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.
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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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