No Mercy / No Malice: The Fix

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1:23Download today. I'm Scott Galloway, and this is No Mercy, No Malice. We are borrowing trillions of dollars from young people in the form of deficits. If we want to get serious about deficits, all paths lead to the same place. We need to reduce health care costs. The Fix, as read by George Hahn.

1:59This week, President Trump signed an executive order to lower drug prices, demanding the U.S. receive most favored nation status from pharmaceutical companies, that they charge Americans the lowest price paid abroad. Trump said his policy would cut drug prices by 59 percent. Quote, whoever is paying the lowest price, that's the price that we're going to get, unquote. One issue, though. It's bullshit. Pharma stocks fell initially, but they more than recovered once the market realized the executive order is voluntary. The market saw the order as a Mack truck season insect. Barely. The announcement is laughable when set against the regulatory capture of the U.S.

2:45healthcare industry.

2:50In the Wall Street Journal, historian Niall Ferguson wrote, quote, Any great power that spends more on debt service than on defense risks ceasing to be a great power, unquote. Sooner or later, the interest on the debt crowds out a nation's capacity to do anything else, fight wars, survive pandemics, build infrastructure, fund social safety nets, etc. In fiscal year 2024, the federal budget earmarked$877 billion for defense and$878 billion to pay the interest on our debt. As Ferguson explained, quote, America's fiscal position is far more constrained today than ever before, unquote. In fact, he argued, we're facing a debt crisis similar to the ones that contributed to the downfalls of the Spanish, French, and British empires.

3:46As I previously wrote, countries typically are not conquered. They go broke. America is up against it. Reigning in our debt should be a national priority, but it isn't. Congressional Republicans are working to make Trump's tax cuts permanent, which would add$9 trillion to the debt, three times the national debt of Germany. During the campaign, Elon Musk said he'd cut$2 trillion from the federal budget. More recently, Doge claimed to have saved$160 billion. But a nonpartisan analysis determined those cuts came at a cost of$135 billion, dollars, netting savings of$25 billion. The GOP refuses to acknowledge math and believes the nation will grow if we cut taxes to zero.

4:41Meanwhile, nearly all Democrats oppose entitlement cuts, and most also oppose cutting defense spending, believing instead that we can tax our way out of debt. This bipartisan kabuki dance is juvenile, just as parents tell themselves their kid doesn't need college in today's world, we've decided there is a free lunch, governments with their own reserve currency don't risk default, and we're not headed toward a cliff. Modern monetary theory is the latest consensual hallucination between policymakers who want to excuse their past behavior and those who want an excuse to spend more. They believe a perpetual motion machine does exist.

5:26Spoiler alert, it doesn't. I received a degree in economics, weak flex as I graduated with a 2.27, taught macro and microeconomics in grad school, better flex, worked in fixed income for Morgan Stanley, getting weaker again, and have written several books on economics and finance. You decide. It's dangerous to be certain, and I'm not an economist. But I am certain that MMT is fucking stupid, and any economist espousing this intellectual traif makes RFK Jr. seem like Jonas Salk. Anyway, when the adults show up, we should have a serious sit-down regarding closing the fiscal gap, the amount the government needs to raise taxes and or cut spending as a share of GDP to stabilize our fiscal health.

6:21The Treasury estimates the current fiscal gap is 4.3 % of GDP. Stanley Druckenmiller, famous for betting against the British pound and delivering 30 % annual returns over three decades, puts the gap at 7.7%. U.S. debt to GDP currently stands at 120%, With the CBO projecting, it could rise to 160 % by the 2050s. But in a presentation that should be required viewing for Congress, Oak Cliff Capital CEO Brian Lawrence points out that the CBO projections include a number of unrealistic assumptions. No recessions, no wars, no pandemics, 4 % interest on treasuries, 2 % inflation, a birth rate of 1.9, the addition of 1.9 million immigrants per year, and Trump's tax cuts expiring.

7:25What we should focus on, Lawrence argues, is the 2 % real growth in health care costs per capita. A one-percentage-point reduction in the growth of health care costs per capita translates to 3 % of GDP. According to Lawrence, that gets us halfway to our goal of eliminating the fiscal gap, which he estimates to be 6 % of GDP. In sum, reducing health care costs isn't the best option. It's the only option. Every election cycle, candidates tell Americans their health care system is expensive and broken. Yes, Americans know this. Incomprehensible insurance bills, medical and dental debt haunting 40 % of U.S.

8:18households, and trips to Canada or Mexico for cheaper prescription drugs have turned our health care system into one of our biggest sources of emotional distress. U.S. health care is a$4.9 trillion corrupt cop. In a report that looked at costs and outcomes across 10 industrialized nations, researchers at the Commonwealth Fund wrote, quote, the U.S. continues to be in a class by itself in the underperformance of its health care sector, unquote. For those in the back of the class, that's the wrong kind of exceptionalism. According to the most recent data, the U.S. spends$13 ,432 per capita on health care, more than twice what the average comparable nation spends.

9:15We pay eight times what Germany and Switzerland pay for Ozempic and seven times what they pay for Humira. Insulin, which has been in mass production since the 1930s, costs eight times more in the U.S. than it does in Greece. The median cost of a coronary bypass in the U.S. is$89 ,000, approximately 8x and 5x what the procedure costs in Spain and Australia, respectively. In the U.S., a childbirth with a C-section costs four times what it does in South Africa. An appendectomy in the U.S. costs three times what it does in the U.K. For what we spend, we should be the healthiest nation among our peers.

10:04We aren't. We pay significantly more for dramatically poorer outcomes. This week, House Republicans floated$880 billion in Medicaid cuts over the next decade to help pay for Trump's$4.5 trillion tax cut. Even by Washington standards, the math doesn't math. But considering the GOP's slim congressional majority and the political fallout from throwing an estimated 8 million people off the health insurance rolls, the proposal likely won't go anywhere. These aren't serious people. A serious person would ask a simple question. Where does the money the U.S. spends in excess of what other nations spend on health care go?

10:56Answer? 30 % of it goes to administrative costs, split evenly between providers and insurers. Another 10 % goes to prescription drugs. Higher salaries for U.S. doctors and nurses and investments in medical equipment account for the rest.

11:20There's no silver bullet to lowering costs. But Brian Lawrence identified our two most powerful tools, pricing transparency and negotiating prescription drug costs. The 2022 Inflation Reduction Act, worst name ever, granted Medicare the power for the first time to negotiate drug prices. Based on a complicated formula, Health and Human Services selected 10 drugs covered under Medicare Part D. The discounts range from 38 % to 79%. When these prices take effect next year, Medicare will save an estimated$6 billion, and Medicare beneficiaries will save$1.5 billion in out-of-pocket costs. In the final days of the administration, Biden's HHS secretary announced another 15 drugs, including Ozempic, would be eligible for Medicare negotiation.

12:20Question. Why isn't the largest purchaser of pharmaceuticals on the planet able to negotiate costs, like everyone else, on all drugs? Answer. Fuck if I know. The insurance industrial complex imprints two ideas into the zeitgeist. First, you're irresponsible if you don't have health insurance. Second, the best companies offer employees gold-plated plans as a point of differentiation. As an entrepreneur, I noticed that my firm's health insurance premiums increased by two or four points above inflation every year. Those costs were effectively non-negotiable. So when I had the means to do so, I went naked, saving my family$50 ,000 per year in premiums.

13:14Note, I'm not suggesting you do this. I'm fortunate to be able to absorb any health care costs. Total U.S. health care expenditures were$4.9 trillion in 2023. Think about the previous sentence. The U.S. health care industrial complex is bigger than the entire German economy. Private businesses accounted for 18 % of total expenditures, with three-quarters of that money going toward insurance premiums. American households, two-thirds of which have employer-sponsored plans, picked up another 27 % of total expenditures via employee contributions to premiums, co-pays, and out-of-pocket expenses. In a functioning market, consumers would allocate their dollars toward lower costs and better outcomes.

14:09In the U.S. healthcare market, however, consumers are left in the dark while insurers and providers maximize profits. More than 90 % of Americans support greater healthcare price transparency. I don't know what the other 10 % of Americans are thinking, but I do know that roughly the same share of Americans work in healthcare. Probably just a coincidence. Injecting price transparency into health care could save an estimated$1 trillion annually As employers and consumers could harness the power of markets to lower costs and inspire better outcomes Senate Republicans, Democrats, and even the chamber's lone socialists support the Health Care Price Transparency Act 2.0 So why hasn't it become law?

15:03Because money is speech, and the healthcare industry and its lobbyists have told Congress, give us America's wallet or we will fucking kill you, i.e. get you booted out of office. In 2024, U.S. businesses spent$4.4 billion on lobbying. It may be the greatest ROI in economic history. One study found that lobbying connected to a 2004 law that created a one-time tax holiday for repatriated profits delivered a 22 ,000 % return. In 2013, Amgen spent$5 million lobbying Congress for a two-year reprieve from Medicare price controls on a single drug. That effort resulted in$500 million of Medicare payments to Amgen.

16:01No other industry embodies regulatory capture like the healthcare industrial complex. I'm watching season two of Andor. It's the best television show so far in the Star Wars franchise, but even if the force isn't strong with you, Andor is an illuminating case study in how revolutions begin. When we meet Cash in Andor, he's a petty thief. But as the empire steps up pressure across the galaxy, our hero, and others like him, evolve into revolutionaries. Luigi Mangione, who allegedly murdered a health insurance CEO, isn't a revolutionary, but he's become a folk hero. His crowdfunded legal defense fund recently topped$1 million, with an average donation of$20.

16:54That a murderer would be seen as a hero is depraved and revealing. Given everything America has lived through, deindustrialization, two forever wars in the Middle East, the Great Recession, an opioid epidemic, the highest per capita pandemic death rate among comparable industrialized nations, the largest generational wealth transfer in history, and millions of young men failing to launch, it's not surprising that voters chose a felon who promised that he alone could fix it. He can't. But if we don't fix it, the wealth inequality at the root of America's pain will self-correct via war, famine, or revolution.

17:40A story that haunts me. For the first time, the New York Times announced the wedding of a young couple who weren't legally getting married, just having a ceremony. The bride was suffering from terminal brain cancer and didn't want her husband to inherit her medical debt when she died. We live in the most prosperous nation in history. We shouldn't be asking our kids to borrow money to support their parents' and grandparents' lifestyle. And our daughters, everyone, Everyone should be able to get married.

18:23Life is so rich.

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19:26Decades to go from their debut to daily use. It's a pattern. Energy tech breaks through, stalls, and then something tips the scales. But for every success, there are even more almosts. So what if there was a breakthrough sitting at this crossroads right now? SAF, or sustainable aviation fuel, could forever change the future of flight. Learn more about how Airbus is contributing to accelerate this journey at fly.airbus.com slash theflightpath. What do walking 10 ,000 steps every day, eating five servings of fruits and veggies, and getting eight hours of sleep have in common? They're all healthy choices.

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