or science will persuade them to change their minds.

Words Matter

I don’t watch many ads on TV, but I happened to see this one near the end of a football game last week. It was one of those public relations ads from Exxon Mobile telling what a wonderful job they were doing developing biofuel from algae. Someday this fuel will be used to power planes, ships and trucks “and cut their emissions in half.”

Wait a minute; something is not right here! Biofuels are carbon-based. When they burn, they emit mostly carbon dioxide. The only way to cut emissions in half is for the same amount of fuel to produce twice the energy as traditional diesel or jet fuel. That involves a factor called energy density.

Now biofuel is generally good. It comes from plants that extract CO₂ from the atmosphere. When biofuel burns it releases the same CO₂ back into the atmosphere, so it is considered to be carbon neutral. 

The downside is that first generation biofuels, such as ethanol, are produced from edible crops. They require a lot of space to grow and a lot of energy to plant, harvest and transport.

Biofuels processed from algae are a second-generation biofuel, similar to fuel made from the inedible and discarded part of a food crop, such as cornhusks or switch grass. The advantage is that food and fuel do not compete with each other, as when ethanol is made from corn.  And the production consumes “small amounts of energy while producing considerable fuel output.”

Other advantages are that algae production is efficient, in that, it can be grown “in almost any climate thanks to the open- or closed-tank approaches that are available today. As long as we can provide this natural product with enough sunlight to create photosynthesis, then it has the capability to grow quickly.” It is a renewable energy source that can be refined into a variety of products, and it can yield almost five times more fuel per acre than sugar cane or corn.

Two major disadvantages according to the same source are that it currently requires about 20% more energy to grow than it yields and production cost is still higher than the alternatives.

Exxon Mobile confronts the skeptics by citing partnerships with several major universities and a private firm to use gene technology and other research to build on the advantages and overcome many of the disadvantages. It looks promising, but they still “face some significant technical hurdles before biofuels production from algae will be possible at a significant commercial scale.”

The question remains about the claim of half the emissions. All fuel from wood and manure to jet fuel has a characteristic called energy density. “Energy density is the amount of energy stored in a given system or region of space per unit volume or mass.”  Gasoline has an energy density of about 45 megajoules per kilogram (MJ/kg). “Ethanol produces 30 megajoules/kilogram.” For that reason, a car will go farther on a gallon of pure gasoline than it will on a gallon of ethanol or any mix of ethanol and gasoline. Adding ethanol at the pump reduces MPG.

This 2011 paper from Stanford gives the energy density of algae-based biofuel at 20-25 MJ/kg, about half that of gasoline. Even if the research at Exxon Mobile’s partners could double it to equal that of gasoline or diesel, it would still be far short of their claim of cutting the emission of planes, ships and trucks in half. 

Deeper reading at the Exxon Mobile site gives the answer: “If key research hurdles are overcome, algal biofuels will have about 50 percent lower life cycle greenhouse gas emissions than petroleum-derived fuel.” The saving is not in emissions but in the energy expended during the entire production and delivery process.

The claim in the ad is inconsistent with that explanation thus is really inaccurate. Perhaps the advertising firm misunderstood, or the company just dumbed it down for football fans. In either case, I love it when I’m right!

Real American Solutions?

What are the real American solutions; what is real about them, and what are they solving?

First, what needs solving? The problem is that Americans are not satisfied with the direction of the country. This link leads to a graph of weekly Gallup Polls (with the data points below) showing “satisfaction with the way things are going in the U.S.” from 1979 to the present. Unfortunately the graph is split into quintiles and has no 50% line making it hard to see a majority. But it would be reasonable to expect that if at least half the people are satisfied, we are doing OK.

The last time the number on the satisfied column reached even 40% was July 2005. We are going on 15 consecutive years with 60% or more dissatisfied. Herein lies the problem.

Furthermore, what are people dissatisfied with? The list is a familiar one and never seems to change: the obesity epidemic, retirement insecurity, drug and alcohol addiction, teen smoking and vaping, declining educational system and student performance, sleep deprivation, consumer fraud, smartphone addiction, science illiteracy, spiraling healthcare costs, deceptive advertising, media-driven fears and hype, health and financial scams, income inequality, frivolous lawsuits, gun violence, the demonization of big business and many more.

Life continues to grow more complex. Our children must be protected from Internet predators, school shooters, violent videogames, drugs, too much screen time, tobacco, faulty highchairs and car seats, laundry soap and other household chemicals, dangerous toys and insufficiently padded playgrounds. Adults must to be warned about the dangers of ladders, power tools, tobacco, alcohol and texting while driving (or walking). Students’ science and math scores are declining. Americans are eating too much, spending more screen time amusing and competing for attention on social media causing them to become angrier and more isolated and spending more money than they earn. Advertisers seem to invent new problems as quickly as they try to con us into buying their miracle products to cure the old ones.

It’s not just President Trump’s fault. The Gallup graph spans the administrations of eight presidents and 20 congressional elections. We seem to keep asking government to fix it; but if government could fix it, we should see some evidence of at least some progress over the past 40 years. In fact, government has been fighting a “war “on poverty and another on drugs for longer than that with nothing to show for it but a stable poverty level and an opioid epidemic. Government got involved in student loans and mortgages to what end? Government is the wrong American solution!

A careful review of the problems shows that most of them are caused by individual behaviors resulting in poor individual problems. The only reason they become national problems is that they spread and accumulate across society. People eat too much, spend too much and fall for advertising tactics, not because of the government or any other outside agent. They make choices. Make the opposite choice and get the opposite outcome, a favorable outcome.

As evidence of this, twice a week for almost 450 weeks, I have been giving examples of how unwise behavior in one or more of the five key behavioral dimensions leads to unhappy consequences, many of which are listed above. Wiser behavior in those dimensions may not solve everything, but it’s an excellent place to start. We can think and act our way out of most of those bad consequences, which is far superior to sitting back and waiting for someone else to bail us out, especially after seeing few positive results over the last 40 years.

Pursuit of Happiness?

Last week the news broke that Americans spent about $9 billion on Halloween. That’s over twice the budget of the entire National Park Service and included almost half a billion dollars on costumes for their pets.

My first thought on hearing this was that people must be feeling pretty good about their life and their personal economic situation if they are willing to spend so much celebrating what years ago used to be a time for homemade costumes for kids going door to door. Now it has become a full-fledged manufactured holiday along the lines of Valentines Day. 

The overall spending level on Halloween has been consistent for at least the last eight years.

But the original story decries it as out of control consumerism. The writer labels that much spending on a non-holiday as a sign of conspicuous consumption. “Conspicuous consumption is designed to show others you are rich, smart or important.” It used to be a case of having a bigger house or fancier car than the neighbors. Today it’s having a better picture of themselves or their pets on Facebook or Instagram and garnering more likes.

That is also the conclusion of this Fox Business article: “Social media 'pressure' drives Halloween spending.” Their conclusion is based on a survey showing that “48 percent [of millennials] admitted to purchasing Halloween items solely for posting online, and four in ten millennials felt a lot of pressure to spend that money.” They were not alone. Over thirty percent of the generations that bracketed them admitted to having the same motivation.

This idea of conspicuous consumption goes beyond dressing up for selfies as this Forbes article explains in: “What Handing Out Full Size Candy Bars on Halloween Says About You, According to Behavioral Economists.” Stores this year were stocking more packages of full-size candy bars in anticipation of the pressure to out-do or at least keep up with the neighbors. “Your Halloween treats can signal not just what you have, but aspects of your character, such as your generosity.” It’s about social signaling, how we try to shape what others think of us.

This whole dynamic, too, is amplified by social media, the way it sets expectations and the way it makes the spread of a reputation, positive or negative, so much faster and easier.

So it’s conspicuous consumption, a sign of insecurity, that drives people to dress the dog like a cat or a box of cereal. It doesn’t sound like they are spending for the sake of a good time or to celebrate happiness at all.

Finally, this Washington Post story from last March confirms that notion: “Americans are the unhappiest they’ve ever been, U.N. report finds.” The US dropped for the third year in a row to 19^th place among 156 countries in the United Nation’s World Happiness Report, an annual ranking of overall happiness. 

“By most accounts, Americans should be happier now than ever,” writes Jean M. Twenge, one of the report’s co-authors. “The violent crime rate is low, as is the unemployment rate. Income per capita has steadily grown over the last few decades.” It’s hard to believe, except that the news media rarely reports this type of good news. Instead they dwell on the negative, the scary and the sensational to incense the audience and attract clicks and eyeballs. 

Commenters on the report blame the trend toward unhappiness in part on the rise in addiction, but isn’t that more of a symptom than a cause? Is it an increase in screen time, activities that have been linked to increases in depression?

Perhaps one key can be found back in the full-size candy bar story. “Our satisfaction is very subjective…it’s not absolute, but driven by what we expect.” Expectations are set by perspective. If we lack perspective we allow others to judge us and set our expectations, and that can only lead to unhappiness.

Staying Conscious

Last time I explained how people tend to make decisions based on how they are feeling 95% of the time unless they make some effort to stop and think things through. The 5-second countdown trick is one way to pause, to slow down the process and avoid impulse decisions. 

We must be always alert because everyone trying to sell something takes advantage of this tendency to make decisions based on feelings. They play to our subconscious. 

Shortly after that I ran across a related article. It was called “Don’t get fooled or conned again” and presents five more tactics or techniques people or companies use “to get us to do what they want.” In most cases that means buy a product or service, but it may also mean adopting a particular political point of view.

Some of these tactics are obvious, like promising to send a huge windfall, but asking for a handling fee or a bank account number to get the process going. Most of the tactics though are common but more subtle, like offering a third item free when you buy two, even when two or three is much more than you need.

The tactics, referred to as superpowers, begin with understanding that the process of being fooled takes place inside your mind. If you are not alert to what is happening, you can be manipulated to buy whatever they are selling. "They’re trying to sell you on a story, to get you to buy into their narrative.”

The first is misdirection. Misdirection is why “companies and governments often release bad news on Fridays or before major holidays” when they know we will be distracted.

Next come time pressure and opportunity. The two are closely related. We are presented with a limited time to act or a limited number available. Any special sale or limited time pricing falls into the time pressure category. Car dealers have sales with catchy names near the end of each year with artificial deadlines, think Toyotathons and Happy Honda Days. Sometimes they combine the two by saying the sale is over at the end of the month or when they have sold a certain number.

Made up days like Black Friday and Cyber Monday also are examples. Estimates for this year are that those two days will result in sales of $12.3 billion (a 25% increase) and $9.48 billion (up 20%), respectively. And some companies have already started Black Friday promotions, so be careful to think first. Something you didn’t want or need is not a bargain, in spite of the great price.

The last two tactics are also closely related. “Social compliance refers to how we respond to people in authority” whereas “Social proof refers to how we constantly look to others around us for clues as to how to behave.” Both are powerful. Social compliance comes when encountering someone either with authority or perceived authority, such as a recognized expert. Examples include a treatment or pill advertised with a doctor’s endorsement or advice from TV doctors, who depend on hype to keep the audience engaged.

Social proof comes from the many customer endorsements (instead of evidence) in those same ads. It explains why when one person begins to applaud, the rest tend to join in. It drives much of the behavior on social media where likes draw more likes and people tend to congregate on line with others who share their philosophy. 

In one study in 2011, a cognitive neuroscientist at Temple University exposed 32 teens to a series of Instagram photos while they were in an MRI machine. They mixed them with other pictures and randomly assigned ratings. The teens were allowed to like a photo or pass. “Teens were much more likely to like images that seemed popular [and] skip pictures with few likes. And the brain's reward pathways became especially active when the teens viewed their own photos with many likes.” That is how social proof works on both teens and adults, likes draw more likes and memes go viral with hardly the firing of a single brain cell.

The article presenting the five tactics concluded: “Be careful when you feel emotionally moved by the headline, and be even more careful when you agree with the headline or when the headline makes you happy, because that’s when you need to watch out.” The best defense against being fooled and conned is critical thinking.

New Thoughts on an Old Idea

Looking through my various news feeds, I came across a recent reprint of an article published at Inc.com in 2017. It was called “How to Change Your Life in 5 Seconds” and gives a simple tip on how to avoid procrastination. By merely counting backward from five to zero, mimicking a NASA countdown, you can overcome the inertia that results from feeling unmotivated to do whatever comes next in life, simple decisions like getting out of bed or starting a project.

The thought behind the countdown suggestion references a Harvard Business article from four years earlier that, in turn, presents an interview with a Harvard professor who published a book in 2003, How Customers Think: Essential Insights into the Mind of the Market. The book is about how to ensure your marketing message gets through to potential customers, based on years of research and “drawing heavily on psychology, neuroscience, sociology, and linguistics.”

So what does that have to do with procrastination, or anything else for that matter? The key discovery is “that 95 percent of our purchase decision making takes place in the subconscious mind.” In fact he suggests, “95 percent of all cognition occurs in the subconscious mind.” In terms of buying behaviors, we leap before we look. Decisions in general are not based on logic or rational thought. “They're based on emotion, on how a person feels about the action.”

It follows that if you give yourself time to think about not feeling like getting out of bed or not feeling like doing whatever needs to be done next, the result is procrastination. The countdown is a conscious effort to block those feelings and, in those 5 seconds, it’s possible to be out of bed already or taking the first step toward any other task that lies ahead.

But this practice could go beyond the simple, everyday decisions. According to the original source, the same appears to apply to buying decisions as well – and we don’t only buy material goods, we buy ideas and opinions.

Take as an example the common tips for selling a house. Some include: half-empty closets; turning on all the lights; clean or new curtains, door handles and cabinet hardware; inexpensive shrubs and brightly colored flowers for curb appeal; cut flowers or cookies in the entryway instead of the more typical coatracks and key hooks. All this is superficial. It targets the emotions, the feelings, the 95%. It’s manipulative, and it works.

This goes far beyond buying a house. Retailers study how they can get us to buy more: One site lists 15 tricks such as:

• Oversized sales signs;
• Shopping carts at the entrance to inspire larger purchases;
• High profit items at the front of the store so you have walk past them to get to essentials, which are in the back of the store;
• Most profitable items at eye-level;
• Music to make shopping fun;
• Plenty of elbowroom;
• Customer rewards cards;
• Low-cost impulse items at the checkout; and
• Limited time offers, vanity sizing, and other psychological tricks.

One age-old piece of advice to overcome these mind games is to make a shopping list (of items, or features in the case of a larger purchase like a house or car) and stick to it. Also, what if everyone did a countdown before putting something in the cart? What if everyone did a countdown before driving into the car lot? What if everyone did a countdown before believing what we hear or see on social media, on ads from purveyors of health and beauty miracle products, on the national news or in political speeches? 

Use the countdown trick as a safeguard to buy just enough time to let the critical thinking kick in. Make it your trick to defend against their tricks. Use it to protect yourself from the marketing ploys and emotional appeals aimed at that vulnerable 95%.

Medicare for All – Part 2

With all the campaign promises about Medicare for all, I took the opportunity about two months ago to explain how Medicare actually works. Politicians give the impression that it’s a totally free health insurance program. Just walk into the doctor’s office or emergency room, tell them your number, get fixed up and leave with no expectation of receiving a bill. 

Real Medicare today is not like that at all. Why would they spend time on TV and in mailings advertising supplemental insurance that “helps pay some of the health care costs that Original Medicare doesn't cover, like: Copayments, Coinsurance, Deductibles”? Those extra costs can only be avoided by paying money up front as a premium for the additional insurance.

From recent news, though, it’s clear that this misimpression is not the only problem. Medicare fraud is another big issue. Sometimes this is a critical thinking issue where patients are lured in as unwitting participants. Sometimes it goes deeper.

Late last month, thirty-five individuals associated with dozens of telemedicine companies and laboratories were charged with fraudulently billing Medicare more than $2.1 billion for expensive cancer genetic tests. Nine of the defendants are medical doctors. “In addition, the Centers for Medicare & Medicaid Services, Center for Program Integrity (CMS/CPI), announced…adverse administrative action against cancer genetic testing companies and medical professionals who submitted more than $1.7 billion in claims to the Medicare program.”

One of the defendants in this case, who cost taxpayers more than $1 billion in illegal Medicare reimbursements, “has been under near-constant federal scrutiny for the past five years and was supposed to have been deported more than a decade ago.” That was billions lost to fraud as a result of only one investigation, due in part to government inaction.

Meanwhile, the U.S. Department of Health and Human Services Office Inspector General has issued an alert to the public about other genetic testing schemes. Medicare eligible patients are offered a free genetic screening for undetected conditions, but the real motive is to get their Medicare information “for identity theft or fraudulent billing purposes.” The screenings are unnecessary and are usually denied by Medicare. When they are, the individual could be responsible for the entire cost of these useless tests, sometimes thousands of dollars. 

They get nothing but the promise of some new information about their health with the selling point that, as Medicare recipients, it may be free to them. This promise of something for nothing – free testing or free devices all paid for by Medicare – is used so often it’s beginning to sound stale, but it must be working.

Advice from the Inspector General is to not volunteer any information to these genetic testers, don’t stop at their booths at health conferences, ignore their ads, and return unopened any testing kits received in the mail.

Medicare fraud is a huge problem. The AARP reported in March of last year “roughly 10 cents of every dollar budgeted for the giant health insurance program is stolen or misdirected before it helps any enrollee. Looked at another way, about $1,000 is lost per Medicare member through theft or waste each year.” That estimate is based on government reports, but a leading expert from Harvard University believes the real number could be much higher, 20% or more.

AARP used the figure of $60 billion in fraud for the 2018 calculations cited above. Other sources show exactly the same estimate for 2015 and 2011. The number hasn’t changed in eight years. Apparently as fast as they can lock people up or put them out of business, more fraudsters spring up to take their place.

Would the general public as a whole be less likely to become victims of Medicare-for-All fraud schemes? That’s doubtful, and it leads to so much waste.