It’s neat that the general population is learning about the US budget. Welcome to the math folks!
Last night at dinner in Dubai with the head of a major British agency, we went through the math.
It’s actually a lot easier than this, from Musk:
In fact you can just do it off the top of your head like this:
Use GDP, is $15T, and the US govt share of that is around 1/3, so the US Federal budget is $5T about.
It breaks down like this:
$1T Medicare
$1T Social Security
$1T Medicaid
$1T Military
the other 1ish T is other stuff, of which interest is variable and lately very high
Compare what we came up with over dinner with the chart above. Roughly accurate.
Perhaps you’ll be surprised that the front page of the news for a week has been USAID, which is $70bn or so per year, or about 1%.
Most folks talk about the intractability of changing the curve….but, note this: $2T or 40% is health care costs. Canada spends about half per person. What if the US did? That’s $1T right there.
But forget the Canada and international politics matters — here’s the way to cut the healthcare budgets.
AI to assist scientists, doctors, administrator, insurers and patients, obviously. My McKinsey friend Rodney Zemmel and Cutler from Harvard + co-authors here predict 5-10% savings in 5 years from today’s right-now tech: that’s $100-200B of the Medicare/Medicaid problem above.
The singularly most powerful application of AI is where labor costs are high — and health care is 1/2 labor. Of the $4.5T spent on healthcare in the US in 2022, here’s the breakdown
1. Labor (~50% | $2.2T)
- Physicians & Nurses (~20% | $900B) – Salaries, benefits, admin burden
- Other Health Workers (~15% | $675B) – Technicians, aides, therapists
- Administrative Staff (~10% | $450B) – Billing, insurance processing
- Non-Clinical Staff (~5% | $225B) – Hospital support, cleaning, food service
2. Consumable Opex (~30% | $1.3T)
- Drugs & Medical Devices (~15% | $675B) – Prescription drugs, implants, machines
- Medical Supplies (~5% | $225B) – Bandages, syringes, PPE
- Diagnostics & Labs (~5% | $225B) – Imaging, blood tests
- Insurance Overhead & Profits (~5% | $225B) – Admin costs, margins
3. Real Estate & Infrastructure (~10% | $450B)
- Hospital Construction & Maintenance (~6% | $270B) – Depreciation, facilities
- Equipment Depreciation (~4% | $180B) – MRI machines, surgical tools
4. Other (~10% | $450B)
- Long-term Care & Home Health (~5% | $225B) – Nursing homes, home aides
- Public Health, Research, Misc (~5% | $225B) – CDC, NIH, health IT
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