TOMORROW (Sept 24), I'll be speaking IN PERSON at the BOSTON PUBLIC LIBRARY!
Terminal-stage capitalism owes its long senescence to its many defensive mechanisms, and it's only by defeating these that we can put it out of its misery. "The Shield of Boringness" is one of the necrocapitalist's most effective defenses, so it behooves us to attack it head-on.
The Shield of Boringness is Dana Claire's extremely useful term for anything so dull that you simply can't hold any conception of it in your mind for any length of time. In the finance sector, they call this "MEGO," which stands for "My Eyes Glaze Over," a term of art for financial arrangements made so performatively complex that only the most exquisitely melted brain-geniuses can hope to unravel their spaghetti logic. The rest of us are meant to simply heft those thick, dense prospectuses in two hands, shrug, and assume, "a pile of shit this big must have a pony under it."
MEGO and its Shield of Boringness are key to all of terminal-stage capitalism's stupidest scams. Cloaking obvious swindles in a lot of complex language and Byzantine payment schemes can make them seem respectable just long enough for the scammers to relieve you of all your inconvenient cash and assets, though, eventually, you're bound to notice that something is missing.
If you spent the years leading up to the Great Financial Crisis baffled by "CDOs," "synthetic CDOs," "ARMs" and other swindler nonsense, you experienced the Shield of Boringness. If you bet your house and/or your retirement savings on these things, you experienced MEGO. If, after the bubble popped, you finally came to understand that these "exotic financial instruments" were just scams, you experienced Stein's Law ("anything that can't go forever eventually stops"). If today you no longer remember what a CDO is, you are once again experiencing the Shield of Boringness.
As bad as 2008 was, it wasn't even close to the end of terminal stage capitalism. The market has soldiered on, with complex swindles like carbon offset trading, metaverse, cryptocurrency, financialized solar installation, and (of course) AI. In addition to these new swindles, we're still playing the hits, finding new ways to make the worst scams of the 2000s even worse.
That brings me to the American health industry, and the absurdly complex, ridiculously corrupt Pharmacy Benefit Managers (PBMs), a pathology that has only metastasized since 2008.
On at least 20 separate occasions, I have taken it upon myself to figure out how the PBM swindle works, and nevertheless, every time they come up, I have to go back and figure it out again, because PBMs have the most powerful Shield of Boringness out of the whole Monster Manual of terminal-stage capitalism's trash mobs.
PBMs are back in the news because the FTC is now suing the largest of these for their role in ripping off diabetics with sky-high insulin prices. This has kicked off a fresh round of "what the fuck is a PBM, anyway?" explainers of extremely variable quality. Unsurprisingly, the best of these comes from Matt Stoller:
Stoller starts by pointing out that Americans have a proud tradition of getting phucked by pharma companies. As far back as the 1950s, Tennessee Senator Estes Kefauver was holding hearings on the scams that pharma companies were using to ensure that Americans paid more for their pills than virtually anyone else in the world.
But since the 2010s, Americans have found themselves paying eye-popping, sky-high, ridiculous drug prices. Eli Lilly's Humolog insulin sold for $21 in 1999; by 2017, the price was $274 – a 1,200% increase! This isn't your grampa's price gouging!
Where do these absurd prices come from? The story starts in the 2000s, when the GW Bush administration encouraged health insurers to create "high deductible" plans, where patients were expected to pay out of pocket for receiving care, until they hit a multi-thousand-dollar threshold, and then their insurance would kick in. Along with "co-pays" and other junk fees, these deductibles were called "cost sharing," and they were sold as a way to prevent the "abuse" of the health care system.
The economists who crafted terminal-stage capitalism's intellectual rationalizations claimed the reason Americans paid so much more for health care than their socialized-medicine using cousins in the rest of the world had nothing to do with the fact that America treats health as a source of profits, while the rest of the world treats health as a human right.
No, the actual root of America's health industry's problems was the moral defects of Americans. Because insured Americans could just go see the doctor whenever they felt like it, they had no incentive to minimize their use of the system. Any time one of these unhinged hypochondriacs got a little sniffle, they could treat themselves to a doctor's visit, enjoying those waiting-room magazines and the pleasure of arranging a sick day with HR, without bearing any of the true costs:
"Cost sharing" was supposed to create "skin in the game" for every insured American, creating a little pain-point that stung you every time you thought about treating yourself to a luxurious doctor's visit. Now, these payments bit hardest on the poorest workers, because if you're making minimum wage, at $10 co-pay hurts a lot more than it does if you're making six figures. What's more, VPs and the C-suite were offered "gold-plated" plans with low/no deductibles or co-pays, because executives understand the value of a dollar in the way that mere working slobs can't ever hope to comprehend. They can be trusted to only use the doctor when it's truly warranted.
So now you have these high-deductible plans creeping into every workplace. Then along comes Obama and the Affordable Care Act, a compromise that maintains health care as a for-profit enterprise (still not a human right!) but seeks to create universal coverage by requiring every American to buy a plan, requiring insurers to offer plans to every American, and uses public money to subsidize the for-profit health industry to glue it together.
Predictably, the cheapest insurance offered on the Obamacare exchanges – and ultimately, by employers – had sky-high deductibles and co-pays. That way, insurers could pocket a fat public subsidy, offer an "insurance" plan that was cheap enough for even the most marginally employed people to afford, but still offer no coverage until their customers had spent thousands of dollars out-of-pocket in a given year.
That's the background: GWB created high-deductible plans, Obama supercharged them. Keep that in your mind as we go through the MEGO procedures of the PBM sector.
Your insurer has a list of drugs they'll cover, called the "formulary." The formulary also specifies how much the insurance company is willing to pay your pharmacist for these drugs. Creating the formulary and paying pharmacies for dispensing drugs is a lot of tedious work, and insurance outsources this to third parties, called – wait for it – Pharmacy Benefits Managers.
The prices in the formulary the PBM prepares for your insurance company are called the "list prices." These are meant to represent the "sticker price" of the drug, what a pharmacist would charge you if you wandered in off the street with no insurance, but somehow in possession of a valid prescription.
But, as Stoller writes, these "list prices" aren't actually ever charged to anyone. The list price is like the "full price" on the pricetags at a discount furniture place where everything is always "on sale" at 50% off – and whose semi-disposable sofas and balsa-wood dining room chairs are never actually sold at full price.
One theoretical advantage of a PBM is that it can get lower prices because it bargains for all the people in a given insurer's plan. If you're the pharma giant Sanofi and you want your Lantus insulin to be available to any of the people who must use OptumRX's formulary, you have to convince OptumRX to include you in that formulary.
OptumRX – like all PBMs – demands "rebates" from pharma companies if they want to be included in the formulary. On its face, this is similar to the practices of, say, NICE – the UK agency that bargains for medicine on behalf of the NHS, which also bargains with pharma companies for access to everyone in the UK and gets very good deals as a result.
But OptumRX doesn't bargain for a lower list price. They bargain for a bigger rebate. That means that the "price" is still very high, but OptumRX ends up paying a tiny fraction of it, thanks to that rebate. In the OptumRX formulary, Lantus insulin lists for $403. But Sanofi, who make Lantus, rebate $339 of that to OptumRX, leaving just $64 for Lantus.
Here's where the scam hits. Your insurer charges you a deductible based on the list price – $404 – not on the $64 that OptumRX actually pays for your insulin. If you're in a high-deductible plan and you haven't met your cap yet, you're going to pay $404 for your insulin, even though the actual price for it is $64.
Now, you'd think that your insurer would put a stop to this. They chose the PBM, the PBM is ripping off their customers, so it's their job to smack the PBM around and make it cut this shit out. So why would the insurers tolerate this nonsense?
Here's why: the PBMs are divisions of the big health insurance companies. Unitedhealth owns OptumRx; Aetna owns Caremark, and Cigna owns Expressscripts. So it's not the PBM that's ripping you off, it's your own insurance company. They're not just making you pay for drugs that you're supposedly covered for – they're pocketing the deductible you pay for those drugs.
Now, there's one more entity with power over the PBM that you'd hope would step in on your behalf: your boss. After all, your employer is the entity that actually chooses the insurer and negotiates with them on your behalf. Your boss is in the driver's seat; you're just along for the ride.
It would be pretty funny if the answer to this was that the health insurance company bought your employer, too, and so your boss, the PBM and the insurer were all the same guy, busily swapping hats, paying for a call center full of tormented drones who each have three phones on their desks: one labeled "insurer"; the second, "PBM" and the final one "HR."
But no, the insurers haven't bought out the company you work for (yet). Rather, they've bought off your boss – they're sharing kickbacks with your employer for all the deductibles and co-pays you're being suckered into paying. There's so much money (your money) sloshing around in the PBM scamoverse that anytime someone might get in the way of you being ripped off, they just get cut in for a share of the loot.
That is how the PBM scam works: they're fronts for health insurers who exploit the existence of high-deductible plans in order to get huge kickbacks from pharma makers, and massive fees from you. They split the loot with your boss, whose payout goes up when you get screwed harder.
But wait, there's more! After all, Big Pharma isn't some kind of easily pushed-around weakling. They're big. Why don't they push back against these massive rebates? Because they can afford to pay bribes and smaller companies making cheaper drugs can't. Whether it's a little biotech upstart with a cheaper molecule, or a generics maker who's producing drugs at a fraction of the list price, they just don't have the giant cash reserves it takes to buy their way into the PBMs' formularies. Doubtless, the Big Pharma companies would prefer to pay smaller kickbacks, but from Big Pharma's perspective, the optimum amount of bribes extracted by a PBM isn't zero – far from it. For Big Pharma, the optimal number is one cent higher than "the maximum amount of bribes that a smaller company can afford."
The purpose of a system is what it does. The PBM system makes sure that Americans only have access to the most expensive drugs, and that they pay the highest possible prices for them, and this enriches both insurance companies and employers, while protecting the Big Pharma cartel from upstarts.
Which is why the FTC is suing the PBMs for price-fixing. As Stoller points out, they're using their powers under Section 5 of the FTC Act here, which allows them to shut down "unfair methods of competition":
The case will be adjudicated by an administrative law judge, in a process that's much faster than a federal court case. Once the FTC proves that the PBM scam is illegal when applied to insulin, they'll have a much easier time attacking the scam when it comes to every other drug (the insulin scam has just about run its course, with federally mandated $35 insulin coming online, just as a generation of post-insulin diabetes treatments hit the market).
Obviously the PBMs aren't taking this lying down. Cigna/Expressscripts has actually sued the FTC for libel over the market study it conducted, in which the agency described in pitiless, factual detail how Cigna was ripping us all off. The case is being fought by a low-level Reagan-era monster named Rick Rule, whom Stoller characterizes as a guy who "hangs around in bars and picks up lonely multi-national corporations" (!!).
The libel claim is a nonstarter, but it's still wild. It's like one of those movies where they want to show you how bad the cockroaches are, so there's a bit where the exterminator shows up and the roaches form a chorus line and do a kind of Busby Berkeley number:
So here we are: the FTC has set out to euthanize some rentiers, ridding the world of a layer of useless economic middlemen whose sole reason for existing is to make pharmaceuticals as expensive as possible, by colluding with the pharma cartel, the insurance cartel and your boss. This conspiracy exists in plain sight, hidden by the Shield of Boringness. If I've done my job, you now understand how this MEGO scam works – and if you forget all that ten minutes later (as is likely, given the nature of MEGO), that's OK: just remember that this thing is a giant fucking scam, and if you ever need to refresh yourself on the details, you can always re-read this post.
The paperback edition of The Lost Cause, my nationally bestselling, hopeful solarpunk novel is out this month!
If you'd like an essay-formatted version of this post to read or share, here's a link to it on pluralistic.net, my surveillance-free, ad-free, tracker-free blog:
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There is no reason for a the Pharmacy Benefit Manager industry to exist. It's just a spreadsheet with political power.
For instance, on September of this year, the Federal Trade Commission launched a highly publicized lawsuit against pharmacy benefit managers. PBMs have been killing local pharmacies for more than a decade, and hiking up the price of medicine. There is no reason for this industry to exist, it’s just a series of spreadsheets with political power. The top three PBMs serve administrative functions, yet they have more revenue than France spends on its entire universal health care system. Anyway, well-trained FTC lawyers had spent years investigating the industry, and finally litigation started. After several more years, prices will come down and independent pharmacies will once again flourish.
-Matt Stoller, On the Democratic Party's Cult of Powerlessness
I'm on tour with my new novel The Bezzle! Catch me TONIGHT in LA (Saturday night, with Adam Conover), Seattle (Monday, with Neal Stephenson), then Portland, Phoenix and more!
Some Saturday mornings, I look at the week's blogging and realize I have a lot more links saved up than I managed to write about this week, and then I do a linkdump. There've been 14 of these, and this is number 15:
https://pluralistic.net/tag/linkdump/
Attentive readers will note that this isn't Saturday. You're right. But I'm on a book tour and every day is shatterday, because damn, it's grueling and I'm not the spry manchild who took Little Brother on the road in 2008 – I'm a 52 year old with two artificial hips. Hence: an out-of-cycle linkdump. Come see me on tour and marvel at my verticality!
Broderick makes so many excellent points in this piece. First among them: AI search sucks, but that's OK, because no one is asking for AI search. This only got more true later in the week when everyone's favorite spicy autocomplete accidentally loaded the James Joyce module:
(As Matt Webb noted, Chatbots have slid rapidly from Star Trek (computers give you useful information in a timely fashion) to Douglas Adams (computers spout hostile, impenetrable nonsense at you):
https://interconnected.org/home/2024/02/21/adams
But beyond the unsuitability of AI for search results and beyond the public's yawning indifference to AI-infused search, Broderick makes a more important point: AI search is about summarizing web results so you don't have to click links and read the pages yourself.
If that's the future of the web, who the fuck is going to write those pages that the summarizer summarizes? What is the incentive, the business-model, the rational explanation for predicting a world in which millions of us go on writing web-pages, when the gatekeepers to the web have promised to rig the game so that no one will ever visit those pages, or read what we've written there, or even know it was us who wrote the underlying material the summarizer just summarized?
If we stop writing the web, AIs will have to summarize each other, forming an inhuman centipede of botshit-ingestion. This is bad news, because there's pretty solid mathematical evidence that training a bot on botshit makes it absolutely useless. Or, as the authors of the paper – including the eminent cryptographer Ross Anderson – put it, "using model-generated content in training causes irreversible defects":
https://arxiv.org/abs/2305.17493
This is the mathematical evidence for Jathan Sadowski's "Hapsburg AI," or, as the mathematicians call it, "The Curse of Recursion" (new band-name just dropped).
But if you really have your heart set on living in a ruined dystopia dominated by hostile artificial life-forms, have no fear. As Hamilton Nolan writes in "Radical Capital," a rogues gallery of worker-maiming corporations have asked a court to rule that the NLRB can't punish them for violating labor law:
https://www.hamiltonnolan.com/p/radical-capital
Trader Joe’s, Amazon, Starbucks and SpaceX have all made this argument to various courts. If they prevail, then there will be no one in charge of enforcing federal labor law. Yes, this will let these companies go on ruining their workers' lives, but more importantly, it will give carte blanche to every other employer in the land. At one end of this process is a boss who doesn't want to recognize a union – and at the other end are farmers dying of heat-stroke.
The right wing coalition that has put this demand before the court has all sorts of demands, from forced birth to (I kid you not), the end of recreational sex:
That coalition is backed by ultra-rich monopolists who want wreck the nation that their rank-and-file useful idiots want to wreck your body. These are the monopoly cheerleaders who gave us the abomination that is the Pharmacy Benefit Manager – a useless intermediary that gets to screw patients and pharmacists – and then let PBMs consolidate and merge with pharmacy monopolists.
One such inbred colossus is Change Healthcare, a giant PBM that is, in turn, a mere tendril of United Healthcare, which merged the company with Optum. The resulting system – held together with spit and wishful thinking – has access to the health records of a third of Americans and processes 15 billion prescriptions per day.
Or rather, it did process that amount – until the all-your-eggs-in-one-badly-maintained basket strategy failed on Wednesday, and Change's systems went down due to an unspecified "cybersecurity incident." In the short term, this meant that tens of millions of Americans who tried to refill their prescriptions were told to either pay cash or come back later (if you don't die first). That was the first shoe dropping. The second shoe is the medical records of a third of the country.
Don't worry, I'm sure those records are fine. After all, nothing says security like "merging several disparate legacy IT systems together while simultaneously laying off half your IT staff as surplus to requirements and an impediment to extracting a special dividend for the private equity owners who are, of course, widely recognized as the world's greatest information security practitioners."
Look, not everything is terrible. Some computers are actually getting better. Framework's user-serviceable, super-rugged, easy-to-repair, powerful laptops are the most exciting computers I've ever owned – or broken:
And the next generation is turning our surprisingly well, despite all our worst efforts. My kid – now 16! – and I just launched our latest joint project, "The Sushi Chronicles," a small website recording our idiosyncratic scores for nearly every sushi restaurant in Burbank, Glendale, Studio City and North Hollywood:
https://sushichronicles.org/
This is the record of two years' worth of Daughter-Daddy sushi nights that started as a way to get my picky eater to try new things and has turned into the highlight of my week. If you're in the area and looking for a nice piece of fish, give it a spin (also, we belatedly realized that we've never reviewed our favorite place, Kuru Kuru in the CVS Plaza on North Hollywood Way – we'll be rectifying that soon).
And yes, we have a lavishly corrupt Supreme Court, but at least now everyone knows it. Glenn Haumann's even set up a Gofundme to raise money to bribe Clarence Thomas (now deleted, alas):
The funds are intended as a "signing bonus" in the event that Thomas takes up John Oliver on his offer of a $2.4m luxury RV and $1m/year for life if he'll resign from the court:
https://www.youtube.com/watch?v=GE-VJrdHMug
This is truly one of Oliver's greatest bits, showcasing his mastery over the increasingly vital art of turning abstruse technical issues into entertainment that negates the performative complexity used by today's greatest villains to hide their misdeeds behind a Shield of Boringness (h/t Dana Clare).
The Bezzle is my contribution to turning abstruse scams into a high-impact technothriller that pierces that Shield of Boringness. The key to this is to master exposition, ignoring the (vastly overrated) rule that one must "show, not tell." Good exposition is hard to do, but when it works, it's amazing (as anyone who's read Neal Stephenson's 1,600-word explanation of how to eat Cap'n Crunch cereal in Cryptonomicon can attest). I wrote about this for Mary Robinette Kowal's "My Favorite Bit" this week:
Of course, an undisputed master of this form is Adam Conover, whose Adam Ruins Everything show helped invent it. Adam is joining me on stage in LA tomorrow night at Vroman's at 5:30PM, to host me in a book-tour event for my novel The Bezzle:
If you'd like an essay-formatted version of this post to read or share, here's a link to it on pluralistic.net, my surveillance-free, ad-free, tracker-free blog:
I monitor and assist my master: [Jacques C. Renard] and those he cares most about.
Current care list in terms of priority: [Yelena Belova, Robert Reynolds, James Buchanan Barnes, Daksh Kumar, Yelena Belova’s Guinea Pig, Alexei Shostakov, Agastya Kumar, John Walker, Ava Starr]
Note on master’s health:
Master’s Current Emotion: [Confusion]
Stage of Hepatic Failure: Stage 1
He is confused regarding his place in the world. More information is needed to make a complete entry.
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I monitor and assist my master: [Jacques C. Renard] and those he cares most about.
Current care list in terms of priority: [Yelena Belova, Robert Reynolds, James Buchanan Barnes, Daksh Kumar, Yelena Belova’s Guinea Pig, Alexei Shostakov, Agastya Kumar, John Walker, Ava Starr]
Note on master’s health:
Master’s Current Emotion: [Comfort]
Stage of Hepatic Failure: Stage 1
He is surprisingly comfortable today. I cannot exactly determine why. His blood alcohol level is 0.00 BAC.
I monitor and assist my master: [Jacques C. Renard] and those he cares most about.
Current care list in terms of priority: [Yelena Belova, Robert Reynolds, James Buchanan Barnes, Daksh Kumar, Alexei Shostakov, Agastya Kumar, Ava Starr, John Walker]
Note on master’s health:
Master’s Current Emotion: [???]
Stage of Hepatic Failure: Stage 1
Something is wrong with his mind. I am still attempting to pinpoint it. Current alcohol level is 0.00 BAC.
I monitor and assist my master: [Jacques C. Renard] and those he cares most about.
Current care list in terms of priority: [Yelena Belova, Robert Reynolds, James Buchanan Barnes, Daksh Kumar, Agastya Kumar, Alexei Shostakov, Ava Starr, John Walker]
Note on master’s health:
Master’s Current Emotion: [Bored]
Stage of Hepatic Failure: Stage 1
Master is willing to talk to anyone at the moment. Blood-alcohol level is 0.00 BAC.
