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Something seemed off about your statement, so I went and looked up some data. Gross margins for Anthem Blue Cross [1] are about 15%; they take in $117B in prem

Something seemed off about your statement, so I went and looked up some data. Gross margins for Anthem Blue Cross [1] are about 15%; they take in $117B in premiums and pay out $102B in benefits. Gross margins for HCA healthcare are better at about 80% ($50B gross profit on $58B in revenue) [2], but net margins aren't much better at 11%. Half of that $50B goes into "selling, general, and administrative" salaries, with much of the rest in "other expenses". By contrast, Google has gross margins of about 50% and net margins of about 30% [3]. I think the real explanation is Baumol's cost disease [4], which does come from labor cost, albeit indirectly. The tech industry is extremely high productivity, which is why they can afford to pay their not-very-numerous employees $500K+/year. But that means that you have to pay people in other industries more to keep them from becoming tech employees. Probably not as much more - programming has pretty high barriers to entry - but more than a middle-class worker used to make. Housing, healthcare, education, and childcare are essential services, which gives them the negotiating leverage needed to pass these labor cost increases along to consumers. Things like manufacturing, food service, and retail are not, which is why those industries are just going bankrupt. It's not really oversupply or undersupply of labor that matters here. It's productivity. To get prices of housing/healthcare/education/childcare down to reasonable levels, you need to invent ways that one nurse could take care of hundreds of patients, or one teacher could teach tens of thousands of students. This is why things like telemedicine, machine-learning based diagnostics, mRNA vaccines, immunotherapies, MOOCs, online learning, 4-over-1 condos, etc are so appealing to investors. The problem is that these innovations haven't yet proven attractive enough to win in the marketplace, so we're stuck with conventional labor-intensive ways of servicing these industries for the foreseeable future. [1] https://finance.yahoo.com/quote/ANTM/financials?p=ANTM https://finance.yahoo.com/quote/ANTM/financials?p=ANTM [2] https://finance.yahoo.com/quote/HCA/financials?p=HCA https://finance.yahoo.com/quote/HCA/financials?p=HCA [3] https://finance.yahoo.com/quote/GOOG/financials?p=GOOG https://finance.yahoo.com/quote/GOOG/financials?p=GOOG [4] https://en.wikipedia.org/wiki/Baumol%27s_cost_disease https://en.wikipedia.org/wiki/Baumol%27s_cost_disease

mschuster91 5y ago
> Half of that $50B goes into "selling, general, and administrative" salaries And a lot of this overhead cost isn't necessary simply because the system is so horribly broken. And not just on the side of insurance expenses, but also on the benefits payout side. The US system has consistently shown to be more expensive for worse outcomes than other nations' systems. > To get prices of housing/healthcare/education/childcare down to reasonable levels, you need to invent ways [...] No you Americans don't need to invent anything new. Americans should just go and look how other countries operate, the typical American Exceptionalism attitude of "no one does anything better than the US" is the biggest problem the country has. Housing cost is inflated because rural areas are getting depopulated because of rotting infrastructure (e.g. broadband Internet, adequately funded schools, public transport, access to healthcare) and because employers for modern jobs are located in urban areas. Fixing that requires investment in mentioned infrastructure and incentives for companies to provide remote work for people living outside of urban areas. In some areas, foreign dark money and speculation (cough AirBnB) add to the mix, the former can be confiscated (which the US is beginning to do, at least against Russian assets) and the latter banned or at least severely taxed. Healthcare costs can be fixed by literally copying any of the other Western nations' healthcare model, and by providing access to more MD education to fix the supply side of doctors. Education costs aren't that inflated (actually, they are often enough so horribly underfunded that schools only run for four days so teachers can go and run side gigs, or teachers having to pay for supplies out of their already poor wages), but if cost savings were to be made there, I'd start with professional school sports teams and by providing food not out of school budgets but out of social services budgets. Childcare costs... well, there's supply and demand right there. When both parents have to work two or more jobs to barely make rent, they need childcare. A decent minimum wage that provides enough for a single income to live a decent life should fix the demand and knock out a whole lot of other poverty-related side effects in the process.
- Moru 5y ago
  Childcare is a must if you want an equal society. If a family gets to choose who works, the incentive is toe choose the one that makes most money. By statistics this is by a far margin male. So childcare is the solution to inequality, not a cost. We call it a women trap. Healthcare has a problem with insurance where the hospitals have to blow up prices to cover costs and give some wriggle room for haggling with the insurance company.

mschuster91 5y ago

> Half of that $50B goes into "selling, general, and administrative" salaries And a lot of this overhead cost isn't necessary simply because the system is so horribly broken. And not just on the side of insurance expenses, but also on the benefits payout side. The US system has consistently shown to be more expensive for worse outcomes than other nations' systems. > To get prices of housing/healthcare/education/childcare down to reasonable levels, you need to invent ways [...] No you Americans don't need to invent anything new. Americans should just go and look how other countries operate, the typical American Exceptionalism attitude of "no one does anything better than the US" is the biggest problem the country has. Housing cost is inflated because rural areas are getting depopulated because of rotting infrastructure (e.g. broadband Internet, adequately funded schools, public transport, access to healthcare) and because employers for modern jobs are located in urban areas. Fixing that requires investment in mentioned infrastructure and incentives for companies to provide remote work for people living outside of urban areas. In some areas, foreign dark money and speculation (cough AirBnB) add to the mix, the former can be confiscated (which the US is beginning to do, at least against Russian assets) and the latter banned or at least severely taxed. Healthcare costs can be fixed by literally copying any of the other Western nations' healthcare model, and by providing access to more MD education to fix the supply side of doctors. Education costs aren't that inflated (actually, they are often enough so horribly underfunded that schools only run for four days so teachers can go and run side gigs, or teachers having to pay for supplies out of their already poor wages), but if cost savings were to be made there, I'd start with professional school sports teams and by providing food not out of school budgets but out of social services budgets. Childcare costs... well, there's supply and demand right there. When both parents have to work two or more jobs to barely make rent, they need childcare. A decent minimum wage that provides enough for a single income to live a decent life should fix the demand and knock out a whole lot of other poverty-related side effects in the process.

Moru 5y ago
Childcare is a must if you want an equal society. If a family gets to choose who works, the incentive is toe choose the one that makes most money. By statistics this is by a far margin male. So childcare is the solution to inequality, not a cost. We call it a women trap. Healthcare has a problem with insurance where the hospitals have to blow up prices to cover costs and give some wriggle room for haggling with the insurance company.