Math: It’s not just for breakfast any more.

A little bit late today compared to when I usually post–not that there’s a set schedule.  Had to pick up my wife and daughter from the airport.

On another Social Media platform (I saw it on FaceBook, but it was copied from elsewhere) the claim was made:

The F-35 fighter jet budget is set to exceed a total of $406 billion.  Remember that when they say single-payer is too expensive.

Let’s run with that, shall we?  First off, that budget is over ten years.  So that would be $40.6 billion a year on average.  Population of the US, as of this writing is estimated (US Census Bureau) at 325,428,250 (it will be higher by the time you look at it, if you do).  Let’s just say 325 million.  That means the F-35 budget, if the project were completely abandoned and all the money shifted to health care, would be worth $125/year per person.  How much health care do you think that would buy?  One, two office visits?

Just because something sounds like a lot of money does not mean it is a lot of money when it’s applied to every man, woman, and child in the US.

Let’s work that from the other end.  The average health care spending, per person, in the US is $10,345.  That’s the total of government, insurance, and individual expenditures.  All of it.  So, the total expenditure over the entire US is just under $3.4 trillion.

The 2016 Federal Budget, the whole thing, was $3.85 trillion

Having the government pay for health care would be almost as big as the entire rest of the government combined.

This, of course, is the part where someone claims that it will be so much more efficient and cheaper to have the government do it.

Don’t make me laugh.  The government is never more efficient than the private sector and it’s never cheaper.  Yes, you can point to foreign nations that get their drugs cheaper but they can only do that because, frankly we subsidize them.  The cost of getting new drugs and treatments approved and brought to market is enormous.  Then there are the ones that never do make it to market, where some problem is found along the way and the drug/treatment is never approved.  Those costs have to be recouped as well.  On balance, pharmaceutical companies make a gross profit in line with the risks.  The total revenue is high, yes, but the total cost is high as well.  Nobody’s going to invest a billion dollars in new medicines unless they’re going to make a reasonable margin on it.

As it stands now, the US is paying those costs.  Am I happy with subsidizing the rest of the world this way?  No.  I’m not.  But if that’s the cost of continued medical progress, I’ll pay it.

One might propose instead of businesses investing and developing medicines for profit and let government handle it.  Well, that would mean that you’d need to fund that cost publicly as well, and that’s hardly an argument that government will reduce cost of healthcare.  And if they did that, well, I’ve discussed the issue of profit motive vs. socialized medicine before.  As things stand now the US is #1 in things like Nobel Prizes in medicine, in new treatments and medicines, #1 in cancer survival rates.  There is a reason for that.  And even medical countries based in countries with various forms of socialized medicine can still make profits so long as there’s someplace (like, say, here) they can sell to make that profit.  If you want to see what will likely happen if that profit motive is taken away and it’s all government controlled, look at the rate of medical developments coming from places where that is the case.  The old Soviet Union would be a good example.

So, no, going to “single payer” would not reduce the cost of health care except at a very high price indeed.  No, the only way they would reduce cost is by reducing care.

And if we stop paying for the new develoments, who’s left who will?  Progress slows to a near standstill.

That’s what “government reducing costs” would mean.

But to get back to the original point, people like to try to compare a single number that seems large with a much smaller number that applies to lots and lots and lots of people.  Another example is CEO compensation.

Let’s take a popular case.  The CEO of Walmart has a total annual compensation of $22.4 million.  That sounds like an enormous amount.  Why, if he took less, he could give all those employees a big raise, right?  Wrong.  Walmart employs 2.3 million people worldwide.  So if the CEO took nothing as pay and bonuses, worked purely out of the goodness of his heart because, I don’t know, he found it fun or something, the money saved would allow him to pay those people a raise.  Of just under $10.  A year.

But wait.  That’s worldwide.  Suppose we say just forget those damn foreigners and only use that money for Americans!  Why that would mean they’d only have to split that raise among 1.4 million people.  That CEO compensation divided among them would give them a raise of…$16.  Per year.

This is just simple math.  People compare some “big ticket” item with “small ticket” items and don’t mention how the very large numbers of those small ticket items add up, or how very little the large ticket item would really stretch among the many to whom those small ticket items apply.

So when someone says “if we can afford X, then surely Y isn’t too expensive” take a closer look.  Just how much of those “Y” do we have to buy and how much is the total cost?

Math.  It’s not just for breakfast any more.

 

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14 thoughts on “Math: It’s not just for breakfast any more.”

  1. — As things stand now the US is #1 in things like Nobel Prizes in medicine, in new treatments and medicines, #1 in cancer survival rates. —

    Naughty, naughty! You can’t run around the Internet blatantly citing actual facts! You might offend someone! Besides, everyone knows that the U.S. is only rich because of all the poor brown people it’s oppressed. Ask any leftist.

  2. Actually, the cost to develop a pharmaceutical and get it approved is merely large (probably should look us the latest eatimates, but my recollection is its in the hundred million or two range), but the cost of the many failures drives the average cost per successfully approved medicine up to about a billion dollars each.

  3. First, the author looks like Grigori Rasputin’s great grandson. Second, there is always math, so deal with it folks.

  4. Of course, your observations are spot-on. Unfortunately, people are so emotionally invested in the idea that with health care, they can have unlimited, state of the art and cheap/free services–instead of just two of those at any given time– that no amount of empirical evidence will convince them otherwise. They will always resort to some magical explanation to allow them to ignore the math.

  5. Walk into a VAMC sometime… Tell me again how Single Payer works…
    Walk into a hospital in Cuba… Tell me again how that works out for you…

    It’s not that it’s too expensive on those budgets (which is what we’re talking about here with that Fighter…Seriously… Math, sir…and you’re **NOT** doing it in this steaming divot…) it’s that it’s too damned expensive to do **RIGHT**…

    You’re entitled to your opinion, sir, but like assholes, everyone has one, and they **ALL** stink.

    1. Well that’s…impressive. Way to completely miss the point. You seem to be thinking that I’m endorsing Single Payer when I’m doing just the opposite.

      See this little paragraph here:

      So, no, going to “single payer” would not reduce the cost of health care except at a very high price indeed. No, the only way they would reduce cost is by reducing care.

      What you appear to be criticizing me for missing is right there. Doing healthcare right is expensive. The only way single payer could “save money” would be to reduce the availability and quality of care. And we see those results in other areas where the government has control of health care.

      But the point of the piece is somewhat difference. I wasn’t addressing, not directly, that government run healthcare in the US would be a disaster. I’ve dealt with the VA. I’ve dealt with military “medical care”. I’ve dealt with medicaid. I know how bad it would be. However, this piece was addressing the claim I run across that is often made “if we can afford “X” then certainly we can affort “Y” that fails basic arithmetic. I used two examples that commonly make that mistake (if they are mistakes–the people originating them might well know that they’re nonsense) that I happen to have encountered recently.

      Are there other things I could have said about health care or about executive compensation? Certainly. But it’s a blog post, not a dissertation.

  6. One quibble– you stated that going to single payer would entail an additional $3.4 trillions year, so the actual additional required expenditure would be $3.4 trillion minus what the federal government already spends on health care. Really good article, and I expect to borrow that explanation about CEO pay sometime.

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