Let me start of doing a spot check of the facts he presents:
If you’re a minimum wage worker and you have a kid...
Minimum wage workers make up 1.5% of hourly workers. Hourly workers are a bit over half of all workers. A little googling suggests 28% of low wage workers (not quite the same as minimum wage workers) have children.
So he's already narrowed his scenario down to 50% x 1.5% x 28% = 0.2% of workers. But does his conclusion even apply to such workers?
If you’re a minimum wage worker and you have a kid who rolls badly on the genetic lottery table during character creation, tough luck - you can easily expect to kiss goodbye to a quarter of your paycheck purely due to the medical bills.
Full time min wage is about $14k/year. Is there any state where this 0.2% of workers don't get medicaid? In TX you get medicaid up to $36k, $24k in NY, CA and FL. That's 40% of America already and I'm too lazy to spot check 46 other states. We're now down to at most 40% of 0.2% of workers.
A small software team could easily design replacements for a lot of high-budget software and drive the bloated inefficient corporations out of business. This isn’t rocket science: I’ve been in the IT field for decades and even managed a couple of automation projects.
Apparently he thinks...software and non-generic drugs are driving the cost of medical care? Hmm, let me check the financials of a randomly chosen publicly traded hospital company:
If you want to cut medical costs in the US in a meaningful way, you need to cut wages, salaries and benefits for doctors/nurses/other employees. The end.
If you want to cut medical costs in the US in a meaningful way, you need to cut wages, salaries and benefits for doctors/nurses/other employees. The end.
Not quite. You need to cut total spending, which is spending per capita multiplied by the number of employees. So an alternate solution is to cut employees and manhours spent doing stuff. My impression is that a large component of cost disease is an oversized beurocracy: receptionists, lawyers, and people who deal with piles and piles and piles of paperwork and insurance companies. Stuff that isn't directly providing value to customers, didn't exist a hundred years ago, but is necessary as a result of the way the system currently works. If we found a way to streamline the process, cut a bunch of unnecessary regulations while keeping the few that actually matter, then a lot of these people could be let go and reduce costs without reducing the salaries of the employees who remain.
This isn't to say that some salaries couldn't simultaneously be reduced. If you make it easier to get licensed as a doctor then that increases the supply and thus reduces the market price. But these two avenues for cost reduction can be approached independently from each other.
Fair point. But either way, the point is that there's no significant pile of "free money" in health care. All the money is going to hard working, nice, and generally sympathetic workers. Your choices are to either pay them less or fire some of them.
My impression is that a large component of cost disease is an oversized beurocracy: receptionists, lawyers, and people who deal with piles and piles and piles of paperwork and insurance companies.
And even out of the non-health care workers, quite a few - janitors and MRI repair guys - aren't the pile of free money that everyone wishes existed.
Stuff that isn't directly providing value to customers, didn't exist a hundred years ago,
Quite a bit of it goes to stuff that didn't exist a hundred years ago but is providing tremendous value to customers. An example from the article:
"I receive regular treatments for chronic allergies (I’m allergic to almost everything on the planet, and have been receiving recurring allergy treatments for several years in order to minimize my unpleasant allergic reactions)."
Yeah, I think that makes sense. Looking at some of the graphs in that link, the fastest growing category is "Personal Care Aides", ie people who take care of old people in nursing homes and stuff. Which makes sense why that's growing: as people live longer and longer the fraction of old people increases. In some cases, old people would have been taken care of by their families instead of by a paid health care worker. But in many other cases they would have just died.
I suppose from this perspective then, cost disease is largely akin to social security. A bunch of young people pay in more than they take out for their insurance and taxes, and then when they're old they are subsidized by the next generation of young people. Which seems like a massive principal agent problem, but not one with an easy solution unless we want to let all the old poor people die in order for young people to keep more of their own money and get better cheaper healthcare while they're young (but not live as long unless they invest their extra money in a healthcare retirement account for themselves)
Well to be fair I do think there is a cost disease in medicine and a pile of money. It's just that the pile of money consists of payment for actual medical treatments given to non-fraudulent people.
There's no shortage of evidence that marginal medical consumption doesn't improve health at all up to and including 3 RCTs (RAND, Oregon and Karnataka) and one national medical system designed to reduce this waste (Singapore). The basic idea is that if medicine has a low marginal cost, people consume more of it even if they don't need it. It makes them feel better but doesn't improve health.
In contrast, if you make them pay 70-90% of the cost (up to a high cap), they don't spend money unless they really need it.
I am far from convinced by the arguments at the end. Sure, our glorious overlords might want all of human society to be run via McGovernment, but they're probably not going to trot out Stalin as a reflexive defense. And while the Nazis promised a utopia, so did the Soviets, and in both cases, the reality was far, far from the promise.
The conclusion very much does not follow from the premises, and as noted by comments below, the economic assumptions are probably faulty too.
I never did think I'd see an attack on healthcare costs from an alt-right-ish angle, but I guess, per Scott, you really can convince some people to attack or support a position with the right framing.
The first argument is about the excess costs of healthcare--in his case he says his last hospital bill was $1,927 and concludes it is too much just because some others would have difficulty paying it. That is not adequate information because he did not describe the value of it. In fact, the author self-admittedly says "I’m allergic to almost everything on the planet", which means without the advances that have made modern healthcare possible he would either be dead or constantly uncomfortable (depending on the severity of his allergies). Being able to live a normal life instead sounds like pretty great value for two thousand bucks.
In the second argument he says that other things, like software, are priced based on the effort to make them. He contrasts this: "the price of a software contract is roughly correlated to the price it takes to produce the software [...[ In healthcare, the price of software licenses is frequently not tethered to the production costs in any way whatsoever [...] it doesn’t take more effect or work for them to create a product for a hospital with more beds." He concludes that this is evidence of grift in healthcare. This is another fundamental mistake: the price of software is correlated with the amount of marginal value it provides to the customer over to their next best alternative. It's just basic economics.
Given two large fundamental misconceptions in the first two arguments of the post I have elected to forego reading the rest of the article.
This is another fundamental mistake: the price of software is correlated with the amount of marginal value it provides to the customer over to their next best alternative. It's just basic economics.
The comparison is almost optimally bad, honestly. The price to produce more copies of software is almost zero; the price of a software contract is utterly disjoint from that. It's a general problem with research-heavy production or primarily-data products. The first one costs a billion dollars, every one after that is free.
Healthcare actually shares this issue, not to quite the same extent as software or, say, ebooks, but more so than almost anything else.
greyenlightenment
investments: META/FBL, TSLA, TQQQ, TECL, MSFT ...
2yr ago
My last hospital bill was $5880. Of this, insurance paid $3952.60, leaving me with a total adjusted bill of $1927.40. That’s a lot of money. I’m lucky enough to make six figures so I can afford it, but imagine how a minimum wage employee would experience being hit by this bill, which would be over a month of their income after taxes. Also, consider that a lot of minimum wage employees don’t have health insurance, so instead of paying the reduced bill like I am
They would get Medicaid, or some other form of charity care.
Or just tell the hospital that they're unable to pay and sometimes the hospital will throw them a bone because the insurance company only agreed to such a high price to scare the uninsured and they know full well they can't squeeze blood from a stone.
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Notes -
Let me start of doing a spot check of the facts he presents:
Minimum wage workers make up 1.5% of hourly workers. Hourly workers are a bit over half of all workers. A little googling suggests 28% of low wage workers (not quite the same as minimum wage workers) have children.
https://www.bls.gov/opub/reports/minimum-wage/2020/home.htm https://www.americanprogress.org/article/raising-minimum-wage-key-supporting-breadwinning-mothers-drive-economy/
So he's already narrowed his scenario down to 50% x 1.5% x 28% = 0.2% of workers. But does his conclusion even apply to such workers?
Full time min wage is about $14k/year. Is there any state where this 0.2% of workers don't get medicaid? In TX you get medicaid up to $36k, $24k in NY, CA and FL. That's 40% of America already and I'm too lazy to spot check 46 other states. We're now down to at most 40% of 0.2% of workers.
Apparently he thinks...software and non-generic drugs are driving the cost of medical care? Hmm, let me check the financials of a randomly chosen publicly traded hospital company:
https://finance.yahoo.com/quote/HCA/financials?p=HCA
Operating expenses are $40B. $27.8B is salaries and wages.
Another one?
https://finance.yahoo.com/quote/UHS/financials?p=UHS
Salaries/wages are $6.7B out of 10.5B.
If you want to cut medical costs in the US in a meaningful way, you need to cut wages, salaries and benefits for doctors/nurses/other employees. The end.
This is terrible. Why is it here?
Not quite. You need to cut total spending, which is spending per capita multiplied by the number of employees. So an alternate solution is to cut employees and manhours spent doing stuff. My impression is that a large component of cost disease is an oversized beurocracy: receptionists, lawyers, and people who deal with piles and piles and piles of paperwork and insurance companies. Stuff that isn't directly providing value to customers, didn't exist a hundred years ago, but is necessary as a result of the way the system currently works. If we found a way to streamline the process, cut a bunch of unnecessary regulations while keeping the few that actually matter, then a lot of these people could be let go and reduce costs without reducing the salaries of the employees who remain.
This isn't to say that some salaries couldn't simultaneously be reduced. If you make it easier to get licensed as a doctor then that increases the supply and thus reduces the market price. But these two avenues for cost reduction can be approached independently from each other.
Fair point. But either way, the point is that there's no significant pile of "free money" in health care. All the money is going to hard working, nice, and generally sympathetic workers. Your choices are to either pay them less or fire some of them.
This surely exists, but it's mostly actual health care workers: https://www.healthaffairs.org/do/10.1377/forefront.20180502.984593/full/
And even out of the non-health care workers, quite a few - janitors and MRI repair guys - aren't the pile of free money that everyone wishes existed.
Quite a bit of it goes to stuff that didn't exist a hundred years ago but is providing tremendous value to customers. An example from the article:
"I receive regular treatments for chronic allergies (I’m allergic to almost everything on the planet, and have been receiving recurring allergy treatments for several years in order to minimize my unpleasant allergic reactions)."
A hundred years ago he'd just suffer.
Yeah, I think that makes sense. Looking at some of the graphs in that link, the fastest growing category is "Personal Care Aides", ie people who take care of old people in nursing homes and stuff. Which makes sense why that's growing: as people live longer and longer the fraction of old people increases. In some cases, old people would have been taken care of by their families instead of by a paid health care worker. But in many other cases they would have just died.
I suppose from this perspective then, cost disease is largely akin to social security. A bunch of young people pay in more than they take out for their insurance and taxes, and then when they're old they are subsidized by the next generation of young people. Which seems like a massive principal agent problem, but not one with an easy solution unless we want to let all the old poor people die in order for young people to keep more of their own money and get better cheaper healthcare while they're young (but not live as long unless they invest their extra money in a healthcare retirement account for themselves)
Well to be fair I do think there is a cost disease in medicine and a pile of money. It's just that the pile of money consists of payment for actual medical treatments given to non-fraudulent people.
There's no shortage of evidence that marginal medical consumption doesn't improve health at all up to and including 3 RCTs (RAND, Oregon and Karnataka) and one national medical system designed to reduce this waste (Singapore). The basic idea is that if medicine has a low marginal cost, people consume more of it even if they don't need it. It makes them feel better but doesn't improve health.
In contrast, if you make them pay 70-90% of the cost (up to a high cap), they don't spend money unless they really need it.
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I am far from convinced by the arguments at the end. Sure, our glorious overlords might want all of human society to be run via McGovernment, but they're probably not going to trot out Stalin as a reflexive defense. And while the Nazis promised a utopia, so did the Soviets, and in both cases, the reality was far, far from the promise.
The conclusion very much does not follow from the premises, and as noted by comments below, the economic assumptions are probably faulty too.
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Saying that political elites are trying to enact a great replacement via high healthcare costs to disincentivize raising children is a bit of a leap.
I never did think I'd see an attack on healthcare costs from an alt-right-ish angle, but I guess, per Scott, you really can convince some people to attack or support a position with the right framing.
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The first argument is about the excess costs of healthcare--in his case he says his last hospital bill was $1,927 and concludes it is too much just because some others would have difficulty paying it. That is not adequate information because he did not describe the value of it. In fact, the author self-admittedly says "I’m allergic to almost everything on the planet", which means without the advances that have made modern healthcare possible he would either be dead or constantly uncomfortable (depending on the severity of his allergies). Being able to live a normal life instead sounds like pretty great value for two thousand bucks.
In the second argument he says that other things, like software, are priced based on the effort to make them. He contrasts this: "the price of a software contract is roughly correlated to the price it takes to produce the software [...[ In healthcare, the price of software licenses is frequently not tethered to the production costs in any way whatsoever [...] it doesn’t take more effect or work for them to create a product for a hospital with more beds." He concludes that this is evidence of grift in healthcare. This is another fundamental mistake: the price of software is correlated with the amount of marginal value it provides to the customer over to their next best alternative. It's just basic economics.
Given two large fundamental misconceptions in the first two arguments of the post I have elected to forego reading the rest of the article.
The comparison is almost optimally bad, honestly. The price to produce more copies of software is almost zero; the price of a software contract is utterly disjoint from that. It's a general problem with research-heavy production or primarily-data products. The first one costs a billion dollars, every one after that is free.
Healthcare actually shares this issue, not to quite the same extent as software or, say, ebooks, but more so than almost anything else.
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They would get Medicaid, or some other form of charity care.
Or just tell the hospital that they're unable to pay and sometimes the hospital will throw them a bone because the insurance company only agreed to such a high price to scare the uninsured and they know full well they can't squeeze blood from a stone.
More options
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More options
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