It's the Administrators, Stupid

Universities are having a hard time lately. They’re beset with protests the like of which we’ve not seen since the Vietnam War days, with animated crowds, sit-ins, violent clashes with police or counter protesters, even storming of administration buildings. Classes and commencements have been cancelled. Presidents of some leading universities seemed unable to clearly denounce antisemitism or calls for genocide when asked to do so in Congressional hearings. Protesters walked out on Jerry Seinfeld’s commencement speech; for heaven’s sake – who walks out on Jerry Seinfeld?

Administrators in Meeting World. Credit: Bing Image Creator

Derek Thompson wrote a great piece for The Atlantic that tries to pinpoint the source problem: No One Knows What Universities Are For. The sub-title sums up his thesis: “Bureaucratic bloat has siphoned power away from instructors and researchers.”  As I was nodding along with most of his points, I found myself also thinking: he might as well be talking about healthcare.

Mr. Thompson starts by citing a satirical piece in The Washington Post, in which Gary Smith, an economics professor at Pomona College, argues that, based on historical trends in the growth of administration staff, the college would be best served by gradually eliminating faculty and even students. The college’s endowment could then be used just to pay the administrators.

“And just like that,” Professor Smith says, “the college would be rid of two nuisances at once. Administrators could do what administrators do — hold meetings, codify rules, debate policy, give and attend workshops, and organize social events — without having to deal with whiny students and grumpy professors.”

It’s humorous, and yet it’s not.

The growth in universities’ administrative staff is widespread. Mr. Thompson acknowledges: “As the modern college has become more complex and multifarious, there are simply more jobs to do.” But that’s not always helping universities’ missions. Political scientist Benjamin Ginsberg, who published The Fall of the Faculty: The Rise of the All-Administrative University and Why It Matters in 2014, told Mr. Thompson: “I often ask myself, What do these people actually do? I think they spend much of their day living in an alternate universe called Meeting World.”

Similarly, Professor Smith told Mr., Thompson it’s all about empire building; as Mr. Thompson describes it: “Administrators are emotionally and financially rewarded if they can hire more people beneath them, and those administrators, in time, will want to increase their own status by hiring more people underneath them. Before long, a human pyramid of bureaucrats has formed to take on jobs of dubious utility.”

All of these administrators add to the well-known problem of runaway college tuition inflation, but a more pernicious problem Mr. Thompson points to is that “it siphons power away from instructors and researchers at institutions that are—theoretically—dedicated to instruction and research.”

The result, Mr. Thompson concludes is “goal ambiguity.” Gabriel Rossman, a sociologist at UCLA, told him: “The modern university now has so many different jobs to do that it can be hard to tell what its priorities are.”  Mr. Thompson worries: “Any institution that finds itself promoting a thousand priorities at once may find it difficult to promote any one of them effectively. In a crisis, goal ambiguity may look like fecklessness or hypocrisy.”

So it is with healthcare.

Anyone who follows healthcare has seen some version of the chart that shows the growth in the number of administrators versus the number of physicians over the last 50 years; the former has skyrocketed, the latter has plodded along. One can – and I have in other forums – quibble over who is being counted as “administrators” in these charts, but the undeniable fact is that there are a huge number of people working in healthcare whose job isn’t, you know, to help patients.

It’s well documented that the U.S. healthcare system is by far the world’s most expensive healthcare system, and that we have, again by far, the highest percent spent on administrative expenses. Just as all the college administrators helps keep driving up college tuition, so do all those healthcare administrators keep healthcare spending high.

But, as Mr. Thompson worries about with universities, the bigger problem in healthcare is goal ambiguity. All those people are all doing something that someone finds useful but not necessarily doing things that directly related to what we tend to think is supposed to be healthcare’s mission, i.e., helping people with their health.  

Think about the hospitals suing patients. Think health insurers denying claims or making doctors/patients jump through predetermination hoops.  Think about the “non-profits” who not only have high margins but also get far greater tax breaks than they spend on charity care. Think about healthcare “junk fees” (e.g., facility fees). Think about all the people in healthcare making over a million dollars annually. Think about pharmaceutical companies who keep U.S. drug prices artificially high, just because they can.

As TV’s Don Ohlmeyer once said in a different context: “The answer to all of your questions is: Money.”

Healthcare is full of lofty mission statements and inspiring visions, but it is also too full of people whose jobs don’t directly connect to those and, in fact, may conflict with them. That leads to goal ambiguity.

Mr. Thompson concluded his article:

Complex organizations need to do a lot of different jobs to appease their various stakeholders, and they need to hire people to do those jobs. But there is a value to institutional focus…The ultimate problem isn’t just that too many administrators can make college expensive. It’s that too many administrative functions can make college institutionally incoherent.

Accordingly, I’d argue that the problem in healthcare isn’t that it has too many administrators per se, but that the cumulative total of all those administrators has resulted in healthcare becoming institutionally incoherent.

Famed Chicago columnist Mike Royko once offered a solution to Chicago’s budget problems. “It’s simple,” he said. “You ask city employees what they do. If they say something like “I catch criminals” or “I fight fires,” them you keep. If they say something like “I coordinate…” or “I’m the liaison…”, them you fire.”

Healthcare should have that kind of institutional focus, and that focus should be around patients and their health, not around money.

Twenty years ago Gerry Anderson, Uwe Reinhardt, and colleagues posited “It’s the Prices, Stupid” when it came to what distinguished the U.S. healthcare system, but now I’m thinking perhaps it’s the administrators.

You Bet Your Life

America is crazy about gambling. Once you had to gamble illegally with a bookie, or go to Atlantic City or Las Vegas; now 45 states – plus the District of Columbia, Puerto Rico, and the U.S. Virgin Islands – have state lotteries. Since the Supreme Court struck down PASPA, the federal ban on sports betting, 38 states – plus the D.C. and Puerto Rico – offer legal sports betting. I didn’t think we could get any crazier, until I saw last week that arcade chain Dave & Busters was going to allow betting on some of its games.

Honestly, healthcare may be the only industry upon which you can’t bet, and I’m beginning to think that’s too bad.

It may come to this. Credit: Bin Image Creator

Dave & Busters are working with Lucra Sports, a “white-label gamification” technology company. “We’re thrilled to work with Lucra to bring this exciting new gaming platform to our customers,” said Simon Murray, SVP of Entertainment and Attractions at Dave and Buster’s. “This new partnership gives our loyalty members real-time, unrivaled gaming experiences, and reinforces our commitment to continuing to elevate our customer experience through innovative, cutting-edge technology.”

“Friendly competition really is a big fuel for our economy, whether you’re playing golf on Sunday with your buddies, or you’re going to play pickleball or video games or even cornhole at a tailgate. There’s so many ways that you can compete with friends and family, and I think gamifying that and digitizing all this offline stuff that’s happening is a massive opportunity,” Lucra CEO Dylan Robbins told CNN.

Credit: Brodie Brazil

The companies are careful not to describe what they’re doing as gambling; they avoid terms like “bet” or “wager.” Michael Madding, Lucra’s chief operating officer, told The New York Times that the focus was on “skills-based” games, such as Skee-Ball or shooting baskets: i.e., “recreational activities for which the outcome is largely or entirely dependent on the knowledge, ability, strength, speed, endurance, intelligence of the participants and is subject to the control of those participants.”

This falls into a category I had never heard of: “social betting.” With social betting, there is no third party setting the odds, and more head-to-head competition with people you know. You’re not betting against the house; you’re challenging your friends. It is estimated by gaming research firm Eilers & Krejcik to be a $6b market, and its proponents argue that it is not subject to licenses & regulations that other gambling does.

Not everyone agrees. Marc Edelman, a law professor and the director of sports ethics at Baruch College in New York, told NYT:

If two people are competing against one another in Skee-Ball, presuming that there is nothing unusual done in the Skee-Ball game and physical skill is actually going to determine the winner, there is no problem. If I am taking a bet on whether someone else will win a Skee-Ball game, or whether someone else will achieve a particular score in Skee-Ball, if I myself am not engaged in a physical competition, that very likely would be seen as gambling.

Brett Abarbanel, executive director of the University of Nevada, Las Vegas, International Gaming Institute, went further, telling CNBC: “regardless of the legal classification of the activity as ‘not gambling’ vs. ‘gambling,’ this is an activity in which participants are risking something of value on an outcome that is uncertain. Therefore, there should be consumer protection measures in place for players, particularly when the target audience is skewed toward younger participants.”

Both Illinois and Ohio gambling authorities have already expressed concerns; Illinois State Rep. Daniel Didech, chairman of the Illinois House Gaming Committee,, told CNBC: “It is inappropriate for family-friendly arcades to facilitate unregulated gambling on their premises. These businesses simply do not have the ability to oversee gambling activity in a safe and responsible manner.”

There are also numerous “social sportsbooks,” including Flitt, PrizePicks, and Underdog Fantasy, that are blurring the line between online sports gambling and social betting, between fantasy leagues and plain old gambling. And they do it with users as young as 13 and with little or no state oversight. Keith Whyte, executive director of the National Council on Problem Gambling, told The Washington Post: “What a lot of these social gaming — social casinos, social sportsbooks — have found is that the regulators ... either don’t feel like they have the jurisdiction or the time or energy to go after every single app that springs up.” 

Whether we like it or not, people are going to bet. “People will place a bet on ‘Will we have rainfall?’, or ‘How much snow will a certain place get?’, or ‘What will be the first day of snowfall?’” sports policy expert John Holden, JD/PhD, associate professor at Oklahoma State University, told Fox 5 NY last year.

So why shouldn’t they bet on health care?

Let’s face it: we all already bet on health care. We bet that the doctor we pick is well trained, competent, and of the highest ethical standards. We bet that the hospital we go to won’t kill us or make us worse. We bet that the prescriptions we take do far more good for us than they harm us. We bet on all these things, spending trillions of dollars, even though we know the odds are against us: in aggregate, Americans are getting sicker and dying younger.  That’s those other people, we tell ourselves; my doctor/hospital is the “best.”

What makes healthcare different from other areas that one might bet on is the paucity of data. I always remember a colleague told me years ago: “I can know more about the performance of every MLB player than I can about any physician.” And that was before legal sports betting.

If we were to bet on health care – either our own (social betting) or others’ (online gambling) – there’d be more data. We’d insist on it. We’d analyze it. We’d use it. It’d get better and more detailed over time. And, I daresay, healthcare would become better for it.

Personally, I don’t like to gamble. I don’t buy lottery tickets. I don’t go to casinos. I don’t even bet on the Super Bowl or March Madness. So I’m tired of gambling so much on healthcare without knowing more about the risks/rewards, without the data I need and should have. If betting is the only way to ensure the data, then I say: let's roll the dice.

Maybe Lucra could develop a gamification platform for us to bet with our doctors and hospitals.

ChatGPT, We Need More Power!

I know: you want to live in the promised world where we get all our electric power from renewables, such as solar or wind. We’ll finally stop burning all those fossil fuels. And you also want to live in the promised world where artificial intelligence – A.I. – makes our lives easier, more prosperous, and safer.

Scotty might not be able to help, but A.I. might

The problem is, right now those are two different worlds.

We may think of A.I. as just being there, in the cloud, but we sometimes forget that cloud computing requires vast data centers, each of which consume massive amounts of electricity. Companies interested in cloud computing and/or A.I. are investing in data centers like crazy. Reuters reports: “Nine of the top 10 U.S. electric utilities said data centers were a main source of customer growth, leading many to revise up capital expenditure plans and demand forecasts.”

The article goes on to note:

Overall, power use from the thousands of giant computing warehouses that comprise data centers is expected to triple globally from less than 15 terawatt-hours (TWh) in 2023 to 46 TWh this year, according to Morgan Stanley research.

"The truth of the matter is these things (data centers) are pigs when it comes to energy use, and now they're the size of an elephant," said Eric Woodell, an expert who specializes in data center operations.

Credit: Washington Post

As a result, The Washington Post warns: “Vast swaths of the United States are at risk of running short of power as electricity-hungry data centers and clean-technology factories proliferate around the country, leaving utilities and regulators grasping for credible plans to expand the nation’s creaking power grid.”

“When you look at the numbers, it is staggering,” Jason Shaw, chairman of the Georgia Public Service Commission, told The Post. “It makes you scratch your head and wonder how we ended up in this situation. How were the projections that far off? This has created a challenge like we have never seen before.”

The key culprit?  A.I. The Post says: “A major factor behind the skyrocketing demand is the rapid innovation in artificial intelligence, which is driving the construction of large warehouses of computing infrastructure that require exponentially more power than traditional data centers.”

The problem isn’t only from A.I. – there’s also the impact of crypto-mining, remote work, and EV charging – but put A.I. at the top of the list.

Well, then, we’ll just build more electric plants, right?  Not so fast. In the first place, that requires lots of capital investment, something power companies are stingy about. In the second place, nothing about building power plants is fast, from the permitting process to the construction to the connecting to the power grid. In the third place, generating power using what? 

“The big utilities are typically most comfortable with one way of doing things: building those big, conventional power plants,” Heather O’Neill, president of Advanced Energy United, a trade group representing low-carbon technology companies, observed in NYT.

President Biden promised to shift electric power generation to all renewables by 2035, but that promise was made before the impact of A.I. on power use was fully evident. “The growth we’re seeing is historic in scale and speed,” Kendal Bowman, president of Duke Energy’s operations in North Carolina, told NYT. “But it’s also going to be a challenge, particularly in the near term, to see carbon reduction at the same time we’ve got this unprecedented growth.”

And it’s not that the power grid is quite as robust or technologically advanced as we’d like. “One of the biggest hurdles is the outdated power system infrastructure,” three Rand researchers wrote in The National Interest.  “Many of these systems were built decades ago and are not equipped to handle the demands of rapidly emerging technologies and changing consumer needs. Therefore, significant investments will be required to update the grid and realize the benefits of emerging technology.”

As a result: "What we're seeing in the market is that these projects are not coming online fast enough to meet the local demand for the for the data centers," Rystad Energy analyst Geoff Hebertson told Reuters.

Credit: Washington Post

This is impacting those climate goals. The Wall Street Journal reports:

For many utilities, the solution to rising demand is to keep coal-fired power plants burning for longer and add natural-gas power plants to balance big expansions of renewables…Utilities in Georgia and North Carolina are adding fossil-fuel power or considering delaying the shutdown of coal-fired plants to meet the demands of data centers and other industries.

That doesn’t make many consumers, or even big Tech companies, happy. “No data center wants to be tied to the need for new fossil resources, that’s the problem,” Brian Janous, former vice president of energy at Microsoft, told WSJ. “You can’t throw this much [data-center] capacity at the system and not have some degree of fossil resources to support it.”

The result, WSJ says, is “a four-way battle among electric utilities trying to keep the lights on, tech companies that like to tout their climate credentials, consumers angry at rising electricity prices and regulators overseeing investments in the grid and trying to turn it green.”

Try to pick the winner of that.

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Many are hoping that A.I. can help solve some of the power problems it is causing. Rand reported:

Overall, it could optimize energy consumption to reduce waste while improving efficiency and comfort levels. AI could also better forecast energy demand and supply, allowing energy providers to adjust their production and distribution to increase flexibility and reduce the risk of blackouts. AI tools could open new ways of interacting within the electricity grid, such as the dynamic charging and discharging of electric vehicle batteries.

Furthermore, AI could help integrate various renewable energy sources into the grid.

Similarly, Javad Mohammadi, a University of Texas assistant professor, said: “If you were to coordinate all these devices, that would give you an army of intelligent devices that could talk to each other and respond to emergencies. If the grid is in a bad situation, and there is a need to reduce energy use, all the different devices could coordinate among themselves to reduce their energy usage."

Geri Richmond, undersecretary for science and innovation at the Department of Energy, believes: “We have the opportunity to build a power grid that’s better and cleaner with the help of AI.”

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We have an early 20^th century energy grid infrastructure that was already struggling to integrate early 21^st century renewables technologies now being faced with the mid-21^st century technology of A.I. Something has to give.

Perhaps some of those engineers working on A.I. should focus instead on reinventing the power grid.

Ready for Robots?

When I was young, robots were Robby the Robot (Forbidden Planet, etc.), the unnamed robot in Lost in Space, or The Jetsons’ Rosey the Robot. Gen X and Millennials might think instead of the more malevolent Terminators (which, of course, are actually cyborgs). But Gen Z is likely to think of the running, jumping, back-flipping Atlas from Boston Dynamics, whose videos have entertained millions.

There's a line-up. Scary or thrilling?

Alas, last week Boston Dynamics announced it was discontinuing Atlas. “For almost a decade, Atlas has sparked our imagination, inspired the next generations of roboticists and leapt over technical barriers in the field,” the company said. “Now it’s time for our hydraulic Atlas robot to kick back and relax.”

The key part of that announcement was describing Atlas as “hydraulic,” because the very next day Boston Dynamics announced a new, all-electric Atlas: “Our new electric Atlas platform is here. Supported by decades of visionary robotics innovation and years of practical experience, Boston Dynamics is tackling the next commercial frontier.” Moreover, the company brags: “The electric version of Atlas will be stronger, with a broader range of motion than any of our previous generations.”

The introductory video is astounding: 

Boston Dynamics says: “Atlas may resemble a human form factor, but we are equipping the robot to move in the most efficient way possible to complete a task, rather than being constrained by a human range of motion. Atlas will move in ways that exceed human capabilities.”

They’re right about that.

CEO Robert Playter told Evan Ackerman of IEEE Spectrum: “We’re going to launch it as a product, targeting industrial applications, logistics, and places that are much more diverse than where you see Stretch—heavy objects with complex geometry, probably in manufacturing type environments.”

He went on to elaborate:

This is our third product [following Spot and Stretch], and one of the things we’ve learned is that it takes way more than some interesting technology to make a product work. You have to have a real use case, and you have to have real productivity around that use case that a customer cares about. Everybody will buy one robot—we learned that with Spot. But they won’t start by buying fleets, and you don’t have a business until you can sell multiple robots to the same customer. And you don’t get there without all this other stuff—the reliability, the service, the integration.

 The company will work with Hyundai (which, ICYMI, owns Boston Dynamics). Mr. Playter says Hyundai “is really excited about this venture; they want to transform their manufacturing and they see Atlas as a big part of that, and so we’re going to get on that soon.”

The company also announced Orbit™, software “which provides a centralized platform to manage your entire robot fleet, site maps, and digital transformation data.” It declared: “With a robust team of ML experts shaping our products, we are prepared to bring impactful AI to market immediately—we’ve already started with Spot, and it will get even better and faster with Atlas.”

Speaking of AI, perhaps lost in the Atlas buzz, last week Mentee Robotics came out of two years of stealth mode to announce MenteeBot, which the company described as “an end-to-end humanoid robot with sufficient dexterity for a wide spectrum of activities in both households and industrial warehouses.”  By “end-to-end” they mean AI-driven.  

The company expects a household version and a warehouse version, with a prototype expected in 1Q 2025.

And, of course, there are numerous other companies racing to get humanoid (and other) robots into our lives, including Agility Robotics, Figure, NVIDIA, and, in its spare time, Tesla. One way or another, get ready for robots in our lives and workplaces – if they’re not already there.

New research confirms that, even if robots don’t take your job, they make workers less happy.  “Our key finding is that robots harm work meaningfulness and autonomy,” the authors say.  The key to mitigating that is to give workers control over the robots, which, of course, runs contrary to having them be AI-driven. Expect some unhappy workers.  

An interesting perspective comes from Jennifer Pattison Tuohy, writing in The Verge: Maybe I don’t want a Rosey the Robot after all.

“The question,” she says, “is should we be working toward an all-capable, bipedal, human-like bot to take everyday chores off our hands? The more I think about it — and the more robots I have roaming around my home — the more I think the answer is no. We don’t need a robot that understands what we say and can replicate our movements; we need robots that do one job (or maybe two related jobs) and do them well.”

As she points out, “when my self-emptying dishwasher breaks, I can responsibly recycle it and get a new one. When my humanoid robot housekeeper reaches the end of its firmware updates, I’ll have to put it out to pasture.” That, she worries, “brings with it a whole host of complicated challenges around the nature of consciousness and the boundaries of humanity.” 

That sorts of put the “retirement” of the original Atlas in a different perspective, doesn’t it?

If we’re going to have all these robots living with us, we better pay attention to how we socialize them. A new paper argues that it is people who make robots social, not programming.

“If we want to understand what makes a robot social, we have to look at the broader scope of the communities around robots and people’s interactions with each other,” said Malte Jung, co-author and Cornell associate professor. “It’s not just about programming a better character for the robot, making it respond better to human social features, making it look cuter or behaving more naturally.”

Take that in: we’re to the point we need to worry about socializing robots.

AI is infiltrating our lives faster than we realize and in ways we don’t realize the implications of yet, and that’s going to happen with robots too.  Whether we’re ready or not.

And Now for Something Completely Different

The most interesting story I read in the past week doesn’t come from the more usual worlds of health and/or technology, but from sports. It’s not even really news, since it was announced last fall; it’s just that it wasn’t until last week that a U.S. publication (The New York Times) reported on it. In a nutshell, a Paris football (a.k.a. soccer) club is not charging its fans admission during the current season.

Translation: It's Priceless. Credit: Paris FC

Since last week I wrote about medical debt in the U.S. healthcare system, you might guess where this is going.

The club is Paris FC. Last November it announced:

For the first time in history, Paris FC is offering free tickets for all home matches at the Stade Charléty, starting from the 11 November until the end of the 2023-2024 season from its Bastia reception, in a bid to offer a new and innovative vision of football by welcoming as many people as possible.

The policy includes the men’s second division team and the woman’s first division team. The NYT article clarifies that fans supporting the visiting team might be charged a “nominal” fee, and that hospitality suites still pay market rates.

Pierre Ferracci, Chairman of Paris FC, said: “We are proud to support this ambitious and pioneering project, which goes beyond the simple framework of sport in terms of the values it conveys. We want to bring people together around our club and our teams, while committing ourselves with strength and conviction. In a context of difficult purchasing power, we are confident that a club can be an ideal tool for bringing together people of goodwill and engage with societal issues.”

Fabrice Herrault, Paris FC’s general manager told NYT: “It was a kind of marketing strategy. We have to be different to stand out in Greater Paris. It was a good opportunity to talk about Paris F.C.” The club estimates it might cost them $1 million.

No wonder they're cheering. Credit: Paris FC

It seems to be working. The NYT reports:

Months later, most metrics suggest the gambit has worked. Crowds are up by more than a third. Games held at times appealing for school-age children have been the best attended, indicating that the club is succeeding in attracting a younger demographic.

The idea is not entirely de novo; last spring Fortuna Düsseldorf, a German second division football club, announced it would offer free admission for at least three matches this season, with the intent that eventually all home matches. “We open up football for all. We will have free entry for league games in this stadium,” Alexander Jobst, the club’s chief executive, said at the time. “We call it ‘Fortuna for all’ which can and will lead us to a successful future.”

In a NYT interview last spring, Mr. Jobst added: “We think it is completely new. We were trying to think about how we could do the soccer business completely different from before.”

I’m always a sucker for efforts to think about a business completely different than before.

Fortuna has now had two of its three free matches, and Mr. Jobst told NYT last week: “Our average attendance has gone from 27,000 to 33,000. Our merchandise sales are up by 50 percent. Our sponsorship revenue is up 50 percent. We have reached a record number of club members.”

Sure sounds like a success.

Keep in mind that for most professional sports, ticket and concession revenues are gravy; the real money is from TV deals, as well as sponsorships. The NFL, for example, only gets 17% of its revenue from fans, the NBA 26%, and MLB 31%, while MLS and NHL need over 40% (not such good TV deals!). Fortuna, in case you’re interested, only gets 20% of its revenue from tickets, even though it is only in the second division.

Meanwhile, Paris FC only gets 4% of its budget from ticket sales. “We're not taking a big risk, and we won't lose out," Mr. Feracci told Le Monde. "The balance will be positive, thanks to new sponsorship income and the arrival of new shareholders who have shown themselves to be keen on our vision.

Spectators matter, not just as a revenue source. We all remember American professional sports during the early days of the pandemic. The NBA finished its 2019-2020 season in a bubble, with players, staff, and media quarantined, playing in empty arenas. Most of the NFL and MLB games that year were also without fans. Players and television viewers hated the experience; it just didn’t seem real without actual fans in attendance.

“Since the pandemic, there has been a growing awareness of the role of spectators in the ‘production’ of sporting events,” Luc Arrondel, a professor at the Paris School of Economics, told NYT. “The presence of supporters in the stadium increases the desirability of the television product, and therefore, possibly, the value of television rights,” 

Professor Arrondel has even made the case in a paper (“Faut-il payer les supporters?”) that it might actually make sense for professional teams to pay the most ardent fans to attend in-person.

Yes, all that is thinking about the business completely differently.

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Meanwhile, there’s the U.S. healthcare system, which treats its “fans” – i.e., patients – as revenue from whom every dollar should be squeezed. E.g., ever pay a facility fee for a doctor’s visit, or pay the inflated U.S. prices for prescription drugs? It’s not surprising that we end up with all that medical debt. As I wrote last week: “why are so many charges so high, why aren’t people better protected against them, and why don’t more Americans have enough resources to pay their bills, especially unpredictable ones like from health care services?”

So here’s a thought” out-of-pocket spending is “only” 11% of national health expenditures. What if we just abolished it? Healthcare’s version of not making fans pay to attend football matches.

Now you might say - that’s crazy, how would the health care system make up that 10%? I’d say two things: first, we all know that there’s 10% of savings to be had in our bloated system; what better to use them for than this?  Second, and more importantly, we need to admit that the current business model in the U.S. healthcare system does not work.

It’s time to think of ways to do the business of healthcare “completely different than before.”

Not making patients pay out-of-pocket might not be the “right” way to do that, although we could do worse, but, in any event, we better think of something completely different before the system crashes.

Healthcare's Debt Problem

 

Among the many things that infuriate me about the U.S. healthcare system, health systems sending their patients to collections – or even suing them – is pretty high on the list (especially when they are “non-profit” and./or faith-based organizations, which we should expect to behave better).

Credit: Kenneth Fowler/CNN

There’s no doubt medical debt in the U.S. is a huge problem. Studies have found that more than 100 million people have medical debt, many of whom don’t think they’ll ever be able to pay it off. Kaiser Family Foundation estimates Americans owe some $220b in medical debt, with 3 million people owing more than $10,000. It’s oft cited that medical debts are the leading cause of bankruptcy, although it’s quite not clear that is actually true.

So you’d think that helping pay off that debt would be a good thing. But it turns out, it’s not that simple.

A new study from the National Bureau of Economic Research (NBER) by Raymond Kluender, et. alia, found that, whoops, paying off people’s medical debt didn’t improve their credit score or financial distress, made them less likely to pay future medical bills, and didn’t improve their mental health.

“We were disappointed,” said Professor Kluender told Sarah Kliff in The New York Times. “We don’t want to sugarcoat it.”

The researchers worked with R.I.P. Medical Debt, a non-profit that buys up medical debt “at pennies on the dollar,” to identify people with such debt, and then compared people whom R.I.P. Medical Debt had helped versus those it had not. One set of people had hospital debts that were at the point of being sold to a collection agency, and another had debts that had already been sent to collection. And, perhaps to highlight how little we understand our healthcare system, they asked experts in medical debt what their expectations for the experiment were.

Credit: Kluender, et. alia

Much to everyone's surprise, having debt paid off made no difference between control and debt-relief groups. I.e.,

• “We find no average effects of medical debt relief on the financial outcomes in credit bureau data in either of our experiments.
• We similarly estimate economically small and statistically insignificant effects on other measures of financial distress, credit access, and credit utilization.
• We find that debt relief causes a statistically significant and economically meaningful reduction in payment of existing medical bills.
• We estimate statistically insignificant average effects of medical debt relief on measures of mental and physical health, healthcare utilization, and financial wellness, with “opposite-signed” point estimates for the mental health outcomes relative to our prior.”

In short:  

Our findings contrast with evidence on the effects of non-medical debt relief and evidence on the benefits of upstream relief of medical bills through hospital financial assistance programs. Our results are similarly at odds with views of the experts we surveyed, pronouncements by policymakers funding medical debt relief, and self-reported assessments of recipients of medical debt relief.

 Amy Finkelstein, a health economist at the MIT and a co-director of J-PAL North America, a nonprofit group that provided some funding for the study, told Ms. Kliff: “The idea that maybe we could get rid of medical debt, and it wouldn’t cost that much money but it would make a big difference, was appealing. What we learned, unfortunately, is that it doesn’t look like it has much of an impact.”

If only it was that easy.

To be clear, there were three key statistically significant effects:

1. “small improvements in credit access for the subset of persons whose medical debt would have otherwise been reported to the credit bureaus,
2. modest reduction in payments of future medical bills, and
3. worsened mental health outcomes, concentrated among those who had the largest amount of debt relieved and those who received phone calls to raise awareness and salience of the intervention.”

The authors admitted they had not expected the mental health results and had no good explanation, but their “preferred interpretation is that recipients of the cash payments viewed the transfers as insufficient to close the gap between their resources and needs, raising the salience of their financial distress and harming their mental health.”

As Neale Mahoney, an economist at Stanford and a co-author of the study, told Ms. Kliff: “Many of these people have lots of other financial issues. Removing one red flag just doesn’t make them suddenly turn into a good risk, from a lending perspective.”

The authors concluded:

Nonetheless, our results are sobering; they demonstrate no improvements in financial well-being or mental health from medical debt relief, reduced repayment of medical bills, and, if anything, a perverse worsening of mental health. Moreover, other than modest impacts on credit access for those whose medical debt is reported, we are unable to identify ways to target relief to subpopulations who stand to experience meaningful benefits.

On the other hand, Allison Sesso, R.I.P. Medical Debt’s executive director, told Ms. Kliff that study was at odds with what the group had regularly heard from those it had helped. “We’re hearing back from people who are thrilled,” she said.

As statisticians would say, anecdotes are not data.

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Removing medical debt seems like a can’t-lose idea. A number of states and local governments have passed programs to pay off medical debt (most working with R.I.P. Medical Debt) and a number of others are considering it.

Credit: Juweek Adolphe/Alyson Hurt for KHN and NPR 

Last fall the Consumer Financial Protection Bureau initiated rulemaking that would remove medical bills from credit reports. It has also, according to NPR, “penalized medical debt collectors, issued stern warnings to health care providers and lenders that target patients, and published reams of reports on how the health care system is undermining the financial security of Americans.”

Director Chopra admits: "Of course, there are broader things that we would probably want to fix about our health care system, but this is having a direct financial impact on so many Americans."

If nothing else, the new study should remind us that our health system is best at putting band-aids on problems rather than solving them. The problems we should be addressing include: why are so many charges so high, why aren’t people better protected against them, and why don’t more Americans have enough resources to pay their bills, especially unpredictable ones like from health care services?

I’m glad R.I.P. Medical Debt is doing what it is doing, but let’s not kid ourselves that it is solving the problem.

Where's Our Infrastructure Plan B?

I’ve been thinking a lot about infrastructure. In particular, what to do when it fails.

There was, of course, the tragic collapse of Baltimore’s Francis Scott Key Bridge. Watching the video – and, honestly, what were the odds there’d be video? -- is like watching a disaster movie, the bridge crumbling slowly but unstoppably. The bridge had been around for almost fifty years, withstanding over 11 million vehicles crossing it each year. All it took to knock it down was one container ship.

Container ships passed under it every day of its existence; the Port of Baltimore is one of the busiest in the country. In retrospect, it seems almost inevitable that the bridge would collapse; certainly one of those ships had to hit it eventually. The thing is, it wasn’t inevitable; it was a reflection of the fact that the world the bridge was designed for is not our world.

Transportation Secretary Pete Buttigieg noted: “What we do know is a bridge like this one, completed in the 1970s, was simply not made to withstand a direct impact on a critical support pier from a vessel that weighs about 200 million pounds—orders of magnitude bigger than cargo ships that were in service in that region at the time that the bridge was first built,” 

When the bridge was designed in the early 1970’s, container ships had a capacity of around 3000 TEUs (20-foot equivalent foot units, a measure of shipping containers). The ship that hit the bridge was carrying nearly three times that amount – and there are container ships that can carry over 20,000 TEUs. The New York Times estimated that the force of the ship hitting the bridge was equivalent to a rocket launch.

“It’s at a scale of more energy than you can really get your mind around,” Ben Schafer, a professor of civil and systems engineering at Johns Hopkins, told NYT.

Nii Attoh-Okine, a professor of engineering at the University of Maryland, added: “Depending on the size of the container ship, the bridge doesn't have any chance,” but Sherif El-Tawil, an engineering professor at the University of Michigan, disagreed, claiming: “If this bridge had been designed to current standards, it would have survived.” The key feature missing were protective systems built around the bases of the bridge, as have been installed on some other bridges.

Credit: The Geography of Transport Systems

We shouldn’t expect that this was a freak occurrence, unlikely to be repeated. An analysis by The Wall Street Journal identified at least eight similar bridges also at risk, but pointed out what is always the problem with infrastructure: “The upgrades are expensive.”

Lest anyone forget, America’s latest infrastructure report card rated our overall infrastructure a “C-,” with bridges getting a “C” (in other words, other infrastructure is even worse).

What's the plan?

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Then here’s an infrastructure story that threw me even more. The New York Times profiled the vulnerability of our satellite-based GPS system, upon which much of our modern society depends. NYT warned: “But those services are increasingly vulnerable as space is rapidly militarized and satellite signals are attacked on Earth. Yet, unlike China, the United States does not have a Plan B for civilians should those signals get knocked out in space or on land.”

Huh?

At least in Baltimore drivers can take another bridge or container ships can use another port, but if cyberattacks or satellite killers took out our GPS capabilities, well, I know many people who couldn’t get home from work. “It’s like oxygen, you don’t know that you have it until it’s gone,” Adm. Thad W. Allen, who leads a national advisory board for space-based positioning, navigation and timing, said last year.

“The Chinese did what we in America said we would do,” Dana Goward, the president of the Resilient Navigation and Timing Foundation in Virginia, told NYT. “They are resolutely on a path to be independent of space.” Still, NYT reports: “Despite recognizing the risks, the United States is years from having a reliable alternative source for time and navigation for civilian use if GPS signals are out or interrupted.”

The economic and societal impacts of such a loss are almost unfathomable.

Credit: War Room/Army War College

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And, if you assume, well, the odds of satellite killers taking out all of the GPS satellites is unlikely – Elon can just send more up! – then think about the underseas cables that carry most of the world’s internet traffic. According to Robin Chataut, writing in The Conversation, there are some 485 such cables, with over 900,000 miles of cable, and they carry 95% of internet data.

What you don’t realize, though, as Professor Cataut points out, is: “Each year, an estimated 100 to 150 undersea cables are cut, primarily accidentally by fishing equipment or anchors. However, the potential for sabotage, particularly by nation-states, is a growing concern.”

The cables, he notes, “often lie in isolated but publicly known locations, making them easy targets for hostile actions.” He recommends more use of satellites, so I guess he’s not as worried about satellite killers. 

We’ve recently seen suspicious outages in West Africa and in the Baltic Sea, and cables near Taiwan have been cut 27 times in the last five years, “which is considered a lot by global standards,” according to ABC Pacific; accordingly, “it has been happening so frequently that authorities in Taiwan have started war-gaming what it would look like to lose their communications with the outside world altogether and what it would mean for domestic security and national defence systems.”

It's not just Taiwan that should be war-gaming about infrastructure failures.

Credit: Visual Capitalist

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If all this seems far afield from healthcare, I have two words for you: Change Healthcare.

Until six weeks ago, most of us had never heard of Change Healthcare, and even among those who had, few realized just how much the U.S. healthcare system relied on its claims clearinghouses. With those frozen due to a cyberattack, physician practices, pharmacies, even hospitals weren’t getting paid, creating a huge crisis.

Infrastructure matters.

Think what would happen if, say, Epic went off-line everywhere.  Or have we forgotten one of the key lessons of 2020, when we realized that over half of our prescription drugs (or their active pharmaceutical ingredients – APIs) are imported?   

Healthcare, like every industry, relies on infrastructure.

Infrastructure is one of the many things Americans like to avoid thinking about, like climate change, the national deficit, or healthcare’s insane costs. I understand that we can’t fix everything at once, nor anything quickly, but at the very least we should be coming up with Plan Bs for when critical infrastructure does finally fail.