X-Message-Number: 1930
From: 
Subject: CRYONICS Insurance and other stuff
Date: Tue,  9 Mar 93 23:16:28 PST

While there is much in message #1909 with which I disagree, Mike 
Darwin makes some good points.  He writes: 

>     1) As I often say, when you open a McDonalds you don't charge your 
>first customer $500,000 for his order of fries, a Big Mac and a Coke 
>"because that is what it costs to deliver the products..."  You recognize 
>that the high start-up costs must be spread over a long period of time in 
>order to recoup the investment.  Clearly, in the early days of Alcor there 
>was NO POSSIBILITY of charging what it really took or we would have had no 
>customers, *including ourselves.*  The question you must now ask 
>yourselves is "is start-up over?"  and "are we ready to start behaving 
>like a real commercial business?"  How you answer this question will be 
>very important as I will discuss a little later.

My opinion based on reasonable usage factors would be that Alcor is in 
startup mode until the OR is being used once a week.  That's a decade 
away at least. 

>     2) Every time the cost of the service goes up so does the cost in 
>lives.  We know for a fact that the perceived high cost of cryonics deters 
>MANY from making arrangements most of whom will die before they discover 
>otherwise.  Having worked in the trenches for many years I can tell you 
>about seeing people die because they cannot afford to be suspended.

and 

>     3)  Cryonics Institute's obvious success at acquiring patients by 
>offering a cheaper kind of service speaks to the price elasticity curve  
>more eloquently than wasting a long paragraph on it here would.

Another point to plot is the large number (perhaps *twice* the 
current membership) of people on the low end of the price elasticity 
curve who entered the OMNI contest. 

(assuming Alcor has reached the stage of a real boy, er, business.)

>                     Having a suspension team leader out in the field who 

> . . . or doesn't know when a patient is suspension material and when they are
>potentially recoverable doesn't cut it.

I think I know what Mike is talking about here, a recent event of 
considerable difficulty which went very sour due (at least partly) to 
what I think may have been inadaquately informed intervention.  Re 
"potentially recoverable," of the suspensions I have been on (nearly a 
dozen) there were two or three which could have been strung out 
longer, one in particular where the patient could have been riding a 
bicycle the next week instead of being under LN2, *if that had been 
the patient's wish.*  I wasn't there, but if actions speak louder than 
words, the patient had clearly expressed a desire to go into 
suspension before suffering further mental deterioration.  Considering 
the patient's problems, I tend to consider this a rational choice 
(though I can sure fault the patient for organization!). 

[re using and getting medical professionals--much deleted]

>     I spend all this time citing this man as an example because he is the 
>kind of person Alcor needs to get.  If not someone like him, then other 
>professionals with real credibility.  This will be necessary because if 
>you are asking people to pay for what they get, they will want a lot.  You 
>will have begun to *formally* embark on the Ever Rising Curve of 
>Expectations.

A difficulty all of us have *long* been aware of is the problem of 
telling how good a job you did freezing the patient.  If it is tough for 
a person to know about the benefits of some medical treatments, then 
how could a lay person tell if grandma got a good freeze or not?  She 
sure isn't going to look much different.  We can dress it up by using 
all medical professionals, but gad what that does to cost, and it may 
not give any advantage.

>     When Alcor was a volunteer, small, non-customer organization people 
>were very understanding about shortcomings.  If mistakes were made 
>everybody (more or less) grinned and bore it because everybody was in this 
>thing together.  Jerry and I have, on more than one occasion, had a 
>husband or son, or lover assist us with surgery or help with transport for 
>their mother, father, wife, lover...  These people knew us intimately, 
>knew above all that we cared, and knew that we were doing the best we 
>could for that patient.  Charles asks why we called them members?  Well, 
>the best answer I can give is that someone who holds the wound open with 
>the retractor while you work on his wife and *can't find her femoral vein* 
>while the minutes are ticking away and she is not oxygenating well on the 
>HLR is NOT a customer.*   What *word* you call such a person I don't know, 
>but it sure as hell isn't "customer" or "client."

>     Those days are largely over.

As you might recall from last summer, those days are still with us.

>     Like it or not Alcor is now large enough that it has become in many 
>ways a "normal" business -- at least with respect to its customers' 
>expectations.  This is an incredibly dangerous thing and in my opinion it 
>is not being handled well.  I think that catastrophe lurks on the event 
>horizon.
 
Not a new situation, Mike always thinks catastrophe lurks on the event 
horizon.  (And, sometimes he is right.)

>     Where does all these leave us with respect to practical matters like 
>raising dues and suspension minimums?  I have the following thoughts:
>
>     *  Dues should be raised in an equitable manner: meaning that those 
>who need the services they get should pay for them.  This means that 
>people who need remote standby should pay for remote standby and should 
>pay for it according to the likely cost based on geography and many other 
>factors.  As long as it does not depend upon RISK it is not insurance and 
>a program along these lines should be implemented IMMEDIATELY.

I have posted extensively on this topic over the last year.  But I 
don't think it should be significantly more expensive for a local 
rescue team to deal with a suspension in New York than in the Bay 
Area.  Now, if you want the folks from Alcor coming out, that cost air 
fare at least. 

>     *  Since we have mentioned the words insurance and risk we need to 
>deal with those issues.  The *fact remains that the vast majority of money 
>being paid for cryonics services is going to insurance companies, not to 
>Alcor.*  This is STUPID, STUPID, STUPID, STUPID!

I am in substantial agreement so far--my insurance payments are about 
three times as large as dues. 

>                                                   In the last few years 
>Alcor has let slip through its hands (in nonessential expenditures), plus 
>what it had in the endowment, enough money to set up its own self-
>insurance program.  

Someone else who was more involved with the financing at that time 
should comment, but I don't think this is true.  I seem to remember a 
capital requirement of $2,000,000 being required to set up a self- 
insurance program, and I don't *think* Alcor has had that much pass 
through in total since the Jones money started to flow.  (It has been 
about four years, and the operating budget has been about 1/4 
mil/year--might be close though if you count the legal fees in the 
Jones estate case.)  

>     If Alcor had done something about this by making hard decisions 
>several years ago, NOT DOUBLING THE STAFF IN ONE FELL SWOOP, NOT SPENDING 
>ITS CAPITAL COUNTING ON GROWTH TO BAIL IT OUT... they would have enough 
>money to hire professional technical staff and your total cost for 
>services (i.e., life insurance plus "dues) would be LOWER today, not 
>edging higher.

Is this entirely hindsight?  I don't remember any articles or other 
discussion on this topic at the time.  The staff was *not* doubled in 
one fell swoop, another example of MD hyperbolae which makes it harder 
to take him as seriously as he deserves.  And, most important, are 
there numbers to back up thess assertions?  (I also recall that a heck 
of a lot of the expenses in those years were legal ones to keep 
cryonics from being wiped out by the state.) 

>     *  The fundamental problem with dues is that they are unfair.  
>TOTALLY UNFAIR.  

As Thomas Donaldson often says, life *is* unfair.

>                 Young people are subsidizing the old and dying who sign 
>up when they are old and dying.  The local California and Florida members 
>(who constitute a big hunk of Alcor's membership) are subsidizing the 
>scattered members who need remote standby services when they run into 
>trouble.  

Yep.  That is the big reason we need to off load standby to local groups.

>           Many of these members cannot, or more often, will not relocate 
>to near Alcor facilities even when they know they are dying.  Now I do not 
>question their reasons for this choice.  But I do question PAYING for it.

[deleted]

>     The solution to this problem is for Alcor or the cryonics 
>organizations as a whole to self-insure.  Do you realize how much money 
>the insurance companies are going to make from us poor bastards?  And in 
>the end the policies we buy will be worthless to pay for the costs of our 
>suspension having been eaten up by inflation!  And the only ones who will 
>have profited will have been the insurance companies!   If Alcor had all 
>that revenue and managed it just as conservatively and JUST AS PROFITABLY 
>as the insurance companies do THERE WOULD BE NO MONEY PROBLEMS RIGHT NOW 
>and what is more THERE WOULD BE PLENTY OF MONEY FOR RESEARCH AND IMPROVED 
>PATIENT CARE.

I fail to follow the logic of the last statement.  Assume Alcor owned 
an insurance company.  Assume we were charging the same rates for 
insurance as other companies.  Assume (a *big* assumption) that our 
tiny, no economy of scale, company did as well as the average 
insurance company over the last 5 years (and *some* have gone belly 
up from junk bonds up during that time.)  I can see an insurance 
company with the need to plow all or most of its profits back into 
itself to grow (at the rate Alcor grows).  Perhaps I am missing 
something, how does money get released to pay for research and 
improved patient care? 

>     Of course, the problem now is that there is a serious lack of trust 
>of management's financial abilities and of their ability to keep their 
>word and much of the necessary capital has been frittered away.

I fully agree that much of the capital has been spent, but there is 
several times as large an organization today as there was in say, '88. I 
doubt that nearly as much growth could have been accomplished without 
spending the money on staff and improvements.  And growth *has* 
brought Alcor a lot closer to break even. 

But, on the general idea of a captive insurance company, I am all for 
it.  In fact, if it were owned by the PCTF, it would be a *can't lose* 
deal.  The typical person makes competitive rate insurance payments 
for a long time, and finally gets suspended.  The payment (less 
suspension charges) goes out of one pocket (reserve for paying off 
policies) and right back into the PCTF which could then buy more stock 
in the captive company.  Even if the PCTF started off with less than 
full ownership, it could eventually own the whole works.  And, an 
insurance company's investment goals are quite similar to those of the 
PCTF, so we could get the PCTF professionally managed to boot!  I 
definitely want professional management as soon as we can get it.  
Perhaps there is a small insurance company in which the PCTF could 
take a significant interest . . . . 

Keith Henson
(Alcor board member floating some ideas) 

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