Comment by dreadsword

When I look at the US, the symptom -> diagnosis hypothesis is not anywhere near the most expensive bit. If you have a medical issue and AI works effectively for this then it saves you maybe one trip to your GP. Your insurance probably still requires your GP to provide a referral to a specialist. If insurance companies allow for AI to be used in place of a referral then you save this trip. But you still need all of the stuff to confirm a diagnosis. And you still need all of the treatment.

If you don't have a medical issue and an AI system tells you this then you save yourself a trip to a specialist and the associated diagnostic tests. Again, this saves a bit of money but is nowhere near the bulk of medical expenses. And it has to be able to do this without any diagnostic testing, just based off of your reported symptoms.

Even if AI diagnosis works flawlessly we save a bit of money but absolutely do not revolutionize the cost of the industry.

I mean, if we're talking Christensenian disruption, that happens in neglected markets rather than currently dysfunctional ones. There's no shortage of actors wronging money out of health care so there's not a disruptable space per se.

Society pretends that human doctors are better than they really are, and AI is worse than it really is.

It's the self-driving cars debate all over again.

Physician compensation is around 9% of healthcare spending. The number of non-physician providers (NPs, PAs and specialists like physical therapists and podiatrists) has also exploded over the last 20 years. We have far more overall providers per capita than we did 20 years ago.

Lack of providers isn’t what’s driving up costs.

I sympthatise with the argument. We should test it against real world data.

Eg your argument would predict that healthcare price inflation is not as bad in areas with less insurance coverage. Eg for dental work (which is less often covered as far as I can tell), for (vanity) plastic surgery, or we can even check healthcare price inflation for vet care for pets.

This argument doesn’t make sense to me. Insurance companies are structurally incentivized to minimize payouts across the board. They want hospital bills lower, physician compensation lower, and patient payouts as small as possible. If insurers had unilateral power, total medical spending would collapse, not explode.

The real source of high medical costs is the entity that sets the hospital bill in the first place.

The explanation is much simpler than people want to admit, but emotionally uncomfortable: doctors and hospitals are paid more than the free market would otherwise justify. We hesitate to say this because they save lives, and we instinctively conflate moral worth with economic compensation. But markets don’t work that way.

Economics does not reward people based on what they “deserve.” It rewards scarcity. And physician labor is artificially scarce.

The supply of doctors is deliberately constrained. We are not operating in a free market here. Entry into the profession is made far more restrictive than is strictly necessary, not purely for safety, but to protect incumbents. This is classic supply-side restriction behavior, bordering on cartel dynamics.

See, for example: https://petrieflom.law.harvard.edu/2022/03/15/ama-scope-of-p...

We see similar behavior in law, but medicine is more insidious. Because medical practice genuinely requires guardrails to prevent harm and quackery, credentialing is non-negotiable. That necessity makes it uniquely easy to smuggle in protectionism under the banner of “safety.”

The result is predictable: restricted supply, elevated wages, and persistently high medical costs. The problem isn’t mysterious, and it isn’t insurance companies. It’s a supply bottleneck created and defended by the profession itself.

Insurance companies aren't innocent angels in this whole scenario either. When the hospital bill fucks them over they don't even blink twice when they turn around and fuck over the patient to bail themselves out. But make no mistake, insurance is the side effect, the profession itself is the core problem.

And "disruption" (a pretty ill-defined term) is the solution to that?

That's because it's incredibly corrupted, not because it needs disruption. Unless the disruption comes in the form of jail time.

The inefficiency is the buying of yachts for billionaires.

It's inefficient and not living to its potential

Yeah, because we saw what a great job the tech bros did making government more efficient.

My fiance was in hospital recently for a fairly common disease. She arrived at 2200 Wednesday night and was discharged 1000 Saturday morning.

Her bill before "insurance negotiated prices" was $59,000. Effectively $1,000/hr, 24/7.

But no business is going to fix it. The market is captured. Only a radical change of insurance laws is going to have any impact. Mandate that insurance must be not for profit. Mandate at least decent minimal coverage standards and large insurance pools that must span age groups and risk groups.

Disruption, yes, in the sense that the current system needs to be overhauled. But this is a space that's frequented by the SV and VC space and "disruption" has very different connotations, usually in the realm of thought that suggests some SV-brained solution to an existing problem. In some edge cases like Uber/Lyft, this upending of an existing market can yield substantial positive externalities for users. Other "heavy industry" adjacent sectors, not so much. Healthcare and aviation, not so much.

Even SpaceX's vaunted "disruption" is just clever resource allocation; despite their iterative approach to building rockets being truly novel they're not market disruptors in the same way SV usually talks about them. And their approach has some very obvious flaws relative to more traditional companies like BO, which as of now has a lower failure-to-success ratio.

I don't think you'll find many providers clamoring for an AI-assisted app that hallucinates nonexistent diseases, there are plenty of those already out there that draw the ire of many physicians. Where the industry needs to innovate is in the insurance space, which is responsible for the majority of costs, and the captive market and cartel behavior thereof means that this is a policy and government issue, not something that can be solved with rote Silicon Valley style startup-initiated disruption; that I would predict would quickly turn into dysfunction and eventual failure.

Enshittification has done a lot of damage to the concept of "disrupting" markets. It's DOA in risk-averse fields.

Why would "disruption" make it better rather than worse?

The profit in insurance is the volume, not the margin. Disrupting it will not dramatically change outcomes, and will require changes to regulation, not business policy.

Profit is a small part of overall revenue.