The Government Ruins Everything It Touches, Health Care Edition

Health care is the largest employer in 38 states, spanning hospitals, clinics, local care centers, insurers, billing offices, nursing facilities and regional hospital systems.

Across the country, the industry employs more than 20 million people, or roughly 12% of the total U.S. workforce:

Turn Your Images On
Surging regulations in health care have spawned an administrative class dependent on the very system that drives costs up. (Source: Daniel Gothis via X)

Few are doctors or nurses at the bedside.

The administrative state includes schedulers, coders, claims processors, compliance officers, billing departments, prior-authorization teams, HR offices, procurement staff, data-entry workers and administrators, layered throughout every corner of the system.

In the Pacific Northwest, Providence is not merely a health care provider; it is a regional economic institution. In the Midwest, the Mayo Clinic employs more than 48,000 people, making it not just a hospital system but an anchor employer. Johns Hopkins in the Mid-Atlantic plays the same role.

Administration replaced the factory in much of America: one dominant regional institution, locally rooted, hard to offshore, politically protected and wrapped in the moral language of necessity.

Across the system, incentives are badly crossed.

The incentives do not reward simplicity. They reward billing, coding, compliance, documentation, denial, appeal, credentialing and risk management. The more complicated the system becomes, the more people are needed to operate it. And once millions of livelihoods depend on operating the maze, the maze becomes politically protected.

What looks like “waste” from the patient’s perspective looks like payroll, margin protection, liability protection and political stability from the institutional perspective.

As Elon Musk and the DOGE team discovered about the Federal Administrative State, reform is next to impossible because “reform” threatens several constituencies at once.

Cutting administrative waste sounds easy until the “waste” is the largest employer in the state, the biggest building downtown, the local nursing school’s pipeline, the county’s stable white-collar employer and the hospital system sponsoring every civic luncheon from Spokane to Rochester.

Now, multiply the problem by a factor of 10: misaligned incentives drive growth in public education and in local and state governments.

Soon, we will have a real political problem on our hands. Nobody campaigns on protecting paperwork, but everybody quietly protects the payroll attached to it.

The AI angle sharpens the problem. If AI can automate claims processing, scheduling, coding, prior authorization and compliance paperwork, it threatens the administrative layer that everyone says they hate but that many communities economically depend on.

That creates a brutal incentive conflict: insurers and hospital systems may want AI to cut costs, but politicians and communities will resist the job losses once they understand what is being automated.

“Affordability!” is the cry as voters rush to elect the very people who will make it worse.

Usually, we like to own companies that we’d be happy to own. But sometimes you have to “hold your nose” and buy a company that you may not like. That’s the case with health care stocks.

Today’s Grey Swan Pro looks at a health care company in a strong uptrend, and which will benefit from government gridlock post-midterms, a reason why it may already be rallying — details here.

~ Addison

P.S. Last week’s Grey Swan Live! with Shad Marquitz covered the essential commodity bedrock underpinning the AI buildout. Many critical materials, such as rare earths, are part of that story.

Plus, metals such as tungsten are also critical for national security and defense spending. And there’s a boom ahead for resource producers in North America that can supply those metals.

Shad broke down how he found companies like MP Materials before last year’s government investment, and the critical metals likely to see government support from Uncle Sam for national security purposes.

The replay is up on the site for members who missed out live last week. As usual, Shad provided a great shopping list for those looking to benefit from the AI buildout story.

Health care is the largest employer in 38 states, spanning hospitals, clinics, local care centers, insurers, billing offices, nursing facilities and regional hospital systems.

Across the country, the industry employs more than 20 million people, or roughly 12% of the total U.S. workforce:

Turn Your Images On
Surging regulations in health care have spawned an administrative class dependent on the very system that drives costs up. (Source: Daniel Gothis via X)

Few are doctors or nurses at the bedside.

Administration replaced the factory in much of America: one dominant regional institution, locally rooted, hard to offshore, politically protected and wrapped in the moral language of necessity.

Across the system, incentives are badly crossed.

What looks like “waste” from the patient’s perspective looks like payroll, margin protection, liability protection and political stability from the institutional perspective.

As Elon Musk and the DOGE team discovered about the Federal Administrative State, reform is next to impossible because “reform” threatens several constituencies at once.

Now, multiply the problem by a factor of 10: misaligned incentives drive growth in public education and in local and state governments.

Soon, we will have a real political problem on our hands. Nobody campaigns on protecting paperwork, but everybody quietly protects the payroll attached to it.

“Affordability!” is the cry as voters rush to elect the very people who will make it worse.

Usually, we like to own companies that we’d be happy to own. But sometimes you have to “hold your nose” and buy a company that you may not like. That’s the case with health care stocks.

~ Addison

P.S. Last week’s Grey Swan Live! with Shad Marquitz covered the essential commodity bedrock underpinning the AI buildout. Many critical materials, such as rare earths, are part of that story.

Plus, metals such as tungsten are also critical for national security and defense spending. And there’s a boom ahead for resource producers in North America that can supply those metals.

The replay is up on the site for members who missed out live last week. As usual, Shad provided a great shopping list for those looking to benefit from the AI buildout story.

Copper and resources are sending us a cleaner market signal than AI stocks.

Channeling Ludwig von Mises, we observe this morning that price is not just a number; it’s information. Price reflects what buyers and sellers collectively believe: demand, scarcity, fear, speculation, disappointment, future expectations and available supply.

When prices rise, and inventories fall at the same time, the message is usually straightforward: buyers need the stuff, and there is not enough of it.

A low VIX does not predict disaster. It measures complacency. A serial skeptic will read it as the calm before a storm. We shook off that feeling this morning and opted to pursue an opportunity instead.

Here goes:

A VIX reading below 15 means the market is not pricing in much near-term trouble, even though there are obvious risks still sitting in the room: Iran, oil prices, memory chip speculation, circular financing, high valuations, epic high concentrations, spiking long-term interest rates, a regime change at the Fed, a meltdown in Japan and a historic deficit and rising national debt.

Money is not flowing in a clean, straight line from outside investors to productive businesses. The firms at the top are investing in and buying from each other.

Microsoft and OpenAI are the easiest examples to follow.

Microsoft says OpenAI has contracted to purchase an additional $250 billion in Azure services, while Microsoft continues to account for $13 billion in funding commitments to OpenAI as an investment.

At this stage, it’s a stock picker’s market.