Letter From Washington: No Fault, No Bailouts, No Buses

by Eli Lehrer on March 1, 2011

photo by pizzodeviso/Flickr, used under a Creative Commons license

Plans to revise Florida’s Personal Injury Protection (PIP) have begun to move forward in the Florida legislature.

PIP, or “no fault”, provides a limited benefit (mostly for injuries suffered during car accidents) regardless of who was at fault. People with PIP file claims against their own insurance company in all cases—even when someone else was at fault.

There’s enormous evidence—growing numbers of clinics that do only PIP claims, actual proven fraud cases—that fraudulent PIP claims are a problem in Florida. Industry-supported plans, which seem pretty well designed, would try to crack down on this fraud and limit attorneys fees for PIP related cases. Clearly government has a duty to prevent PIP fraud and a lot of the fees do seem excessive.

(For the other side, here’s a piece from a lawyer who handles PIP cases.)

It’s not clear to me why PIP should be required at all for people who have health insurance. I can think of at least four reasons for this.

First, all health insurance policies after all, are “no fault,” group policies can almost never be canceled within the policy term, and all health policies provide coverage for things like willful negligence even in cases where auto insurance might not. Thus, the speedy resolution offered by PIP is already implicit in health coverage.

Second, since they have far more monopsony power than auto insurers, health insurers can almost always bargain more with hospitals about reimbursement rates and, in general, cover the same things for less money.

Third, health insurers also have better systems, one assumes, for investigating medical fraud since it’s far more important to their bottom lines.

Finally, when it comes to truly severe accident injuries, finally, health insurers generally pick up the bills anyway.

The result could be a big win for consumers: auto insurance rates would go down, perhaps significantly, and the increase in health insurance premiums would  likely be smaller than the decrease in auto rates. Jeffrey O’Connell, a UVA law professor who is likely the intellectual father of no-fault, agrees.

No fault fraud is always going to exist. In the short-term, increasing the resources devoted to fighting it is a good idea. When a national health insurance mandate goes into force in 2014 (and I think the chances of repealing/replacing/overturning the mandate are slim) that will—for better or worse—be a good time to revisit the idea of mandatory no fault coverage.


Over at FrumForum, I predict that the end of Fannie and Freddie (or something very much like them) would probably result in the end of the 30-year fixed-rate mortgage with a modest down payment and reasonably low interest rate.

On that basis, I argue that the end of Fannie and Freddie probably won’t happen in any genuine fashion. Even if entities called “Fannie Mae” and “Freddie Mac” no longer exist (that’s actually probable), it’s still likely that the federal government with guarantee mortgages in a manner that allows 30 year mortgages to go on existing. The nation’s attachment to them is simply too strong.  And this means that, somehow, there will be another housing crisis and another bailout.

This is why a “no bailouts” policy is more a talking point than a reality: so long as the government guarantees anything at all, some bailouts are inevitable. If government doesn’t guarantee a product at all—say, investments in the stock market—then minimalist regulation oriented towards preventing fraud is, indeed, a good idea. (It should be easy for a company to go public.) When government offers a guarantee—an insurance guarantee fund, the FDIC, credit union share insurance—it has a strong obligation to monitor and, frankly, nose around in the finances of the institutions that benefit from it.


Las Vegas, a hugely troubled but always fascinating city, is investing big time (using federal dollars) in Bus Rapid Transit or BRT.  In theory, by building dedicated lanes, nicer stations for buses, and limiting stops, Las Vegas will realize rail-style development benefits at a fraction of cost. For some reason, this approach had a lot of fans in the Bush administration and amongst conservatives.

The problem is that, like many other transit pipedreams, it doesn’t work that well—even in Las Vegas (a city that already has one Bus Rapid Transit line.)  There, even a formal analysis of the one existing line showed it produced only small increases in ridership (about 700 people a day above the service it replaced) and cost millions of dollars. (Although far less than rail transit would have cost.)

Bus riders may have been made better off for it, but, on the whole, there’s little evidence it did much good for the city. Certainly—and I’ve driven along the line—there’s no evidence it has produced “spin off” development that transit planners hope for. Las Vegas simply doesn’t have the population density to support such development. And, right now, it’s flat broke too.

A new BRT line may be a better investment than a light rail line and is certainly better than the hugely troubled monorail Las Vegas has built but it’s probably not a good way to spend tax dollars.

Until next week,

Eli Lehrer, Vice President, Washington, D.C. Operations

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  • Richard Parillo

    PIP is better than health insurance for many reasons. First, it costs around $3.00 to $6.00 a month for the coverage. PIP is primary over pip and if PIP went away our health insurance and taxes would go up. Second, pip covers not only us but the pedistrians we hit, resident relatives and our passengers. Health insurance does not. Third, pip covers death benefits up to $10,000. Health insurance does not. Fourth, pip pays not only medical bills but lost wages and loss of house hold services and health insurance does not. The cry about fraud is grossly exaggerated by the public relations firms hired by the insurance industry. They want to make it easier to deny claims and raise rates. Wake up.

  • http://www.webautoinsurancequote.com/2011/03/01/florida-interests-unite-against-auto-accident-fraud-insurance-journal.html Florida Interests Unite Against Auto Accident Fraud – Insurance Journal | Web Auto Insurance Quote

    [...] to enact reforms to help stop these losses and keep Floridians' hard-earned dollars in …Letter From Washington: No Fault, No Bailouts, No BusesOut Of The Storm [...]

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