Latest / Words & Numbers / Episode 498: Politicians Broke Health Insurance

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Episode 498: Politicians Broke Health Insurance · Words & Numbers

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Coming up next on Words and Numbers Snow.
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The Dutch tax code goes crazy. The dumbest sheriff in American
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history. And all sorts of things you
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didn't know about health insurance.
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All this and more coming up next on Words and Numbers, a civil
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original production. Check us out at civil.com.
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That's C ivl.com. Hi, I'm James and I'm Anthony
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and. This is words and numbers.
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And it's known exciting in your world this week.
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Oh, I've got a doozy this time. This comes from listener Thomas
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Lockwood. He posted this on the Words and
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Numbers backstage Facebook group, which, you know, we, we
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pushed the Facebook group from time to time.
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It's worth, it's worth mentioning again, this is a
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group of roughly 1600 people. They've been with us for 8-9
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years now on Facebook and they just discuss all kinds of
0:59
things. Often it's something we've
1:01
talked about on the episodes, but not always.
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Things to do with economics, government, bad jokes, these
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sorts of things. Generally.
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Generally it's a very civil discussion.
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People disagree in the best way I've I've seen anywhere.
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That you're, you're, you're overselling it because oh, it's
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not. Perfect.
1:23
It's not. Perfect.
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There's a lot of nonsense going on over there and all the people
1:28
on the left say those people on the right or the devil and the
1:32
people on the right say, God, those people on the left,
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they're, they're all deranged and they yell at each other and,
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and all, and it just drives me nuts.
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But they all tell me that the signal to noise ratio is better
1:47
on words and numbers backstage than it is anywhere else.
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Now we're always working to try and get people to play nice, but
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you know, that's hard nonetheless.
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They play nicer, they they do. And, and I have to say, while
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it's been frustrating, one of the things I've come to really
2:06
like is the fact that we don't resort to kicking people out Are
2:11
are are about. To kick somebody out.
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But that's right, That's that's. Right, Well, it does happen from
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time to time, but but much more often than not, the people that
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are there provide gentle guidance and example to those
2:24
who who are who bring their, how should I say their usual
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experience with social media to us.
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Yeah, that's right. But let me get to this this
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article. This is one last, one last
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thing. The, the reason this even exists
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is because we used to get so much e-mail on every episode
2:47
that we couldn't hope to answer it.
2:48
So we just said, hey, maybe we should have a place where
2:50
everybody can come and hang out. And that's, that's what it's
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become. I, I try to get there a couple
2:56
of times today and I, I like it. I like meeting the people who
3:00
hang out listening to our podcast.
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And it's a weird thing when you're a podcaster because
3:06
people out there think they know you.
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And I'm sure this is true of everybody with a forward facing
3:12
job, right? People in Hollywood have been
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saying this for years. But there are people that are
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convinced they know me. And you know what, Aunt?
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They kind of do, but I don't know them at all.
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And I get by the way, I'm on backstage.
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I have to give a shout out to one of our listeners, Wayne.
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I'm not going to give his last name, but I ran into Wayne in
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Denver, Co this past week and I was giving a talk for my current
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employer sends me around the country.
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I give talks on on the economy, this sort of thing.
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And the room was maybe 150 people and I do my thing for
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whatever. I was up there for an hour and I
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step off the stage and a guy in the front row sticks his hands,
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hand out and says that was great.
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Where's James? He's a Words of Numbers
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listener. Where's James?
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Indeed, that's right. So, Wayne, thanks for listening.
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And Wayne, thanks for asking the obvious question, but you had
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something to say about something.
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Oh, I'm sorry, yes, yes. So Thomas Lockwood post this.
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This is a recent article about the Netherlands and what's
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happened here is the Dutch have approved a 36% tax on unrealized
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gains. Now there's some footnotes here,
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but but basically it boils down to the the article identifies
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crypto, stock and bonds. And that's going to work.
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Out really well this is what people pushing for in this
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country the the I guess it's not exactly a wealth tax, but it's
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in the neighborhood of. This is a wealth tax.
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And the the deal here is you buy something, let's use stock as an
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example. You buy some stock and let's say
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you buy it for $100. You invest $100 in this stock
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and the stock price rises. It's now worth $150.00.
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Now you haven't sold it, you're still holding onto it.
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So you don't have $150.00. This is just gains on paper, but
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the Dutch are now going to tax that $50 gain to the tune of
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36%. So at the end of the year,
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you're going to owe whatever that is on the the tax on that,
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even if you have not sold this stock.
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Which means, which means you're going to sell the stock.
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Yeah, that I'll come to that in a second.
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Now to to give the Dutch their due here, they have made it
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symmetric. So if there's a loss that comes
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off your taxes, and according to this, the loss is it, it doesn't
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matter how far out. So if I buy the stock today and
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finally I sell it 50 years from now, whatever gains and losses
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over the course of those 50 years, the gains would be taxed.
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The losses would be the reverse of the tax.
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But this, this is what's going on now.
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As with American politicians, the Dutch apparently have
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developed this habit of naming laws using the exact opposite
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words of what the laws really do.
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This is called the Actual Return Act, when in fact it should be
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the. Unrealized return act.
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That's right. The the potential return act.
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And it's, it's even worse than it sounds, Aunt, because let's
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just say I did a smart thing Once Upon a time.
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I didn't. I never do smart things ever.
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We all know this, right? I make one terrible life choice
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after another. But let's say that I bought one
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Bitcoin and Bitcoin for $0.05 or whatever and it it promptly went
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up. Well, I'm promptly over some
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years it went up to $125,000. Yes.
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And the government is going to have an arbitrary date upon
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which it will value my things. Maybe they you have.
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The You're going to get a $40,000 tax bill.
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What? Maybe they arbitrarily pick the
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the highest time and then my, my single Bitcoin falls to $60,000
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as it kind of did. And and then I I owe 40 a little
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more than 40 actually, I think, but let's just say 40 to satisfy
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some politicians Craven lust for stealing things.
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And it's going to be like that on asset class after asset
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class, unless you can buy something that the government
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can't keep track of. Yeah, I'm, I'm glad you brought
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up this example because as I think about this, I realized
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this law is in effect shutting lower income people, maybe even
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middle income people out of better investments because what
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do we know? We know on average, the greater
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the return of on investment, the greater the risk, the greater
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the volatility of the thing. Well, here's the thing.
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If you're going to invest in something like crypto that has
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tremendously high volatility and you run the, you then run the
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problem of you could get a $40,000 tax bill one year.
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Which I can't pay. You're not going to, Yeah.
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The only people who are going to be investing in those high risk,
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high return assets are people who have a bunch of cash sitting
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around that they can afford to pay the cash the the tax man.
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Your regular middle class or lower class people that want to
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get in on crypto, forget it. You can't.
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You can't afford it. And it's probably going to be
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the same with stocks. They're going to get hit stocks.
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You have a. Portfolio, you're going to get
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hit so hard that you're going to have to sell off probably 40% of
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your portfolio to cover a 30% tax, our 36%.
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Tax and I want to point out. What politicians here keep
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telling us we should do right? Yeah.
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Well, and and this is question. I got a question for you, Aunt.
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How many times can you? Do it.
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You could do the tax once. Could you have the tax twice
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over 2 years? Maybe.
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Oh, that's a good question. Could.
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You do it three times. No, you cannot do it three
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times. Yeah, I'm assuming, I'm not sure
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if this answers your question. I'm assuming from what I've read
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here, the way they've described it that this is a once a year
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thing. So it's like when you file your
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taxes, you say OK, as of right now, what are things worth you
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owe the difference between that and what you bought them for?
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If they're going to do this bullshit every year, I
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guarantee. Oh yeah, yeah, yeah.
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I guarantee you economies will crash.
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Well. In this sense, I say thank you
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now. I say it's not if God for the
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thank God for the Dutch, because they're going to be a beautiful
10:12
example. After a couple of years when
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this comes back around in the US, we'll be able to point to
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the Dutch and say, look at what happened over there.
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Only the very rich can afford to invest in things because you've
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got to have the cash buffer to pay the tax man.
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But nonetheless, there's one more thing that annoys me here
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and that is in this article they quote and I believe they don't
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say who it is, but they put it in quotes and I at the time
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they're talking about the the Dutch treasury.
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So it's possible they're quoting them.
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But none the less this is in the article.
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They say the lack of this. Apparently the government's
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politician's been pushing for this law for some time.
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But the lack of the law up till this point has been costing the
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Dutch treasury €2.3 billion per year.
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No, Huh. No, you can't.
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Lose. What you don't own to say that
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the lack of the law is costing you 2.3 billion reveals the fact
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that you politicians believe that all of that income out
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there ultimately actually belongs to the government and
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we're just going to allow the people to keep a little bit for
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their personal use. It's not costing you anything.
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That's right, I want to see this in three years time 'cause if
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they keep this up for three years, that economy is going to
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look a lot like Vietnam. Well, and this is the, this is
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the problem with all of Europe. And for all the problems we have
11:43
in the US, our economic growth now Europe's economy, Europe,
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the European Union economy is actually larger than the US
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economy. But for all of our problems, our
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growth is way bigger than Europe's growth is or ever could
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be. And it's because of nonsense
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like this. Nonsense like this.
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That's right, boy, this was really.
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Making the article. Yeah, and, and, and honestly,
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Aunt, truth be told, this was a candidate for the foolishness of
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the week. But I found something so much
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Dumber, more foolish, oh so much Dumber that this just kind of
12:21
lost out. So I'm glad that you brought it
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up in the news. Right this second is a very
12:29
strange occurrence. There is more snow in Florida in
12:35
certain parts of Florida than in Salt Lake City, UT.
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Yeah, I I would believe that. I, well, I told you, I was just
12:41
in Denver. It was 10° here in Washington,
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DC area. I go to Denver, it's 55.
12:49
They had a sign outside the hotel saying please close the
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door because of the inclement weather.
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I went to the desk. I said, what do you mean
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inclement weather? This is great.
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Every now and then somebody will try to Zoom call me and I'll be
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out on my back porch smoking a cigar and they just start
13:04
swearing at me because it's, you know, 8° back on the East Coast
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and I'm outside in a shirt or short sleeve T-shirt.
13:12
But I mean, imagine Florida having more snow than Salt Lake
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City. Salt Lake City is a ski
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destination. Yeah.
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Holy crap, weird weird goings on about the weather this time of
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year everywhere you look Weird, weird, weird stuff.
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I have no point. I just thought it fascinating.
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So on to something I do have a point about and I, I, I tweeted
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this out last week. The, the, the single best thing
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for me about doing this podcast is that I get the absolute joy
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of going out, finding somebody to make fun of every single week
13:58
in the foolishness of the week. But when something becomes as as
14:03
enjoyable as this, everybody wants to jump on board.
14:08
And I get emails, I get texts, I get Facebook messages on, I
14:14
mean, daily saying I bet this is the foolishness of the week.
14:19
And I, I usually look and say, oh God, not even close.
14:21
You're not even in the zip code. But when our good friend Wes
14:26
Westmoreland sends something over, you can bet your bottom
14:30
dollar that it's going to end up being not only the foolishness
14:34
of the week, but something I literally can't believe is true.
14:39
And yeah, what Wes has a. Good nose for foolishness.
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He really does have an eye for it.
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And there was a hearing that involved a a sheriff who is
14:52
noted as an anti ice sheriff. So you can figure out what the
14:58
hearing, you know, what was likely about.
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It was in North Carolina where our friend Wes lives, and it was
15:06
in Mecklenburg County. And the sheriff of Mecklenburg
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County, when asked, what branch of government do you operate
15:19
under now, I think almost anybody who is involved with
15:25
words and numbers to any degree knows the answer to that
15:29
question pretty quickly. I think anybody who's studied
15:35
for an immigration test knows the answer to that question
15:40
pretty quickly. Or, or at the least could name
15:47
what are the branches of government.
15:50
Yeah, but Sheriff Gary McFadden kind of let let himself out as a
15:59
bit of a moron because when asked what branch do you operate
16:04
under, his answer was Mecklenburg County, not
16:07
realizing that Mecklenburg County is not a branch.
16:10
But that's the county where that that little girl from the
16:15
Ukraine was killed, you might recall.
16:19
So this sheriff has probably had some media training.
16:25
I'm, I'm just guessing, right? People have probably said these
16:29
are the sorts of things you should be aware of giving your
16:32
job and the nonsense that's happening, the representative,
16:37
Mr. Chesser repeated. What branch of government do you
16:41
operate under, sheriff? And the sheriff had an epiphany
16:45
and said, oh, the Constitution of the United States.
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To which Chesser responded, That's what establishes the
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branches of government. I'm asking what branch you fall
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under, McFadden answers once again reaching back into a well
17:07
he had already dug into Mecklenburg County.
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Chester remarked. This is not where I anticipated
17:14
getting stuck. Are you aware of how many
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branches of government there are?
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The sheriff shot back. No, after a long pause, I bet it
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was real long, Chesser continues.
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For the sake of debate, let's say there are three branches of
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government, Legislative, executive, judicial.
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Of those three, which do you fall under?
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The sheriff answered. I believe I fall under the last
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one judicial. This.
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This might be the dumbest sheriff in the history of
17:49
sheriffs. All law enforcement is executive
17:53
by nature. How does a sheriff not know
17:55
that? For the love of God, you're an
17:58
economist. Even you know that.
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Well, yeah, I mean, this is they teach you this in what, 9th
18:03
grade? 10th grade.
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I would 5th. I mean, it's just ridiculous.
18:11
And these are the people or this is 1.
18:13
Let's let's be fair, this is one of the people who is charged
18:20
with enforcing the law, law that he knows absolutely nothing
18:25
about at the most basic level. Way to go.
18:30
Mecklenburg, North Carolina. I'm Anthony Davies, Co host of
18:34
Words and Numbers. James Harrigan and I are proud
18:37
to be on Sybil's network because we believe in their unifying
18:39
principle of human respect, which is the idea that our
18:42
well-being as humans is diminished when we employ
18:45
coercion and that conversely, our happiness and prosperity are
18:48
maximized when we cooperate. If you agree, please join us at
18:52
civil.com. That's cibl.com.
18:55
This week, David Greene joins us.
18:57
David is a former healthcare executive and independent
19:00
consultant who spent three decades inside the health
19:04
insurance system. He has held senior roles at
19:07
national insurers and later advised Covered California and
19:12
state leaders during the rollout of the Affordable Care Act.
19:16
Dave joins Words and Numbers to discuss how rational responses
19:19
to incentives shaped today's healthcare system and patient
19:23
experience. David, welcome back to Words and
19:25
Numbers. And I, I say welcome back even
19:27
though you've actually never been on it because you have the
19:30
honor of being involved in the only episode we have ever
19:35
recorded that never got published because of all sorts
19:39
of technical errors. In fact, it's the only time in
19:41
our eight years of existence we didn't come out with an episode.
19:46
I got to, I got to tell you, man, it was easily.
19:50
Now, I don't want to say it was the worst episode because we've
19:52
put out some stinkers on our own, but it it technically
19:56
speaking, technically speaking, it was a train wreck.
20:02
James Technology wasn't working, mine wasn't working, yours
20:05
wasn't working. And then like 75% way through
20:09
the episode, I kept hearing this.
20:10
Womp womp womp womp. Coming, coming.
20:13
That was David Avery. I actually.
20:16
Knew what that was before he even told us.
20:18
Because as loyal viewers, not listeners, but viewers of words
20:22
and numbers will know my dog will routinely walk in here, hop
20:26
up, we'll put her arms on my my shoulder and lick my head as I
20:30
talk into this microphone. And it sounded for all the world
20:34
like David had a dog and it was trying to get its mouth around a
20:38
toy. Which was exactly right looking
20:43
back on that attempt that we had, it feels very on brand for
20:49
healthcare. Honestly, when we when we looked
20:56
at it every, we were confused. We didn't know who was
21:00
accountable and and and that's what a lot of patients feel in
21:06
today's world. And so that's how I chose to
21:10
look at it when I did my own post look and but all that said,
21:16
very happy to be back. Thank you guys.
21:18
And where would you like? To very happy that you are
21:22
willing to come back given right yes the the massive that we've
21:27
hoisted upon you. You are very brave and very
21:30
kind. And I will say you, you're
21:32
running the risk of, of really having an unpleasant
21:35
conversation because I have spent probably 25% of my waking
21:41
hours in the last two weeks trying to get various healthcare
21:46
issues sorted out, and I have made exactly no headway.
21:50
Yeah, so I'm good and cheesed about this topic before we even
21:54
start. Now let's go before we jump in.
21:58
We've had people on at least once before who are healthcare
22:03
professionals who talk about the healthcare side of it.
22:06
We specifically want to talk about the insurance side of it.
22:10
And I think a lot of people, they talk about problems with
22:13
healthcare and they conflate those too.
22:15
So specifically, we'll talk about healthcare insurance.
22:18
Well, good, because that's what I spent 30 years doing.
22:23
And, and I think that there's a lot to the business end of
22:27
healthcare in today's world that effects people in ways that they
22:33
don't see. And so I'm more than willing to
22:37
do my best and and let's talk. Dave, can I ask a personal
22:42
question as we get started here? Sure.
22:45
What did Did you find that your job was incredibly frustrating
22:51
the same way that people on the other side of it do?
22:54
Yes. And I, I think that one thing
22:57
you notice as you delve in deeper is that even when I was,
23:05
it's going to sound a little bad, but even when I was
23:08
consulting with a lot of state and government employees on the
23:13
side of healthcare, they are inside a system where the
23:19
incentives where the system forces them to not do a lot of
23:24
things that they would like to do that are good.
23:27
And so yes, I definitely felt it.
23:32
And that's one of the reasons why I really wanted to try to do
23:35
further breakdowns of what is wrong with healthcare.
23:40
And that's why I spent a lot of time working on various projects
23:45
that ultimately had us learn about each other and talk.
23:51
Maybe I can get us started this way because I, like I said, I've
23:55
been very frustrated the last couple of weeks.
23:57
And when I get frustrated, I, I look at Twitter and today I, I,
24:03
I tweeted or whatever we call tweets now that it is become my
24:07
opinion that the American healthcare system in, in quotes,
24:11
you know, whatever we mean even by American healthcare system is
24:16
designed to keep people or to make people so frustrated in
24:22
getting their own care that they give up.
24:25
It's so Byzantine on purpose. I would agree with what you said
24:30
except for the on purpose part. I would say that there's an an
24:36
evolution that has taken place all going back to what you guys
24:42
have covered in the past, which talks about the changeover in
24:46
the World War 2 era where the healthcare shifted to be
24:52
employer based because of the Stabilization Act of 42.
25:00
And when that pushed benefits onto the employer side.
25:06
That's the core moment that launched a lot of the
25:11
misalignment and a lot of the moral hazard that we're
25:18
experiencing up through today. And then other decisions have
25:23
been made along the way that have compounded that.
25:27
And so I feel your pain. I know it.
25:31
I've been going through it with a family member personally
25:34
recently. And I think there are ways that
25:39
we can look back at the core incentive drivers of why things
25:44
are what they are. And that's what I've really been
25:47
working on recently to create a framework on how to assess
25:51
policy and new legislation and other changes that might be
26:00
coming up to try to understand what the actual consequences
26:04
will be when those policies hit the market.
26:09
So tell, tell me this because I, I've come to think of health
26:12
insurance much like I think about taxes, that it's, it's a
26:16
lottery. I go into the hospital and I
26:18
have no idea at the end of the day whether I'm going to get
26:22
$1000 bill or a $500.00 bill or no bill at all.
26:25
In fact, in one case it was when our child #3 was born.
26:32
We were in West Virginia at the time you go to the hospital.
26:35
It was an uneventful birth. Everything was normal, all of
26:37
this stuff. And I get a bill subsequently
26:42
from the hospital for whatever it was.
26:45
I have no idea. They send me this itemized
26:48
thing. I don't even know what I'm
26:49
looking at. I just pay it.
26:51
Time goes by, I get another bill from the hospital for a
26:54
different amount. Again.
26:56
I have look, I've got a PhD in economics and I couldn't figure
27:00
out what they were sending me. I just pay it fine.
27:02
So there we are, couple months go by, no more bills.
27:05
I figured, OK, whatever it was, I've I've paid it.
27:09
And about three months after that I got a check from the
27:13
hospital for some strange amount like $325.96.
27:19
OK, so I deposited that check, those checks it for different
27:24
amounts, all in a couple $100. They kept coming like every few
27:28
months for years. I have no idea what was going
27:32
on. First, you guys sound a lot like
27:36
what I hear at, you know, social gatherings once people find out
27:41
what I do or did. But I would also say what you're
27:47
touching on is based in price transparency from the get go.
27:57
Because each major player in the marketplace has a reason to keep
28:04
prices hidden. They have incentive to do that
28:09
and some of the incentives are a little bit small, but none of
28:14
the incentives are big enough for any of the players to want
28:18
to change that because there's no, there's no width up, there's
28:23
no what's in it for them for doing, doing so.
28:28
And I, I think one of the things, I don't know what
28:32
insurance you have and, and, and that becomes a whole other level
28:37
of discussion what, what medical systems, etcetera.
28:43
But one thing they all have in common is that they don't show
28:47
prices and it usually starts with the insurer.
28:50
And there are very legitimate reasons from an incentive
28:56
perspective why they don't want to show that.
28:59
I could break that down a bit if you'd like.
29:01
Well, I well along those lines, I'd like to know, look somebody
29:05
somewhere knows what the price is.
29:08
Oh yeah. The doctors don't, the patient
29:10
doesn't. Is there somebody in the
29:11
hospital who can say, yeah, an X-ray costs this much?
29:15
Yes, but the reason why it's not said is let's go to the
29:22
insurance company to start with, because that's where you're
29:25
getting all of your bills from. And the insurance companies at
29:30
the at the beginning, they negotiate with each and every
29:35
provider in the marketplace. And depending on the dynamics
29:39
that are in place, the provider might be a better negotiator or
29:46
the health plan might be a better negotiator.
29:50
And so for all sorts of services, the same provider, it
29:54
could be a hospital, a doctor's office, a clinic, they're all
29:58
going to have different prices negotiated on the books.
30:02
And what the insurer does is they out don't want to make that
30:08
public because, and this is their incentive, because if they
30:13
did in public, what they would essentially be doing is allowing
30:18
all the other providers to see what rates that they ended up
30:22
negotiating. And that public showing would
30:26
tell some of the providers, hey, I should, I should be
30:29
negotiating harder. And so while that's one of the
30:34
two ways that two primary ways that ensure work to help
30:40
mitigate cost in the marketplace, the other is by
30:43
tearing networks. When you see there's a narrow
30:48
network and a wider network in the marketplace, you're seeing
30:53
networks determined almost exclusively by the negotiated
30:58
pricing. Now here's where that breaks
31:01
down in healthcare versus other types of insurances like auto or
31:06
whatever. And the way it does is that many
31:10
marketplaces have a marquee or a very known pro provider that the
31:17
public wants. For example, in California,
31:21
Northern Cal, you would want the Stanford Medical Center to be
31:26
available as in your network so that because people love the
31:32
Rep, the reputation of them. In Southern Cal, you might have
31:35
UCLA Med Center. In other places you'll have
31:39
other prominent medical systems. People want that.
31:43
And so the decision on which network that you're going to be
31:48
in is a timing issue because that's made-up front at the time
31:52
when you purchase the actual coverage.
31:55
So those are the ways in which a health insurance company
32:04
benefits from hiding the cost is they could use networks and they
32:08
can use negotiating to help to try to keep prices down.
32:13
But by and large, they don't have much power to do that
32:18
because their negotiation position is often pretty weak
32:23
with a lot of the providers in the marketplace.
32:27
And what they have to do is focus on what they actually do
32:32
best, and that is pooling risk and protecting people from
32:36
catastrophic loss. The other thing that they have
32:39
to do is maintain connection to all sorts of disparate payment
32:44
systems and people who are submitting bills to them to be
32:48
paid at a certain percentage based on the benefit plan that's
32:52
been purchased. So all those factors involved
32:56
say why the insurance carrier wants to maintain their position
33:02
in the marketplace based on their brand, their network size,
33:07
the premiums that that they could put in place and that's
33:10
how they stay relevant in the marketplace.
33:14
That doesn't solve your multiple check issue that, but what it
33:18
does do is help explain the multiple connections that
33:23
insurers have to keep in the marketplace and why they do
33:27
benefit from that pricing remaining hidden.
33:32
And you'll find there's reasons for every other player in the
33:36
marketplace to keep it hidden too.
33:39
I mean hospitals from the perspective of wanting to hold
33:45
back on those same various negotiated prices that they have
33:49
with each of the insurers that they have to work with, as we
33:53
just discussed. And how they cost share, how
33:57
they use commercial coverage to help make up for losses that
34:03
they might get on Medicaid patients, where the payment that
34:09
they receive isn't always covering the cost that they have
34:12
to put forth. If I may, I'd, I'd like you from
34:16
your perspective, given everything you just said, to
34:20
explain something that happened to me in the not too distant
34:23
past. I needed an MRI.
34:26
No great shakes. I went to the there's a Banner
34:31
hospital here in town. No, again, no big deal.
34:35
It's, it doesn't have a particularly good reputation.
34:39
People tend to hate it. But I, I walked in with my
34:43
paperwork and I said I, I have to get an MRI.
34:46
Here's my insurance card. I'm insured by some flavor of
34:50
Blue Cross Blue Shield at the time.
34:53
And the woman said, OK, your co-pay is $1600.
35:01
And I said I'll be on my way now because and then I said words
35:07
I'm not allowed to say on words and numbers.
35:10
And, and then I, I opened the phone book metaphorically and
35:14
there's a place in town called Simon Simon Med, which does walk
35:20
in imaging. And it cost me $200 to get an
35:25
MRI. So how is my co-pay 8 times my
35:31
actual cost? It comes down to what was
35:35
negotiated for your particular health plan you are uncovering
35:42
when you do that. And I just did it for a family
35:46
member pertaining to a colonoscopy.
35:50
They were quoted $8000 for a colonoscopy at one facility.
35:57
We hopped on the phone, we found one that was 45 minutes away for
36:03
3000. And the point is, is that you
36:08
have that kind of huge variation in pricing in the marketplace
36:13
right now because it all comes back to the incentives to keep
36:20
prices hidden. And if things were to be
36:25
transparent, let's go back to that world, James, because I'm
36:28
not going to be able to answer the details of what you're
36:31
asking. But it just seems, you know
36:33
asinine that my co-pay is 8 times what the out of pocket
36:38
complete payment is. It is, and that's why
36:44
transparency would really help people in the marketplace and
36:48
really hurt others. You would find the people in the
36:52
long term that would gain the most are the patients in the
36:58
short term. Right now, patients actually
37:01
have incentive themselves to keep pricing transparent and not
37:05
know it because it helps making decisions about care easier for
37:10
the now. And then the bills start coming
37:12
months later until in Ant's case, the checks start coming
37:16
back to him months later. And so the and the, the
37:21
employers are able to keep topics off the table like is
37:24
what I spend on wages worth it? And meaning the employees would
37:30
begin to ask the questions to say, go, I want this benefit
37:33
package or would I rather have the difference in wages?
37:37
But let's go back to say if you had, if price transparency
37:43
became known as a general rule and business models matter, so
37:50
there's going to be exceptions within the the category, you
37:55
would find hospitals have the most to lose.
37:58
And that's who you said you went to 1st for pricing.
38:03
That's right. And because that would really
38:05
expose the price variation and threaten the cross subsidies
38:11
that take place within the system.
38:14
And you'll find that most of the time who's bearing the brunt of
38:20
the cross subsidy is the employer sponsored coverage
38:27
because that's where you have the least rules that govern what
38:31
pricing can be. In fact, the ACA, even though it
38:35
was mostly driven to the individual marketplace, has come
38:39
back and has been a driver of employer sponsored coverage
38:43
price increases. Both of you relayed examples
38:49
that were stunning to me, and they involve comparison
38:52
shopping. People don't, at least in my
38:57
experience. They comparison shop for all
38:58
kinds of things, but never for healthcare.
39:01
You know you're told to go to the hospital and get some tests,
39:03
so off you go and you go to the hospital you always go to.
39:06
To what extent would prices come down if more people did what you
39:12
2 did? Well, it has to go beyond what
39:16
we did, but it starts with what we did because we actually, I
39:23
went back to who we were quoted 8004 and, and informed them of
39:29
that. And they claimed that their jaw
39:33
was on the floor about that price difference and how they
39:39
were losing a customer. So yes, that has some effect,
39:45
but society has been trained to not negotiate health prices
39:52
because one, they've never known what the cost were.
39:56
They don't see the prices upfront.
39:58
And then there's the other parameters that have to happen
40:01
within pricing is you might get quoted a different price, but
40:05
you have to make sure that you're comparing the same units.
40:09
Of care, meaning am I getting the theologist reading included
40:16
in the $3000 versus the $8000 what's all included in the
40:22
price? And then obviously wanting to
40:25
know what the a margin thinking issue, which is to know what my
40:30
all alternatives might be. But so that's why showing the
40:38
crisis would disrupt the marketplace tremendously and
40:44
some would survive well and some wouldn't.
40:48
But right now, I would agree that it's incredibly frustrating
40:53
because you could really look at some hospitals out there being
41:00
very good pricing strategies with a building attached.
41:06
That's a really good way of looking at it.
41:08
I've never actually thought about it in those terms, but
41:12
it's sad and very, very insightful.
41:15
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41:38
That's civl.com. I actually worked for an
41:42
attorney when I was in Graduate School, and I learned a a very
41:46
strange thing about healthcare and price.
41:49
When I did that. One day I was sitting at my desk
41:51
and he dropped a bunch of files on my desk and he said, go
41:55
renegotiate all of these medical bills.
41:59
And I said, you can do that. He said, yeah, just call those
42:02
numbers, tell him this guy is never, ever going to pay that
42:07
and ask them what they'll accept.
42:10
And I did that and they almost always came with it back with it
42:15
somewhere within 10 and 30%, just like not ten or 30% off,
42:20
but 10 or 30% of the original of the total.
42:24
And I, I, I got so used to it that I, I changed my approach
42:29
and I would call and say, can you do 10% on this?
42:33
No one ever said no. They have a lot of patients that
42:37
come through and ever get anything.
42:39
So you are offering something. So they're going to say yes to
42:43
that and just ultimately a volume based business.
42:49
So they're going to take what they can get from each iteration
42:55
of patient care that they can. And yeah, there's there is
43:01
again, I think it comes back to how we've been trained as a
43:05
society so far. And I think that because because
43:11
of that, we have had each individual component of the
43:16
market find a place to work in opacity of price.
43:22
And that has led to the experiences that you, James have
43:27
had. And I, I've learned over over
43:30
the years, you should go back and thank that attorney.
43:33
Yeah, that's right. Let's go to the obvious
43:38
question. What are some common sense
43:40
things that could be done 'cause this is a mess.
43:45
Every it is a mess. This is a mess.
43:46
And that's why we have a well, let's talk about what the ACA
43:53
did. All the ACA did that the
43:57
Affordable Care Act is what I'm referring to.
44:01
All the all that that did was create a whole lot of extra
44:06
money going into the broken system because it took the
44:11
premiums, put those premiums on the taxpayer for those who
44:18
couldn't normally afford insurance.
44:22
And that insurance is just more money flowing into a system that
44:28
has misaligned in incentives. Most all of it is driven by the
44:34
benefit design plans that are designed to make the upfront
44:38
cost to the patient extremely low.
44:42
And that extremely low which sometimes orders on free is
44:46
allowing people to just say, all right, give me that next test,
44:51
give me that next whatever. And those are what allow for
44:57
prices to go up because patients don't see the marginal cost of
45:02
the decisions that are being made.
45:04
So that's one thing around pricing that I would say has to
45:11
happen. And it's just, I was, I was
45:17
thinking about it because we had time between our first try and
45:21
this one and about a lot of what you guys speak about.
45:25
And to me it's no different than what happened in education.
45:31
You had government secure loans. So all of a sudden they were
45:38
securing money flowing into the education system and the
45:42
education system bloated. Well, that's the same thing
45:46
that's happened on the misaligned incentives that
45:49
happened with the huge amount of money that's being poured into
45:54
the system that was already broken in healthcare.
45:57
That was the analogy that I drew.
45:59
You guys would know better how well it holds or?
46:01
Not it's. It's interesting you say that
46:03
because I've seen side to side graphs overtime of the growth in
46:09
the number of people employed in healthcare who don't deliver
46:14
healthcare. It goes, you know, remarkably
46:17
up. You can look at the same kind of
46:19
graph for higher education, people employed in higher
46:22
education who aren't involved in education and that goes up the
46:26
same way. And in both cases, it's the
46:29
institutions hiring people to make sure that they are
46:32
compliant with and can deal and handle the paperwork that's
46:36
involved with all of the tax money that's coming in to fund
46:39
this thing. 100% you find that exact same thing in healthcare
46:44
with the regulations that are passed, and it takes a lot of
46:49
really smart, educated people to be able to navigate that and
46:54
those costs have to be passed on.
46:57
You said. Something to cost skyrocketed
47:01
over the past 30 years. Healthcare I I personally
47:07
believe that the core of both of those is the massive amount of
47:11
funding that has been essentially teed through the
47:17
policy changes that took effect. You said something in in our
47:21
first attempt at this episode that I want to make sure we come
47:25
back to because it was news to me.
47:27
You said that the profit margin that ensure health insurance
47:32
companies face is very small. Yeah, it's approximately 2 to 4%
47:39
across the board. You'll find that other pockets
47:44
of the industries such as medical devices and they will
47:50
have a higher margin. They they will be maybe 50% plus
47:55
or minus range, sometimes even higher.
47:59
That could be low depending on what the device is.
48:02
And you'll find pharma can have higher margins too on certain
48:07
things. But by and large, insurance
48:09
companies margins are tight. And I think that's consistent
48:14
with what we spoke about earlier on the call if we want to sit
48:17
back and give it another look. And that is that health
48:21
insurance companies across the board have very little power in
48:27
terms of being able to hold costs down.
48:31
That's they're, they are largely price takers.
48:34
They can do some negotiations at the margins.
48:38
They can do some things like the network tearing that we
48:41
discussed to help hold down prices.
48:43
But otherwise they're price takers.
48:45
They are working on doing what they do best, which is managing
48:49
the risk to help keep the price down.
48:52
And otherwise they're a marketing machine for sales and
48:56
you see that close to commodity type operation reflected in the
49:02
margins which they made. Now there's huge amount of money
49:07
flowing through these insurance carriers, suspect larger ones.
49:11
So their margins look huge from a dollar perspective, but their
49:16
margins are actually pretty slow.
49:18
So where is the money going? You mentioned pharmaceuticals,
49:22
for example. That can't be the lion's share
49:25
of it. Who's who's ending up?
49:27
We're paying a lot of money. Where's it going?
49:29
Well, it is spread out, but I would say it's going to the more
49:35
institutional the player in the marketplace, the more money
49:39
that's going to them. So I would say in terms of
49:43
volume of dollars, you're looking at the hospital systems,
49:50
you're looking at health insurance companies definitely
49:54
take some, I mean a lot of this is the cost of care.
49:58
I don't want to sit back here and say that there's certain
50:01
people making unbelievable margins across the board that
50:06
just doesn't exist. I mean, you might, you might be
50:11
able to argue if you went deeper into the books, how much is
50:17
margin versus how much is admin cost etcetera, and other types
50:22
of overhead costs. But you're finding the vast
50:27
preponderance. You know you could find 90% or
50:31
more of the money that goes into an insurance company is pumped
50:35
right back out into the marketplace to take care of what
50:39
they're being billed as cost of care.
50:42
So if I think that's you correct, that's worth
50:44
underlying. James and I have talked about
50:46
that, that that our level of Healthcare is tremendous.
50:51
Now I, I give you an anecdote. A friend of mine I ran into
50:56
today, I said to you, hi, I saw him last time last week.
50:59
I said, Hey, how was your week? He said I was all right.
51:02
I had a heart valve replacement. He went, went in that, you know,
51:07
do the heart valve and it's an outpatient.
51:09
He's in there for a couple of hours and then he goes home and
51:12
that's and that's it. When I was younger that was a
51:17
multi week process and they tear your chest open and the whole
51:21
business you're in that. That level of science fiction
51:26
doesn't come cheap. Not at all.
51:28
And I think you're absolutely right to be amazed at that
51:31
'cause I have, I'm there's, I think one of the questions that
51:37
you often ask aunt is to say, hey, would you rather have 1950s
51:42
healthcare at 1950s prices or today's healthcare at today's
51:46
prices? One of the things I do in the
51:49
framework doc document that I recently finished is I asked the
51:54
question to say what kind of healthcare do you want in 2100?
51:59
And that takes the thinking of your question forward to say
52:05
what are we going to do to manage both cost and quality and
52:09
innovation? I heard every word you said.
52:13
And I think, let me let me kind of reframe it so people who
52:19
don't think about healthcare very much can think about it in
52:22
another way. If everything you said is is
52:26
correct, and I have no reason to think it's not, I am
52:29
extraordinarily unlikely to find any company in this space with
52:35
the margins, say Apple True. Not going to happen.
52:39
I would say you might find a few and that would be mostly in the
52:44
medical device ran and it would be I would say relatively short
52:52
lived depending on what kind of products that they have in their
52:57
pipeline. But I would say overall, I would
53:00
say your question or your result of your thinking is on target.
53:07
And I'm certainly never going to find it in the insurance world,
53:10
in the medical insurance world. No, you won't.
53:15
And again, I think it's because when you look at it closer, you
53:18
begin to see how close and the trust me, the people in the
53:23
insurance world that I work with don't like me saying this, but
53:27
they're at a commodity level or very close to it and how they
53:32
operate. And that's why their margins are
53:34
not very strong. I think I like the way you put
53:41
that right at a commodity level. I think that's a very good a
53:46
good way for people to get their fingers into it.
53:48
But there's a broader question here.
53:50
Why do they do such a fabulously poor job of public relations?
53:56
Because we're at a point now where Luigi Mangione can walk up
54:01
behind Aceo of a medical insurance company, kill him, and
54:07
become a hero. OK.
54:09
I know in a industry where you otherwise never see a price, the
54:16
only place you see it is from the insurance company.
54:21
And due to the nature of the way billing works and all the cycles
54:26
that have to be gone through to understand what the price should
54:30
be, everybody people want to believe.
54:38
And they're not necessarily wrong as long as they're
54:41
defining it correctly, that Healthcare is something that
54:46
they should get because nothing is more valuable than health.
54:51
And when now they're being asked to pay certain charges for it
54:55
that are extremely high, they want to find a quote UN quote
55:01
villain. And the best villain to find is
55:04
the one that's actually handing you the bill.
55:07
Whether it's their fault, for lack of a better word or not,
55:12
they are the ones who are the visible entity that is the most
55:18
easiest target. And you have a lot of political
55:21
messaging that helps to back that up.
55:24
And I'll, I'll just say the bleeding obvious at this point,
55:27
the actual villain here is the federal government.
55:32
This how it started. That's what sustains it.
55:35
That's where the political messaging is coming from.
55:38
There's your bill, and you wouldn't know it because what do
55:41
you hear from the federal government?
55:42
Elect me and I'll fix this problem.
55:45
Oh, I'll make it free. Yeah.
55:49
And as you guys both know, there's some significant issues
55:53
with that when reality chooses to step into the room.
55:58
And so and a lot of that falls under the same type of framework
56:06
that we're applying to what I call a hybrid system.
56:10
What we have right now is a cross between a free market
56:13
system and a centralized system. And you really don't get the
56:19
best part, best parts of either when that happens because you
56:24
really begin to lose a point of accountability is the net net of
56:30
that. And so when you look at what a
56:35
purely market driven marketplace would look like, you have to
56:38
have certain parameters in place.
56:41
And you, if you choose to have a centralized system, you have a
56:48
lot more things that you have to overcome to make it real.
56:53
And you're stepping deeper into that political motivations
56:58
bucket that you just brought up, James.
57:01
Tell me this, David, My understanding is that that
57:05
there's all these this bucket of topics that we've talked about
57:08
with healthcare, excuse me, health insurance.
57:13
But then my understanding is Medicare is an entirely
57:16
different thing to the extent that when you go somewhere and
57:21
you seek medical care, the question is, is it private
57:24
insurance or is it Medicare and different things happen.
57:27
So my question to you is, is it, are we in a space where, where
57:33
health private health insurance is subsidizing Medicare or is it
57:38
the other way or is that that just not even a thing?
57:41
Oh, the former. The former by fall.
57:44
The the private subsidizing Medicare.
57:46
Yes, and that's how you see things like we could.
57:52
Medicare is one of the huge reasons why hospitals crossed
57:58
price because they need to make up some of the dollars,
58:02
especially when they might have parts of their system.
58:07
Or they might just be a hospital in a rural area where they can't
58:10
support the volume necessary. So you will definitely find it
58:15
fall into the private sector. One of the things, let me get a
58:21
little bit wacky for a second here and talk about how in the
58:26
Affordable Care Act, there are rules in the Affordable Care Act
58:31
that basically what they do is they have you look at how the
58:39
premium costs are limited for can be charged for the
58:44
individual coverage. And so you find that the 90% of
58:51
the people who have coverage through the, a, the ACA, they're
58:56
paid for by the taxpayer. So 90% of the premiums there.
59:02
And so, and because the premiums must stay reasonable and I put
59:07
that in quotes because it needs to stay at that level.
59:11
The carriers are very reluctant to want to put a lot of pricing
59:18
pressure there because the political it's being paid for by
59:24
the taxpayers. So if costs start to run away on
59:27
the individual side of the AECA, they're the insurance companies
59:33
who are already evil are going to be the ones who are going to
59:37
take the brunt of that. So what happens is you also have
59:41
other factors that are built into the Affordable Care Act,
59:46
such as you have what are called metal tier levels.
59:50
And those metal tier levels are bronze, silver, plat, gold and
59:55
plat. And each one of those
59:57
corresponds to what's called an actuarial value.
1:00:03
And and that value represents what that medical care should.
1:00:08
Cost on average or should be covered on average.
1:00:12
My whole point being is that there's very tight parameters
1:00:16
around what those values can be and thus while it doesn't define
1:00:22
pricing, it gives a good indication of what kind of
1:00:25
pricing window you have with each of those metal levels.
1:00:29
The bigger point here being is that on the group insurance
1:00:33
side, you don't have those restrictions.
1:00:37
So you could have any value of care built into the benefit
1:00:41
design and the insurance company is free to price it with less
1:00:49
oversight. Lack of a better phrase, because
1:00:51
the employers can't, can't back out if they they say no to every
1:00:57
proposal that's dropped on their desk, they're going to lose
1:01:00
their employees because they're not going to offer benefits
1:01:04
anymore. And so they kind of like a lot
1:01:07
of audience there where pressures to way that it's
1:01:13
become the phrase and think that I've worked on is I call down
1:01:17
essentially the shock absorber in the marketplace and that's
1:01:22
how you find definitely to and I know I'm driving your point home
1:01:29
home further amp, but it's definitely the large group
1:01:34
insurance sector that's sucking up a lot of paint.
1:01:39
Well, all right, David, thank you.
1:01:42
I mean, this has all been very disconcerting, of course, so
1:01:45
thank you. Doesn't seem to be the right
1:01:47
words to use, but thanks for sharing your time with us the
1:01:50
way you have. You been very generous with your
1:01:53
time and your knowledge, and I just want to know, is there
1:01:57
anything out there you're working on that you might like
1:01:59
to have people know about? Yeah, recently retired.
1:02:03
And so one of the things that I've really taken on as a
1:02:06
passion effort is launching a free educational project for
1:02:12
community groups and students and even just the curious adults
1:02:16
out there. And it's called
1:02:17
unravelingtwists.com. And it's working on explaining
1:02:23
outcomes that surprise us. And it's very much aimed at
1:02:27
looking at the incentives that are created by policies and how
1:02:33
the outcomes don't necessarily match the intent.
1:02:37
And, and there's all sorts of subjects on there.
1:02:42
There is larger framework document just healthcare that I
1:02:47
recently posted to that site and it gets into all subject matters
1:02:52
of healthcare. And so that's available there
1:02:55
too. But I would just like to, I'm
1:02:59
just watching it and I'm hoping to be able to make a little bit
1:03:04
of an impact here locally in my community and hopefully a little
1:03:09
wire. Say the name one more time.
1:03:11
Unraveling Twist explaining how Beaten's that surprise us.
1:03:17
We'll be sure to include a link to that on our Words and Numbers
1:03:21
Backstage Facebook group when the time comes.
1:03:25
And if you're not on that group, well, what?
1:03:29
What are you waiting for? Come on.
1:03:30
Oh no, I've been on that group for six.
1:03:33
Or not you. I'm I'm talking to those.
1:03:35
People out. There who consistently say,
1:03:39
well, how come I can't have the link?
1:03:40
Well, here, here's mine. You're not with us.
1:03:43
No. But if you write to very
1:03:45
thankful for words and numbers and the work that you guys do
1:03:48
soon searly and so I appreciate you guys very much.
1:03:53
Well, thank you for joining us and and helping us cover a topic
1:03:56
that we've shield away from for a long time.
1:03:59
We have avoided this for eight years, so thank.
1:04:02
Happy to be able to bring the depressing flavor to you, James,
1:04:06
based on how it ended up. And you, you know, you know how
1:04:12
badly you've screwed yourself over here, right?
1:04:14
Because every single time something stupid happens in the
1:04:18
healthcare market, you got to come back.
1:04:22
Right. I actually, believe it or not,
1:04:27
find the industry fascinating and it's a lot like trying to
1:04:33
unscramble eggs at times. But it is it is fascinating how
1:04:39
we got into this mats and to try to think of ways to work out of
1:04:43
it. And it's a Herculean mental
1:04:47
experiment every time. Well, thanks for everything and
1:04:51
I look forward to talking to you again.
1:04:54
Thank you guys. Soon enough, soon enough.
1:04:57
At Words and Numbers, we spend a lot of time talking about what's
1:04:59
going on in the economy and the government.
1:05:01
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1:05:04
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1:05:07
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1:05:09
find it difficult, if not impossible, to discuss their
1:05:12
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