Math: It’s not Just for Breakfast any More (a blast from the past)

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.