Many people don’t get it, it’s really expensive, even in countries with non broken healthcare systems (not the us) costs increase rapidly and no one is sure how the systems will remain solvent with the same level of care given today. The way things are currently done are entrenched but not sustainable, that’s when disruptions are apt to appear.
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.
Salaries for healthcare workers make up only a small portion of expenditures. You do not want to avoid a trip to your GP for an AI system.
It'll be great at first while in development. But when profits need to be generated, seeing a specialist will get harder. There will be less wiggle room. I predict we will see more GP utilization.
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.
It's really just not there yet. I've been in medical school for >3 years now and have been using the latest models with good prompting. They have gotten much better, but I still see misses that my classmates would easily catch. This is not acceptable in healthcare. It's certainly not getting 100% on all my assignments, which are a step below the complexity of real-world clinical practice.
Before medical school, I was not so sure of the quality of your average doc. Now having spent a year in clinical practice across various settings, I am extremely reassured. I can say with certainty that a US trained doctor is miles ahead of AI right now. The system sucks really bad though and forces physicians to churn patients, giving the impression that physicians don't pay attention/don't care/etc.
because in america at least, the supply of doctors is kept artificially low. that combined with exploding administrative headcount, means patients are getting pretty terrible, expensive service.
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.
I don't think physician compensation per se is a good metric for capturing the effect of lack of providers, because some of the increased costs are due to the bottlenecks in the services per se, in terms of procedure costs and types of procedures offered. I also don't think the number of providers per se under the current regime, without deregulation or reregulation of practice boundaries, is representative of what would happen if there were changes in those boundaries. Adding more optometrists 5 years ago isn't the same as changing what they're allowed to do. It also doesn't address what cost increases would have been without an increase in the number of providers.
9% might also seem pretty big to me if it's out of all spending and doesn't include other provider compensation? What if overall healthcare costs went down, but physician compensation stayed the same? Would that then be a problem because it was an increased proportion of the total costs — fat left to be trimmed, so to speak?
There are many problems that don't have anything to do with providers per se, but I also don't think you can glean much by extrapolating to more of the same, especially compensation per se.
Because insurance companies incentivize upward price momentum. The ones who innovate and bring the prices down are not rewarded for their efforts. Health inflation is higher than headline inflation because of this absence of price pressure
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.
Dental and vanity surgeries aren't happening in a vacuum. There are baseline costs eg. anesthesia, recovery medications, medical machinery etc which are all bloated due to the rest of industry not being under price pressure (rising tide lift all boats)
It's similar to how AI data center buildout race is raising the prices for consumer electronics in 2026 and beyond. The suppliers have no incentive to sell lower cost products to tiny niche
I just looked it up, and apparently health care costs for pets has gone up in price even faster than for humans.
Pets typically don't have medical insurance, and any insurance that does exist there has a radically different regulatory regime than for humans.
Since 1980 for the US:
CPI has gone up by 3.16% on average per year (x4.17 in total). Human healthcare costs by 4.9% per year (x8.96 in total). And pet healthcare costs by 6.49% (or x17.87 in total).
The uninsured medical market is actually quite efficient. e.g. lasik surgery can actually be done for very reasonable rates with full price transparency.
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.
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.
> 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.
They absolutely do not.
They have their profit levels capped at 15% by law and regulation. That means if the insurer wants more absolute dollars of profit, prices must go up.
It also means that if they push prices down they necessarily have less funding to administer those plans, even if the needs are the same (same number of belly buttons, same patient demographics and state of health).
As you note there's also other variables, but this claim: "Insurance companies are structurally incentivized to minimize payouts across the board" is absolutely and categorically not so.
Physician reimbursement is only ~9% of national healthcare expenditures.
I tell you this with certainty as a 3rd year medical student: If physician wages go down and tuition stays as is, no one will do this. Intrinsic motivation to help people evaporates as soon as you see how enshittified healthcare in the US has become.
I do agree that medical school is far too restrictive to get into (For MD schools at least). However, if you want to make medical school easier to get into: Where will all those students rotate at for their clinical years? There aren't enough spots in hospitals to jam students in.
Stop taking aim at the people that sacrifice so much to help you. Take aim at the real drivers of healthcare expenditures: administrative bloat.
The solution is single payer. Any attempt to solve this with technological band aids is completely futile. We know what the solution is because we see it work in every other developed nation. We don't have it because a class of billionaire doners doesn't want to pay into the system that allowed them to become fabulously wealthy. People who are claiming AI is the solution to healthcare access and affordability are delusional or lying to you.
Compare: Google's founders can buy all the yachts they could possibly eat, yet Google Searches are offered for free.
If we could get healthcare to that level, it would be great.
For a less extreme example: Wal-Mart and Amazon have made plenty of people very rich, and they charge customers for their goods; but their entrance into the markets have arguable brought down prices.
IDK, the owners of retail clothing chains buy yachts and yet that sector is jaw-droppingly efficient at delivering clothes to people. Executives can be annoying tools but I don't think their pay is the problem.
Seriously? Spending a night in a hospital results in a $10,000 bill (though the real out of pocket is significantly cheaper. God help you if you have no insurance though). Healthcare in the US is the thing that needs the biggest disruption.
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.
These solutions are often proposed as easy fixes but I'm skeptical that they actually will do much to reduce healthcare costs. Healthcare is fundamentally expensive. Not-for-profit hospitals and for-profit hospitals don't really substantively differ in terms of out-of-pocket expenditures for patients; I find it difficult to imagine that forcing insurance companies to be nonprofit would do much to reduce costs.
> large insurance pools that must span age groups and risk groups.
What you describe (community rating) has been tried and it works. But it requires that a lot of young, healthy people enroll, and seniors receive most of the care. In an inverted demographic pyramid like most Western economies have, this is a ticking time bomb, so costs will continue to rise.
> Mandate at least decent minimal coverage standards
I think a better solution is to allow the government to threaten in negotiating prices with companies as Canada does; it greatly reduces rent-seeking behavior by pharmaceutical companies while allowing them to continue earning profits and innovating. (I understand a lot of the complaints against big pharma but they are actually one of the few sectors of the economy that doesn't park their wealth and actually uses it for substantive R&D, despite what the media will tell you, and countless lives have been saved because of pharma company profits)
Essentially the gist of what I'm saying, as someone who has been involved with and studied this industry for the better part of five years, is that it's much more complex than what meets the eye.
Many hospitals are already non-profit. That doesn't seem to bring down prices. Why would you think that this would work for insurance?
Profit isn't even a big part of the overall revenue.
> Mandate at least decent minimal coverage standards
I assume you want higher coverage standards than what currently exists? Independently of whether that would be the morally right thing to do (or not), it would definitely increase prices.
> and large insurance pools that must span age groups and risk groups.
Why does your insurance need a pool? An actuary can tell you the risk, and you can price according to that. No need for any pooling. Pooling is just something you do, when you don't have good models (or when regulations forces you).
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.
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.
Agreed. I'd also argue that there will always be the issue of adverse selection, which in any system that doesn't mandate that all individuals be covered for healthcare regardless of risk profile, will continue to raise costs regardless of whether or not margins are good or bad. That dream died with the individual mandate, and if the nation moves even further away from universal healthcare, we will only see costs rise and not fall as companies shoulder more and more of the relative risk.
Many people don’t get it, it’s really expensive, even in countries with non broken healthcare systems (not the us) costs increase rapidly and no one is sure how the systems will remain solvent with the same level of care given today. The way things are currently done are entrenched but not sustainable, that’s when disruptions are apt to appear.
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.
Salaries for healthcare workers make up only a small portion of expenditures. You do not want to avoid a trip to your GP for an AI system.
It'll be great at first while in development. But when profits need to be generated, seeing a specialist will get harder. There will be less wiggle room. I predict we will see more GP utilization.
1 reply →
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.
> wronging
Not sure if this is a typo (of wringing) or a pun, but it's apt either way.
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.
It's really just not there yet. I've been in medical school for >3 years now and have been using the latest models with good prompting. They have gotten much better, but I still see misses that my classmates would easily catch. This is not acceptable in healthcare. It's certainly not getting 100% on all my assignments, which are a step below the complexity of real-world clinical practice.
Before medical school, I was not so sure of the quality of your average doc. Now having spent a year in clinical practice across various settings, I am extremely reassured. I can say with certainty that a US trained doctor is miles ahead of AI right now. The system sucks really bad though and forces physicians to churn patients, giving the impression that physicians don't pay attention/don't care/etc.
because in america at least, the supply of doctors is kept artificially low. that combined with exploding administrative headcount, means patients are getting pretty terrible, expensive service.
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 don't think physician compensation per se is a good metric for capturing the effect of lack of providers, because some of the increased costs are due to the bottlenecks in the services per se, in terms of procedure costs and types of procedures offered. I also don't think the number of providers per se under the current regime, without deregulation or reregulation of practice boundaries, is representative of what would happen if there were changes in those boundaries. Adding more optometrists 5 years ago isn't the same as changing what they're allowed to do. It also doesn't address what cost increases would have been without an increase in the number of providers.
9% might also seem pretty big to me if it's out of all spending and doesn't include other provider compensation? What if overall healthcare costs went down, but physician compensation stayed the same? Would that then be a problem because it was an increased proportion of the total costs — fat left to be trimmed, so to speak?
There are many problems that don't have anything to do with providers per se, but I also don't think you can glean much by extrapolating to more of the same, especially compensation per se.
2 replies →
Because insurance companies incentivize upward price momentum. The ones who innovate and bring the prices down are not rewarded for their efforts. Health inflation is higher than headline inflation because of this absence of price pressure
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.
Dental and vanity surgeries aren't happening in a vacuum. There are baseline costs eg. anesthesia, recovery medications, medical machinery etc which are all bloated due to the rest of industry not being under price pressure (rising tide lift all boats)
It's similar to how AI data center buildout race is raising the prices for consumer electronics in 2026 and beyond. The suppliers have no incentive to sell lower cost products to tiny niche
1 reply →
I just looked it up, and apparently health care costs for pets has gone up in price even faster than for humans.
Pets typically don't have medical insurance, and any insurance that does exist there has a radically different regulatory regime than for humans.
Since 1980 for the US:
CPI has gone up by 3.16% on average per year (x4.17 in total). Human healthcare costs by 4.9% per year (x8.96 in total). And pet healthcare costs by 6.49% (or x17.87 in total).
3 replies →
The uninsured medical market is actually quite efficient. e.g. lasik surgery can actually be done for very reasonable rates with full price transparency.
1 reply →
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.
> 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.
They absolutely do not.
They have their profit levels capped at 15% by law and regulation. That means if the insurer wants more absolute dollars of profit, prices must go up.
It also means that if they push prices down they necessarily have less funding to administer those plans, even if the needs are the same (same number of belly buttons, same patient demographics and state of health).
As you note there's also other variables, but this claim: "Insurance companies are structurally incentivized to minimize payouts across the board" is absolutely and categorically not so.
Physician reimbursement is only ~9% of national healthcare expenditures.
I tell you this with certainty as a 3rd year medical student: If physician wages go down and tuition stays as is, no one will do this. Intrinsic motivation to help people evaporates as soon as you see how enshittified healthcare in the US has become.
I do agree that medical school is far too restrictive to get into (For MD schools at least). However, if you want to make medical school easier to get into: Where will all those students rotate at for their clinical years? There aren't enough spots in hospitals to jam students in.
Stop taking aim at the people that sacrifice so much to help you. Take aim at the real drivers of healthcare expenditures: administrative bloat.
1 reply →
It's inefficient and not living to its potential
And "disruption" (a pretty ill-defined term) is the solution to that?
The solution is single payer. Any attempt to solve this with technological band aids is completely futile. We know what the solution is because we see it work in every other developed nation. We don't have it because a class of billionaire doners doesn't want to pay into the system that allowed them to become fabulously wealthy. People who are claiming AI is the solution to healthcare access and affordability are delusional or lying to you.
3 replies →
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.
Compare: Google's founders can buy all the yachts they could possibly eat, yet Google Searches are offered for free.
If we could get healthcare to that level, it would be great.
For a less extreme example: Wal-Mart and Amazon have made plenty of people very rich, and they charge customers for their goods; but their entrance into the markets have arguable brought down prices.
13 replies →
IDK, the owners of retail clothing chains buy yachts and yet that sector is jaw-droppingly efficient at delivering clothes to people. Executives can be annoying tools but I don't think their pay is the problem.
1 reply →
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.
Seriously? Spending a night in a hospital results in a $10,000 bill (though the real out of pocket is significantly cheaper. God help you if you have no insurance though). Healthcare in the US is the thing that needs the biggest disruption.
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.
These solutions are often proposed as easy fixes but I'm skeptical that they actually will do much to reduce healthcare costs. Healthcare is fundamentally expensive. Not-for-profit hospitals and for-profit hospitals don't really substantively differ in terms of out-of-pocket expenditures for patients; I find it difficult to imagine that forcing insurance companies to be nonprofit would do much to reduce costs.
> large insurance pools that must span age groups and risk groups.
What you describe (community rating) has been tried and it works. But it requires that a lot of young, healthy people enroll, and seniors receive most of the care. In an inverted demographic pyramid like most Western economies have, this is a ticking time bomb, so costs will continue to rise.
> Mandate at least decent minimal coverage standards
I think a better solution is to allow the government to threaten in negotiating prices with companies as Canada does; it greatly reduces rent-seeking behavior by pharmaceutical companies while allowing them to continue earning profits and innovating. (I understand a lot of the complaints against big pharma but they are actually one of the few sectors of the economy that doesn't park their wealth and actually uses it for substantive R&D, despite what the media will tell you, and countless lives have been saved because of pharma company profits)
Essentially the gist of what I'm saying, as someone who has been involved with and studied this industry for the better part of five years, is that it's much more complex than what meets the eye.
1 reply →
Many hospitals are already non-profit. That doesn't seem to bring down prices. Why would you think that this would work for insurance?
Profit isn't even a big part of the overall revenue.
> Mandate at least decent minimal coverage standards
I assume you want higher coverage standards than what currently exists? Independently of whether that would be the morally right thing to do (or not), it would definitely increase prices.
> and large insurance pools that must span age groups and risk groups.
Why does your insurance need a pool? An actuary can tell you the risk, and you can price according to that. No need for any pooling. Pooling is just something you do, when you don't have good models (or when regulations forces you).
5 replies →
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 part that needs disrupting is the billionaires who own insurance companies and demand profit from people's health .
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.
Agreed. I'd also argue that there will always be the issue of adverse selection, which in any system that doesn't mandate that all individuals be covered for healthcare regardless of risk profile, will continue to raise costs regardless of whether or not margins are good or bad. That dream died with the individual mandate, and if the nation moves even further away from universal healthcare, we will only see costs rise and not fall as companies shoulder more and more of the relative risk.
Profit is a small part of overall revenue.