Wow, this really blew my mind. The divergence is striking. Even without words, the article really explains the contemporary social situation in the US. It makes me wonder if remote-work, high COL in tech hubs, higher-ed cost exhaustion, tech burn-out, and the next recession will reconfigure things. Like the article states, the amount of unbalance here can't be sustainable though "the market can remain irrational longer than you can remain solvent" kind of idea should be kept front and center in this discussion. I am worried a massive wealth transfer coordinated by the government (e.g., single payer healthcare, UBI, basic housing guarantee, free college, etc.) will entrench this divergence. I wish we had let the last recession ('08) actual happen instead of cheap money for a decade allowing us to kick the can down the road. Intervention in the capital markets a la the past decade probably amplified this phenomenon by pulling money from productive, structural capacity increases instead of to loss-leading Unicorns that wouldn't work in an economic system that accurately priced risk (i.e., higher interest rates). A company like Uber, though amazing to me and I use all the time, could only exist with cheap money for a decade. The idea of building a company by losing money for 10 years in order to build your client base is impossible if rates are high. That capital would have looked for more "real" investments that probably would have valued what these areas that lost GDP over the past decade could have provided.
> what these areas that lost GDP over the past decade could have provided.
The data isn’t measuring areas that most GDP over the past decade. It’s measuring the average GDP per capita of areas that voted Democrat/Republican in 2008 and 2016, which is a different set of areas. What it’s showing is the economic sorting that happened in the 2016 election, with higher income suburban areas voting more consistently Democrat, with lower income rural areas voting more consistently Republican. That doesn’t say anything about the incomes of any given place, since the set of places wasn’t held constant.
And I think more important than the places not being held constant, the people weren't held constant either. That is, people move. Many of these more rural areas are basically seeing a massive exodus of young people who are moving to cities and other places with more opportunity. The people staying behind are then those who are older or those who find it difficult to move, or those who don't have the ambition to move in the first place. So the self-sorting then only accelerates.
> I wish we had let the last recession ('08) actual happen instead of cheap money for a decade allowing us to kick the can down the road. Intervention in the capital markets a la the past decade probably
The recession did happen and it ended, as recessions tend to do. Recessions are always much briefer than expansions. Cheap money is helping but much of the expansion is driven by consumer spending and tech innovation, in America and China especially. Companies such as Facebook, Apple , Disney, Walmart, Google and Microsoft making record profits every quarter and have so much cash they are giving it away in the form of dividends and buybacks. As evidence of how the US economy is not dependent on the fed, when the fed began raising rates in 2015-2017, the market still rallied. I don't see any reason for the era of low rates to end. In spite of the huge rally in stocks over the past decade, there is still an aversion to risk, and that is why capital keeps flowing into low or native yielding debt. Companies such as Ubere are spending a lot of money, but similar to Tesla, they are cashflow positive. The money is spent on outlays and other lagre expenses. When the expenses end, they will be profitable similar to Amazon. People keep predicting that things will eventually have to change, but maybe they won't. I n 2012-2014 there was talk of a tech bubble, but now valuations for FANG stocks is the lowest the have been in a long time.
> A company like Uber, though amazing to me and I use all the time, could only exist with cheap money for a decade. The idea of building a company by losing money for 10 years in order to build your client base is impossible if rates are high.
Not necessarily true. Tech VC funding for money-losing companies was huge in the late 90s despite high interest rates.
> The recession did happen and it ended, as recessions tend to do. Recessions are always much briefer than expansions.
I think the part of the recession that didn't happen was the failure and disintegration of at least a couple of very large banks and at least one car company, among other things. There was no fundamental reorganization to clean up a couple of decades of bad decisions, which signalled to the next round of players that high risk is not really high risk. One day the chickens will come home to roost.
> "I wish we had let the last recession ('08) actual happen "
wat.
The great recession _did_ happen, and by all accounts came damn-near to devolving into a second Depression. There might be something to your complaints about capital markets' problems, but had to respond to that line...
It is a massive wealth transfer. It may be a good idea, too. Currently 2/3 of non-elderly people have insurance through their employers. If we need to extend coverage to those who don’t have it, those 2/3 will have to pay for the other 1/3. If we are proposing a massive income transfer of $3 trillion a year for the good of the country, we have to be honest about it.
The US spends almost twice the OECD median on healthcare as percentage of GDP (17% vs 9%). Almost all the other countries in the OECD have nationalized health care. Ending our current system and switching to something normal would in fact be ending a massive wealth transfer to the health care industry. In dollar terms, the difference between 17% and 9% of the US’s GDP is $1.7 trillion dollars per year. This is an enormous ongoing wealth transfer to a rather ineffective health care industry, which ranks below many countries that spend much less.
While potentially true (it's hard to say given US healthcare 1. produces much of the innovation that the rest of the world utilizes at subsidized rates and 2. provides more capital-intensive services per capita, and most healthcare is provided toward the end of life when much of it is futile), all developed nation healthcare systems have performed absolutely terribly over the last 50 years and just because some have performed less poorly doesn't mean that they're the ideal solution.
We should look back to a time before national one-size-fits-all healthcare regulations that, based on crude generalizations, regiment a complex industry at great cost to innovation, and monolithic central-government-administered programs with no end user price incentives.
We are overpaying for everything because healthcare should not be a for profit venture the government needs to step in and set a max profit of say 5%. Also we're paying for a lot of bad habits like overeating and not exercising. Lots of preventable diseases go into that mix, I dare say it's the majority of expenditures. There is virtually no governmental or social efforts being put into stopping those preventable diseases.
It's much more complicated than that. For one, healthcare gets more expensive with per capita GDP. This is the pattern across the developed world. Healthcare spending in the US is about where you would expect based on this pattern, given US per capita GDP is significantly higher than that of most developed countries. Medicare in the US is similarly much more expensive than comparable programs. For another, there are things the US does better than other countries, like treat heart disease and cancer.
Also like I said, other countries get to utilize medical innovation produced in the US at subsidized rates.
And yes, for-profit healthcare should be allowed. Healthcare workers aren't all volunteers. They're doing it for money. The same applies to investors. Having laws limiting investment to philanthropy and taxpayers is totally destructive.
Healthcare costs are going down in cosmetic surgery, unlike other healthcare fields across the developed world. Cosmetic surgery is driven by price conscious consumers and profit-motivated practitioners. Self-interest is a powerful motivator and ignoring that leads to misguided bans on for-profit healthcare and inefficient, rent-seeking government-run healthcare bureaucracies and government-permissioned private industries shielded from competition by regulatory barriers.
>>Also we're paying for a lot of bad habits like overeating and not exercising. Lots of preventable diseases go into that mix, I dare say it's the majority of expenditures. There is virtually no governmental or social efforts being put into stopping those preventable diseases.
Agreed. I think health outcomes are mostly a result of non-healthcare factors. Having safer, denser and more pedestrian friendly cities would go a long way in improving health for example.
What we're really paying for is the armies of data entry and clerical workers that have to back up every doctor in this country because they are in a constant arms race with the insurers about getting every claim paid. Compare any medical practice to just about any tech firm these days. My company has one office administrator taking care of 30 keyboard commandos. A typical medical practice has more than one clerk per doctor.
This is not normal. Go to any medical clinic in Europe, and it's no different from the tech sector. One office admin, lots of doctors and nurses.
If we cut hospital administration costs to Dutch levels (as a %-age of GDP) we could save about $140 billion per year. It's not nothing, but it's also only about 4% of total U.S. health expenditures. As noted in my response to a sibling post, all profit in the system amounts to another 6%.
So even if you cut out all profit,[1] and reduced administrative costs to Dutch levels, you get a 10% cut. It's not nothing, but it doesn't even get you 30% of the way there to cutting our costs to rich-OECD country levels (as a %-age of GDP). You still need to find another $875 billion or so to cut.
[1] Which is of course unrealistic, because drug companies in the EU make significant profits too, and most countries like Germany and the Netherlands have private service providers who make profits.
Right, but inflated salaries for who? US nurses typically start out at double what nurses in the UK earn. They can top six figures, which a nurse in the UK won’t touch. If you look at smaller US cities, the hospital is typically the largest employer. Cutting down to European levels of healthcare expenditures will require cutting jobs and cutting salaries for upper middle class people, and there is no political will to do that.
Here in Poland (where we have universal, state-provided health insurance), there are relatively few office admins, but the paperwork still needs to happen (perhaps less than in the US). The health care providers need to diligently fill it out in order to get paid by the state-run insurance. And since the doctors don't get admin help, they have to fill out the paper work themselves, which is a giant misallocation of their skills...
> Currently 2/3 of non-elderly people have insurance through their employers. If we need to extend coverage to those who don’t have it, those 2/3 will have to pay for the other 1/3
I thought the uninsured rate was closer to 10%. Some googling suggests 8% or 9%. This is short of 33%.
Of course many are insured but under insured, or insured but paying (or in I guess 66% of cases having their employer pay) for massive amounts of waste. There are entire industries like medical billing which don't strictly need to exist.
Yes but he implied that the employer-insured need to pay for both non-employer-insured and uninsured. If his 2/3rd figure is correct we can say it's about 23% in the former and 10% in the latter, but he just says 2/3rd needs to pay for 1/3rd.
If the 23% are already paying, why do they need a subsidy from someone else's employer? I guess there is an affordability issue and rising costs ... but this is true for everyone, even those who mask it by going through their employer.
If, for example, someone has a life threatening illness like cancer, they would gladly sell most of their stuff to pay to get their health back. Your health is more valuable than a garage full of Ferraris.
Taking care of that wealth is important. It baffles me how people can smoke sigaretes. It's like cleaning your Ferrari with a scouring pad.
No amount of wealth (which is a fancy word for lots of money) can buy health. Therefore, health is not wealth. It is, as you say, more valuable than that.
You can view inequality and bad health in the US together as a mutually reinforcing expropriation. On an individual level you cannot buy or sell health, but on an aggregate level they blur.
Those 2/3 are already paying for the other 1/3. A hospital must treat anyone who shows up whether or not they can pay. The difference is made up via increased costs for those who can pay via insurance or tax payer funded hospitals.
"wealth transfer" is usually invoked as a dog-whistle for "communism" and "socialist" class warfare. It's literally true, but figuratively, it's a weaker form of "taxation is theft."
I disagree. The costs of health care are ridiculously high and rising. Out of the people who actually have health insurance, how many can actually afford a serious health issue? That number is getting smaller and smaller and as it shrinks, prices rise to preserve profit.
If something isn't done, health insurance will become an empty promise. Even when people have it, it will be to expensive to be truly useful. There are already segments of the population where this is happening.
IMHO, that is massive wealth transfer: collecting all the premiums from working people and transferring it to the health care industry.
You’re talking about a different thing than I am. The CBO estimates Medicare for All will cost $3 trillion per year. That will require a large wealth transfer to pay for. Even if it were half that it would require a large wealth transfer.
Paying for healthcare is, by contrast, not a wealth transfer because it’s payment for receipt of goods and services. As I outline in a response to a sibling post, profits account for just 6% of health spending. The rest goes to paying staff, for supplies and equipment, etc.
Which is also why cutting healthcare expenditures is a pipe dream. If you look at many places, the local hospital is the biggest employer. Nurses in the US make double or more what they make in the UK. Maybe we do a bunch of unnecessary tests, but we lay for lab techs to do those unnecessary tests. Real reductions in healthcare expenditures will require cutting salaries and cutting jobs, and that’s politically impossible.
You act like it's 3 trillion on top of what we already pay though. Obviously you and your employer quit paying insurance companies and that money goes toward the government program. Also the richest pay more in taxes on their income and "wealth" instead of being able to hide it overseas and buying up land. They'll have to sell some of that to pay the 2% wealth tax every year so they can't store it away for 10 generations of a dynasty.
I think you are oversimplifying. Everything related to health care in the US is more expensive then anywhere else, from personnell to medication and supplies, to equipment. Cost is exaggerated at every step... Unecesary tests and procedures are part of the problem, bet even necessary procedures have costs associated that are inflated.
Yes, some costs come down when insurance actually pays. But this still doesn't bring costs down to amounts that we see in Canada.
More and more no one can pay for healthcare anymore. Perhaps it will cost $3 trillion the first year but costs will drop as prices standardize and we start to see care become predictable. The alternative is prices that continue to rise with more and more bankruptcies and, eventually, more deaths due to lack of care. Even the insured cannot continue to afford these rising costs.
Wealth transfer... from where? The federal budget seems plenty big. $700 billion was transferred to banks staring in 2008, $4.6 trillion was paid out in eight years. I'd prefer a proactive solution, perhaps it will cost less in the end then our current plan to do nothing and fight what little regulation has been put in place.
There's an additional wealth transfer between the owners of healthcare related stocks and non owners. If the US approached EU type health care costs we could easily give every one health care for free. The cost would come out of healthcare company margins.
Totally false. Total health industry publicly traded company profits (including drug companies, hospitals, and insurance companies) add up to about $50 billion per quarter, or $200 billion per year worldwide: https://www.thefiscaltimes.com/2018/11/12/Chart-Day-Big-Phar....
Total domestic hospital profits (including more than just public companies) is about $74 billion per year: https://www.modernhealthcare.com/article/20180104/NEWS/18010.... Insurance companies are $25 billion annualized: https://www.cnbc.com/2017/08/05/top-health-insurers-profit-s... ($7 billion per quarter for health insurers). The link above shows $100 billion in drug company profits worldwide; about half of revenues are in the US, so let’s say $100 billion in profits domestically. That’s $200 billion for the US healthcare industry, including non-public companies in addition to publicly traded companies.
Total US healthcare spending is $3.5 trillion. Profits account for just 6% of that spending.
To reduce healthcare spending to the same levels as the rich European countries like Germany or France we’d have to cut spending about $1.25 trillion. Cutting healthcare industry profits to zero (and note that there are for-profit hospitals and drug companies in the EU and they don’t make zero profit!) would reduce healthcare expenditures by just 1/6 of the amount required.
That's the big takeaway I wish more people understood. Health is broken not because of fat cats making obscene profits (although there are a few), but because we're fundamentally doing it wrong.
Its not one guy digging a ditch and charging too much. Its that for every 6 people digging, 5 are racing behind them filling it back in and all of them are charging us for the "service".
A better estimate for savings from some parts of the industry is revenue not profit. That’s because the work done by, for example, insurance companies is largely useless paper shuffling that doesn’t need to exist under single payer.
Edit: oh yeah, and marketing. So much health industry money ends up in marketing. Something almost completely unnecessary under single-payer as well.
The post I was replying to was talking about wealth transfer from people to shareholders. Profit is the proper measure of that.
As to cost savings, you can’t use insurance industry revenue because that includes money spent on services. And a lot of the “paper shuffling” does need to exist under single payer. Most universal healthcare systems aren’t nationalized systems like the UK NHS. Germany for example has mandatory membership in Public health insurance organizations for those making under 60,000 euro. There are 100+ of those. Then 15% of the population has private health insurance. Care providers are mostly private. So there is still medical billing that needs to be done. Most EU countries are similar in that regard, and unlike the UK NHS.
As to marketing, now you’re talking about a drop in the bucket. Pharma industry advertising adds up to just $6 billion per year.
I support pretty much any solution that provides guaranteed access to effective acute care (the fact that the ER can’t legally turn you away doesn’t mean it’s effective care).
But people who advocate for this position (which, again, I believe in) all too often live in a fantasy world where we can magically switch systems and pay less. If we keep paying US medical personnel their prevailing wages, there is no way we’re going to lower costs.
Nurses and doctors are too popular in the US to ever even suggest that we reduce their wages to European levels.
Acute care, including the ER, is a small fraction of the total cost of health care. If the health care problem was simply ensuring everyone access to a GP's office and an ER for emergencies, we'd have solved it by now.
Providing effective and low cost chronic care is an unsolved problem everywhere.
I can’t say that I support any and all entitlement schemes I’ve ever heard for chronic care, is why I was singling our acute care, where I do, but you’re right that I was mixing up arguments.
But of course when you provide low cost acute care, and don’t cover chronic conditions, there’s strong pressure for chronic problems to wait until they’re acute and harder to solve, and for chronic patients to use the acute system very inefficiently.
First, the location and timing of accounting profits is not the same as economic profits and the return on capital.
Second, what do you think the point of single payer negotiation with healthcare providers is? The NHS in britian negotiates prices on behalf of the entire country. This system in the US would massively move producer surplus over to consumer surplus by reducing prices through negotiating power.
Lastly, healthcare outcomes in the US are terrible and prices are astronomical compared to Europe, do you think it's a coincidence that their systems are centralized while ours is distributed? The US system massively favors capital returns over service cost and quality.
Yes, but some of this is funny money. Like when you go to the hospital and get charged $50 for a tablet of aspirin. I can see a coordinated national system to be far more efficient than the system we have now of fake list prices where some parties get a negotiated real price
As an European with family and friends working in health care in several countries, I think the general impression most people in US have about the European health care is idealized and very far from reality. It is not the place for a long discussion here, but we are having serious problems in most countries, from waiting lists longer than the expected patient's life to lack of "free" drugs that you have to buy yourself if you want to live.
Am not saying the system is problem free, but I've had multiple surgeries done for free, whereas in the U.S I'd most likely go bankrupt.
Also the point about waiting, not only did I not have to wait, but are you seriously comparing this to a system where I don't have to wait if am wealthy, but can wait until I die if am not?
> A study published in the journal Health Affairs reviewed Justice Department data and discovered that among Americans who cited medical debt as a
contributing factor in their bankruptcy filing, only 12 to 13 percent of their total debts were medical.
Also the studies that are invoked for that proposition don’t distinguish between bankruptcies due to medical bills and bankruptcies resulting from reduced income due to health issues.
Regular people have ended up in debt just to live, and can carry a surprising amount. If we build a society where everyone carries debt, often ongoing, it's hardly surprising just bunging another few thousand or tens of thousands surprise medical debt at them may break them. Even if it turns out to be just a proportion of total.
Your link makes no mention of mortgage or home loans. If they are included in the debts at bankruptcy, it's not in the least surprising that medical debt is "only" 12%.
The 12-13% was unsecured debt (which would exclude mortgages, which are secured by the house).
> This past year, the U.S. Department of Justice (DOJ) responded to a request by Sen. Charles Grassley (R-IA) by examining 5,203 bankruptcy cases from the files of the U.S. Trustee Program. The filings occurred between 2000 and 2002, the same time frame as the filings studied by Himmelstein and colleagues. The DOJ reported that 90 percent of filers had medical debt of less than $5,000. Of those reporting medical debts, those debts accounted for only 13 percent of total unsecured debt. The DOJ summarizes the evidence against Himmelstein and colleagues' thesis as follows: “The conclusion that almost 50 percent of consumer bankruptcies are ‘medical related’ requires a broad definition and generally is not substantiated by the official documents filed by debtors.”
The study is a little old, but the “medical debt is the leading cause of bankruptcy” trope is also old.
OK, that rules out my second point then. Still the first applies. I don't find it terribly surprising that $5k could break someone's back. Plenty of folks seem to run at maximum possible credit. Others will no doubt be able to take it on the chin.
Never heard of it being the leading cause of US bankruptcy btw. My distinctly European perspective is it's problematic it's a possible cause at all.
Yes, there are many success stories of people using the healthcare system in Europe (EU, more precisely), more than people winning the lottery, but there are also many stories of people dying because of the failures. In a few countries (especially Germany) the system still works pretty well, but in the majority it does not, it is in various degrees of failure.
There are long waiting times to access American health care too, anyway, even with insurance. I feel like the people who make those sorts of claims must never do more than use the ER or walk-in clinics.
"paid by the state" and "free" are not the same thing and shouldn't be used as such. I realize I'm nit picking here, but when people banty about the term "free health care for all" I really do think there is a disconnect somewhere. It's paid for. And while the IRS may be an efficient system, the government certainly is not. Now, while I'm not opposed to medical coverage for all, saying that our government running insurance instead of rolling hospitals into one of it's emergency services, like police and fire, is a different discussion.
Well, considering I said maybe we should move health care to emergency services,like the police and fire services, added to that comic, I can only assume you completely missed the point of my statement. And while not everything is paid for except sunlight, everything the government provides IS paid for, yes. There is a ledger to be kept. I'm not some hard core conservative, nor am I some hardcore liberal. Like most Americans, I'm somewhere in the middle and am capable of more nuance and critical thought than I am given credit for.
I don't mean it as a pejorative at all. I am all for a universal basic health care setup (e.g., Medicare for all) because "we" (the insured and tax payer) are already paying for everyone's healthcare that can't afford it. If you go to the ER instead of PCP, we are paying for it; if you lose out on work because of preventable illness, we are paying for it; if you die early without adding productively to society, we are paying. But we currently don't have this system to pay for this from those who are making money. In other words, everyone is paying for this, but in reality it should be the higher earners that are paying more for this. That is what I see as a wealth transfer. People like you (likely) and me will have higher payroll taxes or income taxes to cover those who cannot afford. Please don't take this the wrong way--I am all for this. But it may entrench this inequality because it removes the "push" from the invisible hand of the market to get people finding ways to improve their lot in life--the whole basis of our current economic system. Again, not saying it is right or wrong, just commenting on how I think things are.
Healthcare is not a market. There's no price transparency, often no real choice (you can't choose your employer's insurer or what drugs you need), no real ability by consumers to assess the quality, and extremely high barriers to entry.
US healthcare functions more like a horrific reverse lottery where occasionally someone is sent a bill that bankrupts them for reasons they don't understand and had no control over.
The push from the market appears to mainly consist of a) engineering ways of preventing drugs coming out of patent b) absurdly increase margins on basic and necessary items c) insanely increase margins on items with limited competition, e.g. epipens, last but certainly not least, advertising to unbalance healthcare by encouraging the expensive over the appropriate treatment. Pharma prefers to find long term treatments rather than new antibiotics and other treatments that are a week or two then done. Much more money in an ongoing treatment than cure.
It's not the market, but far more US liability laws and willingness to sue that brings the US tendency to over investigate, diagnose and treat, is it not? That seems to be the sole advantage of the US approach over others, and even that can be questioned in many areas.
All of those market pushes seem to be in the interests of medical CEOs and stockholders, not patients and citizens. I am far happier with a system that tries to remove or limit those for benefit of everyone. That tries (fallibly) to achieve fairness on medical not solely market grounds. I would prefer more openness too, but after the infamous farce of monoclonal antibodies, that's not realistic.
Seems more like we need to keep that invisible, and very imperfect hand out of healthcare as much as possible. Then heavily constrain it where we can't keep it out.
So if people aren't faced with chronic illness and the fear of bankruptcy they won't have a drive to succeed and improve ghetto their lot in life? Are you seriously arguing that? That's absolutely absurd. Why would a sick person me motivated to be productive when they can go on Medicaid or to the er for free? I think you have it backwards.
