The American Affordability Crisis — ft. Neera Tanden

17:18Neera Tanden:We'll be right back after the break. And if you're enjoying the show so far, send it to a friend and please follow us if you haven't already.

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20:09Neera Tanden:We're back with Prof G Markets. I think one thing that I always find and that we always find whenever we try to dig into healthcare is we like try to figure out why are healthcare costs still so high? Why are they so much higher in America? And then we kind of do the digging and digging and then it's always comes around to some answer of, oh, there's a lot of just complexity in the middle somewhere. There's the pharmacy benefit managers. There's the insurance companies. No one can see eye to eye on this stuff. The whole thing is just like, oh, it's really complicated. Like that's the explanation.

20:44Neera Tanden:Could you just give us like a 101 on what is going on with healthcare policy in America right now? And why hasn't America really gotten its act together? in terms of bringing healthcare costs down?

21:00Ed Elson:The way I bottom line healthcare costs in America is the per unit cost of things in America is much more expensive. Going to a doctor, getting a medical device, getting a surgery is much more expensive here than in Europe or other places. Just anything you do is a lot more expensive in the United States. And the reason why it is a lot more expensive in the United States is essentially you have a variety of forces, hospitals, insurers, PBMs, benefit manager, drug benefit managers like middlemen, the drug companies, all like very few of those forces are transparent. And so it basically, the fractured system allows a bunch of people to drive up costs.

21:58Ed Elson:A big area where things are just much more expensive in the United States is hospital care. It's just, and those hospitals often have a monopoly. And no individual group is using their, has enough market power to really drive costs effectively. down. So it's a very inflationary system. So I don't have like a much better answer than it's complex. And that's what makes it more expensive. But essentially of a system that is super fractured and in a way, everyone looks at somebody else to lower the to be transparent. What we should do is have everyone be transparent. The hospital should be really clear on what it costs.

22:46Ed Elson:And, you know, I do think that there is an additional problem in the United States, which is because people don't have health insurance. There are a bunch of forces like hospitals shift costs. I mean, there's we've insured a lot of people in the United States, particularly after the ACA. But there are some people who still don't have coverage and they shift costs to others to sort of pay for for that. So it's it's two complicated things. But what we should do is have radical transparency everywhere. get rid of the PBMs. There's a lot of self-dealing in the system as well, and that would make it a lot better.

23:22Neera Tanden:What could government do about this? Like, what I'm getting is, like, all of these, this fractured system, all of these independent actors, everyone's blaming it on each other, pointing fingers, being opaque. Like, I feel like that's exactly the domain of the government, to get in there and just figure it out. What would that look like?

23:43Ed Elson:There are states that have done really effective things. And I'll give an example. So it's to use the power of the government, not to set price caps, but to basically try to negotiate with all the insurers. Insurance is regulated in the United States basically at the state level for the most part. And so very similar to the German model where you have kind of bargaining between all the employers and all the insurers to set, the government kind of oversees to set lower prices for insurance. And they do the same thing with hospitals. And essentially it helps bring the whole price system down by taking negotiating power and concentrating it.

24:30Ed Elson:And this is why I think it's important for Medicare to negotiate drug prices, because you have something that has a lot of market power able to match the power of like near monopoly prescription drug companies. So I think, you know, other countries have used that model. Other countries have also done single-payer. But in a system that's going to be, that you imagine, short of single-payer, having the government help, you know, basically negotiate with employers and, like, bring all the employers together and renegotiate rates down in a way where companies can still be profitable. but you actually are concerned about consumer costs as well, you know, I think that's an important step.

25:17Neera Tanden:What is Trump, is this administration doing on health care policy that you think is either a good idea or a bad idea? I think the one thing that I'm kind of interested in particularly is Trump Rx. And from my understanding, it's, you know, this policy to theoretically get the cost of drugs down. That's also part of his whole great health care plan. The details are like not very clear as to what he's actually going to do there. But just on health care, what do you make of what this administration has either gotten done or not gotten done so far?

25:52Ed Elson:The Trump administration is trying to lower health care costs and actually lower the level of federal payments to Medicare Advantage plans. So the Trump administration recently, you know, tried to put the brakes on some overpayments to Medicare Advantage, which Medicare Advantage is a private insurance in the Medicare system, which historically has been, you know, overcharging the federal government vis-a-vis, like much more than, you know, it pays for traditional Medicare, fee-for-service Medicare that the government is just handling. So that's one area. And Trump Rx, like, basically the Democrats in Congress passed Medicare drug negotiation.

26:38Ed Elson:They have not undone that. And in some ways, it seems like they're trying to act like they're building on that by lowering drug costs. But, you know, whatever that's good, it's good that this is an area where they are trying to continue that work. And there are plenty of areas that are not continuing important good work. So, you know, I think that's a really important step. I think the fact is that even Donald Trump recognizes Americans pay more for drugs, prescription drugs, than anywhere else in the world. And we do that at the same time where we spend the most money on research for prescription drugs.

27:15So consumers are paying on both ends, and I'm glad he's trying to take some steps there.

27:23Neera Tanden:We'll be right back. And for even more markets insights, sign up for our newsletter at profgmarkets.com slash subscribe.

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29:31Neera Tanden:We're back with Prof G Markets.

29:33Scott Galloway:I want to take advantage of the fact that you are sort of at the intersection of kind of a think tank. Is that how you would describe your group right now, policy group think tank?

29:42Ed Elson:Yes, I would say the Center for American Progress is an action-oriented think tank.

29:46Scott Galloway:An action tank. So the and the fact you've worked in the Obama administration, you have a solid understanding of economics. What I want to do is sort of a lightning round here. I want to propose a series of policy ideas and get your sort of quick 30 ,000 foot action oriented reaction. You ready? Single payer or national health care?

30:08Ed Elson:If America could start over again, there'd be a lot of benefits to single payer. It works well in other countries, but it would be a radical transformation today. So I we support I support more of a public option to people that would create competition for insurance companies. And they'd actually have to compete on lowering costs vis-a-vis the government.

30:31Scott Galloway:Mass distribution of GLP-1 drugs.

30:34Ed Elson:That would be great. I mean, GOP-1 drugs are, they have many facets, one of which is the drug companies just kind of discovered, like, they basically struck gold with these drugs. They weren't expecting to, you know, invest to have this kind of benefit. They are exceedingly expensive. They have huge costs, huge health implications. They would make Americans' lives much, much better on a whole range of issues. We're discovering health, sleeping, heart conditions, as well as weight loss. So it would be fantastic to get wide distribution and much cheaper price.

31:18Scott Galloway:Federally mandated minimum wage of$25 an hour.

31:20Ed Elson:I think, you know, we're looking at things like a$20 an hour. I think the most important thing to think about here is how you set a wage that people can live on and do it in a way that creates more job opportunities and doesn't give people an excuse to get rid of jobs. So, I mean, you could do$25 minimum wage and think of some regional variation. But I think the impetus to drive the minimum wage up is really crucial and hugely necessary. Just in much of the landmass of the country, it is still$7.25, just as a reminder. So think about what that's like. In most of the South, it's still$7.25. In much of the West, it's still$7.25.

32:08Ed Elson:And I think that is outrageous, frankly, in this day and age.

32:14Scott Galloway:Elimination of capital gains and mortgage interest, one basic income tax rate, and similar to what Reagan did.

32:21Ed Elson:I think the country over the last 20 years has seen a big increase in wealth that goes towards capital versus labor. And I mean, there's been some studies that show when you really raise capital gains that, you know, people play games around that. But fundamentally, I think we should raise, we should have, we should not have this big differential between capital gains and traditional income that benefits very wealthy Americans.

32:54Scott Galloway:Last one, alternative minimum tax of 50 % for anyone making over, say,$3 million a year.

33:00Ed Elson:Yeah, that sounds good. I think what I'd say here, and you know, you've talked about this yourself, I think we have a real kind of cancer in the country in declining opportunity. And I'll also say, you know, we had Raphael Warnock here at Cap a few months ago, and he was talking about, you know, essentially a spiritual crisis in the country. And he identified it really with a sense that millions of Americans, most Americans, in fact, don't think that they can, that they have a real fair shot in the country. And they might think that because it's true that upward mobility has really declined. We have less economic mobility than Canada, almost half.

33:50Ed Elson:We have less than most countries in Europe. This was a country that used to be a place where you could go as far as your talents can take you. So I think we have to transform our institutions to make them put that issue, like opportunity for every American, at the heart of what they do. And those ideas are part of that.

34:15Scott Galloway:Last question for me, just along the lines of the lightning round. What do you think of the idea of the notion of mandatory national service?

34:21Ed Elson:I love it. I wish we could get it done tomorrow.

34:23Neera Tanden:I would add one proposal to the lightning round. This has gotten a lot of tension recently. It's very controversial. It was proposed in California, and that is a wealth tax. Specifically, the one that was proposed in California would be a one-time 5 % wealth tax on billionaires. Basically, for those wondering what is a wealth tax, it's just take your net worth and lop off 5%. What do you think of wealth taxes? Do you think they make sense? Do you think they will address inequality? What do you make of them?

34:57Ed Elson:Well, I think it's hard to do at a state level. I will say that. I think the fundamental impetus to me is how you address the inequality in the country. And I want to say a little bit more about that, which is I think we've had an important conversation about inequality for over, you know, 15 years. Piketty's book came out like 15 years ago. And I think that we lose sight of how it's a corrosive effect, not just on our economy, but our democracy. I mean, and that billionaires today have the ability to have a billion times wealth of other people is one thing, but they also have a billion times more political power.

35:43Ed Elson:So I think it is very corrosive. Now, Now, you know, I hate to be a policy wonk here, but there is some concern that a Supreme Court will never approve of a wealth tax because we needed an amendment to even get an income tax. So I think to me, the most important question is how do we use, how do we, what ideas can we have, which there are many, to reduce the kind of overwhelming political power and economic power of the very wealthiest people in America. And, you know, I would just also note, you know, if you just look at, say, the 1995 tax code, okay, was in the heart of the Clinton administration.

36:26Ed Elson:It had pretty high taxes and the economy was doing very well, okay? We were stable to have a tech boom. We had pretty high tax rates on income. We had pretty high tax rates on the highest end and on capital gains. And, you know, we didn't do these three rounds of tax cuts that George Bush did on dividends and all these other things. We're just a wealth of areas that we have cut taxes on over the last 20 to 30 years that we could undo without the Supreme Court challenge or other challenge that a wealth tax would raise. And so it might be easier to start doing those and see where we land up.

37:07Neera Tanden:I mean, yeah, I think this is hitting on what Scott often talks about, which is the difference between being right and effective. And, you know, maybe a wealth transfer fixes things, just a one-time wealth tax. But is it actually going to get done? To your point, probably, almost definitely not. Are you proposing higher taxes in general, just higher tax rates? What are some of the ideas that you think are more likely to happen that would be more effective, more probable than a wealth tax?

37:40Ed Elson:So I think we should start with what our values are, right? Like, I think, you know, we should reward merit in our country. We should ensure that like people can rise, etc. We shouldn't, you know, we shouldn't make it so much easier to have benefits of capital over labor. You know, you should reward work. Um, so if you like those values to me mean that you would eliminate things like stepped up basis, which is a way in which really wealthy people kind of hide money from taxes and enrich their errors. You should have a higher estate tax, in my view. You should have raised capital gains, you know, increase, not lower taxes on dividends.

38:29Ed Elson:You know, there's just a whole way. There's a whole range of ways that tax code, particularly over the last 30 years, has benefited super wealthy Americans and benefited capital over labor. People are investing instead of people who are like working paycheck to paycheck. And from my perspective, I think we should start. I mean, like, you know, I think we should have a rich debate about a wealth tax. Sure. But it's complicated. It's really hard to do. It's people can still hide assets and income. And so I think we could just start off making the tax code a lot fairer by unrigging it in many ways that it's been rigged over 30, at least particularly the last 30 years.

39:11Neera Tanden:If you were the emperor of America for a day, so there's no Congress, there's no checks, no balances, you can basically just do whatever you want, you've got a day to do it, what would you change in the law? What would you implement and why?

39:31Ed Elson:I would ensure that we built mixed income housing in the suburbs and wealthier parts of America. And I'll say why I think that, you know, essentially what we've learned about poverty in America is that people who have access to like wealthier places, poorer people who have access to wealthier places, their upward mobility goes up like this. Rod Shetty has done a lot of work in this space. And, you know, to be candid, this actually is a bit the story of my life. My parents got divorced when I was really young. My father left just as a kind of accident of policy. Massachusetts had passed this encouragement of low-income housing in suburban areas.

40:24Ed Elson:My mom was able to move into an apartment. We had really good schools. If she didn't have that apartment in a middle-class town, I could have grown up in a place where no one went to a college. I grew up in a place where everyone went to college. I went to college. I went to eventually law school. And I'm here because of all those decisions. So if I could change one thing in America just for a day, there'd be a lot of opposition from some wealthy homeowners. But I would have a system in America where we integrated housing a lot more, allowed much more mixed-income housing in places that are wealthier in the country.

41:02Ed Elson:And I think you'd have a lot more opportunity for everyone.

41:05Neera Tanden:Nero Tanden is the president and CEO of the Center for American Progress. Before leading American Progress, Tanden was the domestic policy advisor to President Joe Biden and director of the Domestic Policy Council overseeing some of the administration's signature achievements, including its efforts to lower the cost of prescription drugs and expand health insurance coverage. previously. She was senior advisor and staff secretary in the White House. Neera, thank you so much. We really appreciate your time.

41:32Ed Elson:Thank you.

41:40Neera Tanden:This episode was produced by Claire Miller and Alison Weiss and engineered by Benjamin Spencer. Our research team is Dan Chillon, Isabella Kinsel, Kristen O'Donoghue, and Mia Silverio. Drew Burrows is our technical director. And Catherine Dillon is our executive producer. Thank you for listening to Prof G Markets from Prof G Media. If you liked what you heard, give us a follow and join us for a fresh take on markets on Monday.

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