D (2:30)

Well, so what we're seeing in Minnesota is that there's billions of dollars of fraud going on, particularly targeting government welfare programs. The fraud has gotten so bad that the U.S. attorney's office has indicated that there are entire government welfare programs where the fraud outstrips the legitimate claims. These large scale fraud rings to date have largely been concentrated in Minnesota's Somali community. But this is an inconvenient fact that progressive politicians in Minnesota, and I would also say the mainstream media has been unwilling or unable to acknowledge. And over the course of our investigation for City Journal, we developed several counterterrorism sources, law enforcement sources, who confirmed to us that some of these stolen funds, millions of dollars, are being sent abroad through hawala networks, which are informal money transfer networks that are popular in Islamic countries. This money has then gone overseas and some of that money has ended up in the hands of Al Shabaab to the point that one of our sources said the largest funder of Al Shabaab is the Minnesota taxpayer.

C (3:43)

Well, can I just read. I just want to give your, your, you some kudos here, Ryan, because this is your opening. You had me at hello kind of moment. Your opening to this article is just so blunt and to the point. I love it. I have to read it. Minnesota is drowning in fraud. Billions in taxpayer dollars have been stolen during the administration of Governor Tim Waltz alone. Democrat state officials overseeing one of the most generous welfare regimes in the country are asleep at the switch. And the media, duty bound by progressive pieties, refused to connect the dots. I mean it's just really direct.

B (4:18)

I want to flag the numbers on here. So this is one, this is so incredible. We're having Cremeu on next to talk about health care. And when he came out on the show with Charlie a few months ago, one of the things he said is he's like, he says, I think the number the growth of autism in America is overstated because they over diagnose it. And the example he said is, he said in Minnesota, Somalis are just scamming the autism system to get a ton of money. And, and this is a quote, I want to read this. So like with another program, autism claims to Medicaid in Minnesota have skyrocketed from $3 million in 2018, 3 million to, I'm going to abbreviate it, 399 million in 2023. So they went up more than 100 times over in five years. And it mentions the number of autism providers went from 41 to 328. And then it says the Somali community has established autism treatment centers for culturally appropriate programming. 1 in 16 Somali 4 year olds has reportedly been diagnosed with autism. Are they just letting anything happen and they're not doing any policing whatsoever?

E (5:24)

Ryan?

D (5:24)

Well, it's very clear with these government programs that there weren't many checks and balances that were built into the system and that this was done by design. I mean, this was done purposefully to help facilitate money going out the door, ostensibly to people in need. And what's interesting about the autism fraud case, the first indictment that's come down, the U.S. attorney's office indicates that more indictments will be coming, is that it is very clear the extent to which this fraud scheme penetrated the wider Somali community. So this wasn't just a bad apple. The woman accused in this case would approach members of the Somali community in Minnesota who had children. She would sign them up for autism services. If the child wasn't autistic, she would get them a fraudulent diagnosis, and then kickbacks would be paid to Somali parents in the state who had signed up their children for fraudulent autism services. And the U.S. attorney's office noted that if the kickbacks were too low, the parents would threaten to pull their child from one provider and take them over to a different fraudulent provider in order to get more money that was being stolen from taxpayers through the scheme.

B (6:41)

So that's, that's. The autism was an example. Can you also describe this, this, this homelessness one, the Medicaid Housing Stabilization Service. Can you explain how that fraud worked as well and any others that come to mind?

D (6:55)

Yeah, the Housing Stabilization Services program was quite interesting because if you were to design a government program specifically to facilitate fraud, fraudulent claims, it would probably look a lot like this program was. There were almost no checks and balances baked into this system. It was launched in 2020 with I, I would say a fairly noble goal. It was seeking to get people who are struggling with drug and alcohol addiction, mental illness, people with disabilities, to help them find and secure housing. The U.S. attorney's office claims that, you know, fraudulent companies were set up. They were operating out of, you know, dilapidated storefronts. They would target people that were exiting drug and drug rehabs. They would sign them up for Medicaid services that, you know, they had no intention of providing, and then they would simply pocket the money. And yet again, we've seen the claims under this program absolutely skyrocket. When it was launched in 2020, government officials estimated it would cost about $2.6 million a year. By 2024, it cost 104 million. And in the first six months of this year alone, claims were $61 million. At that point, the state stepped in and shuttered the program because they realized that, you know, they had a significant problem on their hands in regards to fraud. And the U.S. attorney's office has indicated in a press conference that he, the U.S. attorney at the time, he believed there were more, there was more fraudulent activity in this program than there were legitimate claims. There have been eight indictments to date for HSS fraud. Six of the eight men who have been accused were of Somali heritage. Two were Nigerian, of Nigerian heritage, and they're accused of defrauding millions of dollars from this government welfare program. And yet again, it's been indicated that more charges will be coming.

B (8:57)

Is it as simple as it looks? Where I guess the stereotype would be, it's Minnesota. You've got a lot of Swedes, Norwegians, sort of Nordic, high trust people, very used to doing pro social behaviors. And it's almost like they're like an animal on an island that has no predators. So the thought that someone would just fleece a program or just lie about it is so alien. Like they just have no defenses against this sort of behavior. Is it that simple? Is there any interest in fixing this other than arresting people occasionally?

D (9:30)

Well, you know, I think that's a really good point. I think that does help explain some of what's going on. As I was reporting this piece out, the picture that was emerging was really of a perfect storm in Minnesota to facilitate fraud on a massive scale. You have a sizable smally community that comes from a tribal clan based society and it has proven itself willing to cynically deploy accusations of racism as a shield in order to help cover up criminal behavior. And you have a very generous, very progressive welfare state. And in many of these programs, checks and balances, they were specifically designed with very few in place. And then you have a progressive political establishment that is terrified of being seen as politically incorrect and also worried about alienating the Somali community, which is a sizable voting bloc in the state and has also established significant political connections. And so when those three things kind of collide, this is what you get.

E (10:41)

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C (11:50)

We'Re joined by Ryan Thorpe from the Manhattan Institute. He has a great new piece about Mogadishu, Minnesota. I want to get into this, Ryan, because how much of this is essentially western culture confronting, I mean let's just be honest, a very backwards, tribalistic African culture that has been imported into our country and they're just colliding and they don't understand each other or Somalis seem to understand us. They're taking advantage of Minnesota. Nice. How much of it is a cultural breakdown though where, where Americans in Minnesota, they simply cannot fathom the cynical nature of these, of these schemes and these cons?

D (12:32)

Well, I would say that sources I've spoken to in Minnesota have indicated that as a significant contributing factor in regards to these large scale fraud rings that we're seeing, there is a cultural component here. When you're talking about people of Somali heritage that have landed in Minnesota. These are people that come from a very tribal clan based society. They have likely spent time in a refugee camp prior to arriving in America, where I would imagine you have to be pretty resourceful in order to get by. They then come to a traditionally very high trust state with significant welfare programs, perhaps the most generous in the country. And quite clearly by the criminal indictments that have been coming down, many people in the Somali community have figured out how to fraudulently obtain significant amounts of money. We're talking about billions of taxpayer dollars here that have been stolen, fraud rings that run to hundreds of millions of dollars alone. So I don't think you can discount that clash of cultures as a major factor. And what we're seeing that's going on.

C (13:47)

Well, listen to this. This is a quote from your piece. What we are seeing. What we see are schemes stacked upon schemes, draining resources meant for those in need. It feels never ending. I've spent my career. This is a guy named Thompson, as a fraud prosecutor. And the depth of the fraud in Minnesota takes my breath away. What can be done? Like, if you were gonna. I mean, is there a significant move to actually denaturalize, to deport some of these people that are here on protected status or on a temporary status of some nature? Is there a way that you would dismantle this that would actually fix the problem or. It feels like we're just going to play. Be playing whack a mole for years here in Minnesota.

D (14:25)

Well, the sources that I've spoken to, these are political people, law enforcement, counterterrorism folks. I put this question to them, you know, what. What needs to happen here? You know, they don't discount the fact that there is a role for law enforcement to play. They have been cracking down on many of these major fraud rings. There's more work to be done, more indictments will be coming, but pretty much across the board. People that I spoke to said there really isn't a law enforcement solution to this problem. As you said, that's simply playing whack a mole. People pretty consistently told me that, you know, there needs to be a policy change here and there clearly needs to be more accountability from the state government in Minnesota, which under Tim Waltz has been overseeing fraud after fraud to the point where the fraud has taken over entire government programs. So there has to be a policy solution here. Simply hoping for law enforcement to clean the mess up is naive.

B (15:29)

Yeah, it really is a striking case. The most extreme thing of when you bring in people from a different culture, you bring in a different culture, and it really manifests the way that it's so large and so many people are involved. Like, we didn't even talk about the feeding our future scam, another scam they did during COVID where they were pretending to feed thousands and thousands of kids, got millions of dollars, and it was, I think, one white Lutheran woman at the top of it, and then 50 plus people from the Somali community doing the rest of it. That it really is just who you have any moral relationship to is people in your, you know, extended family, people in your clan, people in that community. And you have no moral relationship or otherwise with the government, with wider society. You've basically brought a people within a separate group of people who just don't feel any obligation to the rest of the citizenry. And they think it's totally valid to just loot the that community for everything they have. And I think the only way, the only way you can deal with that is you basically need to impose far higher standards for any benefits you're going to dole out. Or you also have to say, frankly, why are we doing this in the first place? Why have we imported an alien culture that thinks it's their duty to just loot us?

C (16:43)

Now isn't now with Trump's travel restrictions? Because we had this in Trump 1.0, now 2.0. What's the status of immigration from Somalia right now?

D (16:52)

To be honest, I haven't looked into that, so I would not be.

C (16:57)

Yeah, I'm pretty sure Somalia's on the track. So I don't know if we're making this problem worse right now or if we sort of stop the bleeding or if there's backdoor ways for chain migration.

B (17:07)

And family reunion before we close it up. I want to throw up. Put up 298. It's the social contract in Minnesota. You have only 30 years old and all of his money is going to Al Shabaab, defeating our future to cause more chaos in Somalia so that more migrants move in to Minnesota so that they can give more money to them. I wanted to share that one.

C (17:25)

Rain, great job. Really good reporting. Thank you so much.

D (17:28)

Thank you guys.

C (17:31)

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C (18:34)

We now have our next guest, Cremu. He's the author of the Cremu substack and you can find him on X at Cray Moo.

B (18:46)

How do you pronounce that?

E (18:47)

Cremu.

C (18:48)

Cremu. Welcome to the show.

E (18:49)

Cremu Raque.

B (18:51)

We wanted to have you on because there's been. You're a big expert on healthcare. Healthcare has totally taken over a lot of the discussion in the US as one of the biggest sources of rising costs in America. You know, people are. Let's just play one of these clips. Actually, I think that'll set it up nicely. How about we do. Let's just do.

E (19:12)

263 going to hear horrible stories. People are not going to be able to afford their. Their insurance. I don't think even with subsidies they're going to be able to assure to afford the premiums that are hiking up 100, 200, 300%. Wasn't Obamacare supposed to fix that?

C (19:29)

No.

E (19:29)

Well, not without the universal. I mean there's Affordable Care Act.

C (19:32)

Affordable was the first and I want to. I want to throw up. This is the last Primer here. Cray Mood279. This is the average annual expenditures for health insurance per household consumer unit. And you can see that big jump there right when the Affordable Care act was implemented into law. So health care is far outpacing the trend that we saw before the ACA was passed. So we call it the Unaffordable Care act. And that really is the foundation for our discussion. So Cray Moo. What is going wrong with American healthcare?

E (20:05)

So I would qualify that last bit a little bit. I would say healthcare spending isn't really growing way over what you would expect before the aca. We're looking at different metrics there, but if you use consistent ones, it looks pretty like fine. The bigger issue is that we have. It just shouldn't be growing this way in the first place. It is a completely broken system in the sense that we have created incentives to make it worse. So we have a lot of things in healthcare, post ACA especially that are terrible in the sense that, for example, take the medical loss ratio requirement. This is the requirement that health insurers have to spend 80 to 90% depending on the type of plan. So 85% are there. So of their premiums each year. So if they charge their customers X amount, they have to spend 85% of X. And the fact that they have to spend that amount is effectively a profit gap. So they have to make profits in other ways. And to make those profits, they look into other things like buying up the pharmacy benefit managers, or buying up hospitals, or sneakily changing the prices or even overpaying for drugs in order to meet the threshold of things they have to pay for. So you end up with costs just kind of running everywhere. You end up with incentives for vertical integration such that they're buying up everything else. And the number of competitors that comes into the market is very, very small. Because again, who's going to invest in a company, a new company that has to spend 85% of its revenues every year? That's not a very good investment. There's a lot of other issues. The ACA also, for example, had a lot of stuff that was informed by small, kind of crappy studies. So there was this idea that came about as an example of this where hospitals run by doctors would be lower performing. And the reality was they actually didn't be higher performing. But the aca, when it was written, wasn't like, it wasn't based. The idea was not based on good empirical evidence, it was based on bad evidence. So they ended up banning doctors from establishing new, like physician run hospitals.

B (22:16)

Wow.

E (22:16)

They do. There's a lot of things in there.

C (22:17)

That are just kind of cremu. That seems like it should be illegal. How could you ban somebody from starting a business? I don't understand is this is just, is this like a real ban or you just can't get access to insurance funds or something?

E (22:30)

No, it's a real ban. Unfortunately, you cannot start a new one. There are some existing physician run hospitals that predate the ACA's ban going into effect, but you can't start new physician run hospitals, and that's a specific thing. So if you want to give up being a practicing physician, you can still start a hospital, but you can't both be a practicing physician and run the hospital.

B (22:49)

That's so interesting. So I guess just big picture, there's a lot of debate. You know, the GOP in Trump's first term tried to repeal and replace Obamacare. They failed, thanks to our late senator here. But I guess people talk a lot about rising costs, but if there were targeted reforms that the Republican Party could start advocating, what do you think some of the best ones would be?

E (23:10)

Tons. So a lot of the problem is that we have good ideas that have been actually supposed to be put into effect. For example, price transparency is the law of the land right now. If you go to a hospital, they are required to provide you with a credible list of all the prices. Before any operation is done on you, you are supposed to be given a price that is reasonable and that you will end up paying because once they, you know, put the number out there, they have to charge that for you unless some reasonable complication comes up. But the law is not enforced. The regulation for price transparency was supposed to go into effect on October 1st. And I looked around at a sample of local hospitals and I found, hey, you guys still aren't transparent about your prices. It's a lot of the issue with this stuff is that we don't actually enforce the rules, which is bizarre. I don't know, like, what do you say about that? At the end of the day, that.

B (24:06)

Sounds like a good chance to do populism. You know, have the Trump admin just sue a big hospital or like perp walk some random like, official at like a really big hospital.

C (24:15)

When was that law, when was that law passed into law? That. That was supposed to go into effect on October 1st.

E (24:23)

So that was a regulation. The law that provided the regulation with power was. Is like very old. I think it's like a decade old, if I remember.

C (24:31)

Did that get caught up in like the government shutdown or something? I mean, or we're just.

E (24:35)

No, it predated it.

C (24:36)

There's just not a mechanism to enforce it. Yeah, the present trip. The Trump administration should absolutely start. Start insuring this.

A (24:42)

Yeah.

B (24:42)

What else? Yeah, what else though? Yeah, we cut you off there a bit.

E (24:45)

There are tons of things. So for example, patients are actually entitled to all of your data. If a doctor generates some data and goes in your ehr, you are supposed to be able to get access to that. You should be able to ask your physician and have your physician give that to you in some format that can be used by you, the patient. The same thing applies to the CMS's CLIA certified lab. So like IVF clinics, if a parent has some sequencing done in like one of their embryos, they should be able to get that data, but they don't. In fact, the on, I think it was September 14th, if I'm recalling the date correctly. RFK put out a little video saying that patients are entitled to their data and at some date in the future there'd be a little. Not a hotline, but like a little form online that you can go fill out to report when data is not provided to you, when you ask for it. And they just don't. They don't do it. So it's like, it's not even things that are high costs that are being enforced. It's also things that are just good, like I said from a patient rights perspective, that just nobody follows the rules because there are enforcement mechanisms. To be clear, CMS can really start hitting hospitals very hard. They can hit providers in ways that make their pocketbooks scream, but they don't. And that is the big issue at the end of the day, is that they have enforcing mechanisms. They don't enforce them for all sorts of things. Another thing is, for example, site neutral payments. So if you are running a hospital chain and you buy up a clinic, you can charge hospital prices at that clinic location, even if they're totally separate. You just bought the location, you didn't change any way it's run, but that allows you to charge the hospital rights. You're associated with the chain. Like that sort of thing should be outlawed and it was supposed to be outlawed on October 1st, but guess what's still in effect, non neutral payments. It's, it's absurd.

C (26:30)

So, so it feels like you're sort of painting a picture that the health industry is plagued by death of a thousand cuts. There, there's maybe isn't one silver bullet. But you know, we, we were talking.

B (26:41)

Of a thousand cuts. It's so big. It seems like they just feel that it's so big and so impenetrable, they can just ignore.

C (26:46)

They can just. Of course, but. So we have to, we have to.

E (26:48)

That's right.

C (26:49)

There has to be an initiative though, from probably the highest levels of our government to start enforcing some of these regulatory changes that are supposed to benefit the patients. A lot of the problems in the country you could sort of trace back to illegal migration, illegal immigrants. How much of the rise in healthcare prices could you trace back to illegal immigrants on the dole or within the system? Or is that not a driver in your opinion?

E (27:16)

Not a big driver. The most liberal estimate that I've seen that's Credible is about 0.9%. And that's quite, that's stretching it, honestly. I think it's not that much. The main cost drivers have to do with old people. Old people are the biggest parts here. And the fact that we have bad incentives for cost control and we don't allow certain types of cost control to even be put into place. So the AMA is really your bigger problem here. Most of your growth is provider side rents. And that means the payments that go to doctors that are way in excess of what the doctors like that the care they're providing is worth, that's most of your issue. And we could lower provider side rents by allowing more physicians. But we have placed an effective cap on the rate of growth, not on the actual number of slots, but on the rate of growth in Medicare funding for residency slots. So the number of doctors who can actually come in and compete with the doctors and lower the rents and make it so they, you know, they're paid less, but they provide more because they're going to be more of them is limited. It's been limited since 1994, and we just don't.

C (28:20)

What happened in 94? What happened in 94?

E (28:22)

Oh, this is amazing. So the AMA argued there was going to be a surplus of doctors, there were going to be too many doctors, and that this would cause a big problem. And you have to think, how can there be a surplus of doctors? Don't we always need more doctors? The answer is, yeah, of course. But they managed to somehow convince Congress this was an issue that would impact the quality of care when it makes no sense. And then they got these limits set in place. And now they argue to get away from the fact that they did this. They argue, well, we don't limit the actual number of residency slots. But they ignore that. Yes, there's still limitations on the growth in the number of slots and the funding mechanisms available to create more slots outside of Medicare funding. So they created a broken system where we can't actually fix the issue with provider side rents, which is a roughly a third of all of the spending problem.

C (29:13)

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B (30:15)

I just. It's so. It's so enraging that specific fact on that we've basically intentionally capped the number of residencies, by extension, capped the number of doctors we make in America. And then we'll also say, oh, we need to import. It's like part of the immigration hustle. Have lots of foreign doctors come in when. Just have more residency slots, have more people go to medical school in the US that will be more opportunities for Gen Z, people who want to work hard and get a good job.

C (30:42)

Let the market work. Let the market work. I mean. Okay, now let's go back to aca, because you seem to think that maybe the ACA is not driving costs like the.

E (30:53)

No, no, no, no, no. Let me rephrase. The ACA is terrible. The biggest problem with the healthcare system is the medical loss ratio requirement. It is.

C (31:01)

Say that by far. Slowly.

E (31:04)

Yes, yes. Okay, let me be slow here. So the ACA's medical loss ratio, the MLR thing that I mentioned a moment ago, where you have to spend 85% of your premiums, leads to an enormous level of cost shifting. It leads to vertical integration where insurers will buy up every other part of the medical space. It leads to. It prevents AI and healthcare from actually being useful. And it gives a lot of leverage to doctors, to. And doctors cartels like the AMA and like the American Society of Anesthesiologists and all these other groups to continue to do things that increase costs. It's the worst thing on the books. And it can be fixed in two ways. They're like. So drug spending is like a problem in its own Right. That's like 9% of the problem. But the ACA's medical loss ratio thing is a much, much larger portion of it. It's closer to 40% of the actual problem. And if you eliminated the problem, you could immediately start embarking on a massive wave of innovation in healthcare because you would allow AI stuff to be slotted in to the prior auth departments where insurers do the rejections or they accept a medical call by a doctor. But we don't allow this. We have effectively banned it. We've made there no incentives to do it.

C (32:25)

So just so I'm understanding, because I want to make sure I'm understanding exactly what you're saying. If we send a dollar. If we spend $1 on health care, 85% of that has to go to the actual treatments, meaning that the providers are only allowed to take 15% of the. Okay, okay, yeah.

E (32:44)

No, anything not administrative. So that 15 is whatever's left over. And what that means is that in order to meet that level, like at the end of a billing cycle, what they'll do is they'll just pay more for stuff. So if a doc, if a doctor says, like I want to build, blah, blah, blah, blah, blah, blah, they'll pay more for medication, they'll overpay for all sorts of things. They'll get wrong claims and just pay them because they want to meet. They have to meet this legal requirement. And in order to manage, like the, this fact, they transfer large portions of their medical claim revenue to their PBMs, their subsidiaries that aren't regulated directly by this regulation.

C (33:24)

So Cray Moo, it sounds like there's, you said that these two buckets, they essentially lead to 90% of the problems with the ACA. So if you were consulting President Trump, J.D. vance, would you just say deal with this 85% ratio issue? And it sounds like one. I forget what the other one is. No. Okay.

E (33:44)

So the, these issues are unfortunately statutory. There are. So statutory means that Congress is the reason for the issue. Congress has, in the case of the mlr, the medical loss ratio requirement that drives so much of the spending issues and so much of the lack of AI related innovation in health care. The issue was given. Congress gave the HHS the opportunity to write up the rules and they gave them some limits. And it said you have to write the rules a certain way. And these rules are terrible. But in order to reform it, you can't just have the HHS rewrite the rules because of those limits put in place by Congress. If you actually wanted to fix this issue, you would have to very likely, unless you can get some Democrats to agree, and I really doubt you could, you would very likely have to suspend the filibuster, which is what something the Republicans should be doing right now, and then go and get Congress to change it. So were I to offer this advice to Trump, I would say push on the filibuster, keep pushing, pushing, pushing. You have to get them to change the thing because you can't do it directly. But as president, you will be blamed for any sort of health care mishaps or just continuations of bad trends that we've had going on.

B (34:49)

That is the big tough question. We've talked about the filibuster a lot on this show and because Trump wanted to get rid of it, to end the shutdown. And we've generally said end the shutdown but only, or end the filibuster but only if you have a home run slate of legislation to pass. Otherwise you're just going to do some, some lame thing and then fart around and then Democrats will have no filibuster to do. Their agenda, which is a lot more clear cut on what they want to do.

C (35:14)

It's inferior too, by the way. And so there are two, like, there's popular aspects of aca, right? It's the, the uninsured, uninsurable people, right, that you, you couldn't have some very expensive treatment that you need for the rest of your life.

B (35:27)

The pre existing conditions, people like being.

C (35:29)

On their parents insurance and then being on your parents. Would your recommendation, just from a political standpoint, put your political hat on? Would you say, let's keep those things in place and fix these underlying, I guess, statutory issues? I mean you could instead of replacing Obamacare, you pitch it as like, hey, these reforms would make it better.

E (35:47)

Yes, I absolutely would. So the big thing is with respect to the preexisting condition requirement, it does add a lot of costs. I mean it obviously does because you have suddenly people who are high cost being covered and you're in the same pool as them and you got to cover them. So that's a big issue. But if you fix the medical loss ratio requirement and you allow health care providers, or not, sorry, if you allow health insurers to make better use of their prior authorization departments, you can minimize the downside of those people because you can offer them more tailored care. You can offer them, you can say, hey, your doctor called for this, but we actually think there's a better option here. You can figure out what is more optimal to give them in terms of care and save a lot of that money that you would have wasted anyway. But you're forced to spend it, so it doesn't matter at the moment. It becomes a bad thing in large part because there are no incentives to fix the issue from a technological perspective. Like you can't go the technological route and minimize the issue the other way, which we totally could do if we fix this other issue. So I think keep that in place. It's fine because it's so popular, no one wants to touch it. And it like you really do still want these people to be covered somehow. Like it's a, it's a humane issue. At the end of the day you want them to be covered in some way that is it just like.

B (36:58)

So one last question, I'm thinking, so you've mentioned it's statutory issues on the biggest things, but what is the best thing you think the Trump administration could do? Right now, just with its regulatory executive branch authority doesn't need Congress, which is its own big problem. What could they do tomorrow if they wanted to?

E (37:17)

They could fix tons of the issues with cms. So like that site neutrality thing I mentioned before is totally able to be fixed. The issue is the enforcement there. They have that power to fix that issue and enforce it. And they've written up those rules and they have changed those rules and they have not enforced it. That is the big issue is enforcement. And there are tons of things like this. So they could get away with fixing a lot by just enforcing the rules and change. There are some things they could change too. So they could be adventurous. There are some untested legal theories here. Like section 804 is the thing that allows you states to sign up to start importing drugs for their Medicare Medicaid programs from Canada at Canadian prices. If they were to be a little adventurous with this, they could expand that by changing two parts of the regulation so that states could import Canadian generics that don't yet have a generic equivalent in the US Thus lowering prescription drug prices a lot. It's totally on the table to do a lot of little fixes that are in untested legal territory if they want to try that. And they could meaningfully lower the cost of health care considerably beyond what they've done so far with the negotiations. Because the negotiations have actually been getting kind of duped on. Like a lot of the Trump RX stuff that they've done where they've tried to get like directly go to Pfizer and tell them give us most favored nation rates. That stuff doesn't really work to cut prices very much, unfortunately. Like you, you think there's a lot of room there, but the issue is those companies aren't really giving a great price.

C (38:47)

I was texting Blake that, you know, I assumed that it was the subsidies for people who couldn't otherwise afford, or at least so they say couldn't afford health care that was driving up the cost of health insurance for average American families.

B (39:00)

Yeah, we've all heard the story of the illegals who just go in for everything to the ER causes overflow, causes all of these extra costs and they never pay for any of it. It's all eaten by the taxpayer. But you say it's maybe 1% of total cost inflation.

C (39:17)

Poor Americans, working class Americans that qualify for the subsidy so they get discounted insurance rates. So that's the assumption is that's what's driving most of the cost increase.

E (39:28)

That is, yeah, that assumption is very wrong. Health care is a $5 trillion industry. It is so much larger than these subsidies and it's growing. It grows faster than the rate of inflation by a considerable margin too. So the majority of the cost growth is just way away from these things. And it's. There's been no detectable change in trend related to the subsidies either in terms of like, like prices of drugs and whatnot. They're just negotiated on too, like long term a scale and too large a scale for this stuff to really matter all that much. And the government has their rates, they get through with CMS stuff like Medicare, Medicaid, that aren't going to be meaningfully changed if they get the subsidies. Like, they're not going to lose negotiating leverage the moment they start financing plans a different way. So ultimately this stuff doesn't make much of a difference. The big stuff is systemic, like incentive related stuff that has been put in place for too long and needs to be changed at a more fundamental level.

C (40:23)

Yeah, I have an anecdote for you and I wonder if there's a root cause that I'm not aware of. So, for example, Daisy is pregnant. She works here in the office. I've had three kids. I understand this process well. You get towards the end of your pregnancy and the first time with your first kid, you're like really grateful for it. And you go to the OB GYN like every week in that final run up to having your baby. But then on baby two and three, you're like, I don't need to go every week. I know what we're doing. We do not need to go everywhere. The OB GYN's gonna say, hey, you gotta come in every week. It's mandatory, stuff like that. No. Okay, maybe I'm not a doctor, maybe that's really medically necessary. But for me and my wife and I've heard this from other parents, like, you don't. I'm not going in again. Sorry, I'm just gonna like skip that one. We're not doing it. You start taking control of your own healthcare a little bit. But the doctors, it occurs to me, are getting paid every time you're going in. That's money. That's expense to the system. And here's what else they know is that you've already hit your $5,000 or $6,000, $8,000 deductible. And the incentive structure for the client, the patient in this case is off because you know it's not going to cost you anything more out of pocket. So the whole system just has to absorb this cost. What am I describing there and how do you fix it?

E (41:34)

What you're describing is actually related to the MLR issue. Again, the medical loss ratio thing. So medically necessary care is the majority of care, but it's a slim majority, 30 to 40% of the care. And I'm leaning more towards the 40 side that we give out in this country just isn't necessary. So many things don't need to be done. And we don't have the ability to say no to doctors in a very meaningful way because there's no incentive to. There are incentives to say yes to doctors, to overpay for care, and they only recently added prior authorization, that's the rejection department basically, to Medicare fee for service plans. But they need to make that a more extensively used thing everywhere. They need to be able to say no more often. They need to be able to target care better. They need to make individualized guidelines. And I don't mean in some hockey, in personalized medicine sort of way. I mean in a. We need access to massive amounts of data in order to properly tailor everything for individual patients in a way that, like, still provides them with all the care that they personally need without having them go over by, like, getting five times more, well, visits than they actually need or getting a mammogram when they're in the lowest decile of risk or something like that. Like, it's. That sort of thing is just far too common. And it is the big issue. And that is why, if you were to fix that MLR requirement, you would, you would basically be able to start cutting back on medically unnecessary care and allocating care better. And you'd be incentivized to figure out people who are currently underserved, who you're not currently incentivized to go out and find and to bring them into the doctor's office. So, for example, there are a lot of young people these days, not, not a lot in absolute terms relevant to the old, but like an increasing number of young people who get colorectal cancer. And we have wonderful algorithms for finding those people young, but nobody implements them in the prior authorization stage because there's no financial reason to. There are financial reasons not to, but no financial reason to. We have totally distorted the incentives away from promoting health for people and towards promoting cost, because that's just how it is. I mean, that's just. We've made some very, very bad decisions in designing these systems, and we totally could fix them.

B (43:46)

But I always feel so much more optimistic because you're always like, oh, there's like, all these big changes we could make, and then you go back into politics and it's such a mess. But before we lose you, I want to congratulate you. When you came out and you talked to Charlie, he loved it, by the way. He wanted to talk to you as long as he possibly could. One of his favorite segments of the past year, I think. So I wanted to thank you for that. But when we talked about autism, rising autism rates, one of the things you told us is you said, I think this is basically just it's a matter of diagnosis. And one of the things you said was, the Somali community in Minnesota is scamming the autism system, way inflating their rates to just scam everyone. And our segment just before you, as we were talking to Ryan Thorpe about the Somali scam, they're sending all the autism dollars to Al Shabaab in Somalia. So I wanted to congratulate you for calling that shot months in advance. And I wanted to thank you again for coming on and giving us your time.

C (44:41)

Cray moo. We got to get you in touch with some people that can actually implement some of this stuff, so we'll work on that, too. But really, I mean, enlightening conversation. I hope people at home appreciate it just as much. So, Craymouth, thanks for making the time, my friend. And we'll see you again, I'm sure, when the next next hot topic comes up.

B (44:59)

Extremely complicated topic.

C (45:01)

Yeah, exactly. And you're looking at the macro, data, trends, so we appreciate it.

A (45:05)

Tremendous.

E (45:06)

All right, have a good one, guys.

C (45:07)

Ciao. You, too.

E (45:13)

For more on many of these stories and news you can Trust, go to charliekirk.com.