Purchasing Power in Nickels and Dimes

The U.S. Postal Service is branching out. The service has been running a test program of delivering groceries in the San Francisco area, and just won approval to keep the program going for another two years.

The goal is to eventually roll out grocery delivery to other towns, like Las Vegas and Phoenix.

Obviously, the Post Office is looking for ways to earn additional revenue without raising the price of postage. Given that the service keeps running at a deficit, the desire to provide more services is understandable, but misdirected.

If they really wanted to fix their revenue problem, all they have to do is take a page out of the health care industry’s playbook.

By most accounts, the growth rate for health-care spending has been edging lower for years. The 9% growth rate of the 1990s and early 2000s has given way to growth rates under 4%.

Everyone in government seems to be crowing about this, but from the standpoint of the consumer, the moderating costs are hard to reconcile.

Maybe it’s because our costs haven’t actually flat-lined; they’ve just shifted from one provider to another…

Instead of paying our health care dollars to insurers, we now get the pleasure of paying insurers, providers, plus a host of other people we didn’t even know existed for services that were previously included.

A recent trip to the doctor illustrates the point. Instead of paying the doctor for an office visit where he examined an injured shoulder and administered a shot, now patients get the joy of paying for the office visit, paying for the medicine and paying for the administration of the shot.

If a medical condition requires a trip to the hospital, then all bets are off. While the facility might be “in-network,” chances are the emergency room doctor is not, since a majority of these physicians are contract workers.

So the patient pays the triage level fee to the hospital (this fee estimates the acuteness of the problem, the more serious the condition, the higher the fee), the fees for any services rendered by the hospital (shots, x-rays, medicine administered, braces, slings, etc.), and then a separate, typically four-figure bill to the physician.

The trend is obvious. Take items that were covered by previous billing, separate them out, and charge for them. Voilá! The basic charge hasn’t been increased, therefore costs are contained and yet consumers still have to cough up more money for the same service.

I fully expect doctors and hospitals to start charging diagnosis fees, explanation fees, appointment reminder fees, appointment or admission fees, etc.

And this trend is occurring outside of health care as well.

Baggage fees? Really? My bags, I’m guessing, always flew with the plane. The cost of transporting me was actually the cost of transporting me and my bags. Only now, they are charged separately.

Spirit Airlines in the U.S. gets the award for the most fees, since they charge for bags, seat assignments, snacks, and now carry-on items. But hey, their tickets fares are low, so there’s no inflation or cost increases in air travel!

How about cellphones?

With a family of five, I’m pretty up to speed on cellphone replacement. When I recently called Verizon to replace a phone, I was informed that the phone I requested was available for free with a contract renewal.

As we went through the process, the representative eventually asked if I wanted to put the activation fee on the monthly bill or use a different payment method. I asked: “What activation fee?” He told me it’s part of the upgrade.

I replied that, in that case, the upgrade wasn’t free as it required me to pay something. And not only did I have to pay something, but I was being told to pay for something I had to do once the phone arrived!

Which brings me back to the post office…

They’re going about this all wrong. In the spirit of the new business culture in America, the postal service should simply implement home pickup fees, sorting fees, and delivery fees. We all want our mail picked up, sorted, and delivered, right?

That way the cost of a stamp could remain the same for many years, bypassing any nasty claims of inflation or higher costs, and yet it would still mean that consumers pay more.

I guess the last few words sum it all up … consumers pay more… no matter what we’re told by government statistics, the claims of politicians or slick advertising.

 

 

 

 

Rodney

 

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Categories: Purchasing Power

About Author

Rodney Johnson works closely with Harry Dent to study how people spend their money as they go through predictable stages of life, how that spending drives our economy and how you can use this information to invest successfully in any market. Rodney began his career in financial services on Wall Street in the 1980s with Thomson McKinnon and then Prudential Securities. He started working on projects with Harry in the mid-1990s. He’s a regular guest on several radio programs such as America’s Wealth Management, Savvy Investor Radio, and has been featured on CNBC, Fox News and Fox Business’s “America’s Nightly Scorecard, where he discusses economic trends ranging from the price of oil to the direction of the U.S. economy. He holds degrees from Georgetown University and Southern Methodist University.