Mark Cuban’s Plan to Make Healthcare Affordable

We are not in an efficient healthcare market. The economics are broken. One of the many ills of healthcare is that it completely lacks competitive dynamics. Just merely by the presence of cost plus drugs, you've actually forced change in the incumbents. UnitedHealth, 3,000 plus subsidiaries, $150 billion in intercompany transfers annually. There's often times when they'll increase premiums, increase deductibles, and at the same time, force you into a relationship with a company they already own and you don't know they own them. The ultimate mission is to disrupt healthcare so that it's affordable again. Is there like some area where you're like, why is no one building here? There's no better time to be an entrepreneur than right now. The biggest challenge and where AI, I think, is going to have the biggest impact is... Mark Cuban has a simple piece of advice for employers trying to lower their healthcare costs. Take every benefits contract you're about to sign, run it through AI, and ask where you're getting screwed. In this episode, Julie, you and I sit down with Mark to talk about what he's learned trying to disrupt one of the most opaque industries in America. We start with cost plus drugs, which has grown from 111 medications at launch to roughly 4,000 SKUs today. Mark explains why he sees trust as the company's core product, how it's expanding into direct hospital contracts and drug manufacturing, and why transparency can be more disruptive to healthcare than another layer of technology. We also get into AI. Mark argues that it can expose bad contracts and help consumers navigate a system that was almost impossible to understand before. But he's skeptical that AI alone can fix healthcare when the underlying economics and incentives remain broken. And looking further ahead, we discuss personalized drugs, how the role of doctors could change, and why Mark thinks this is the greatest technological transition he's ever seen. Well, Mark, welcome to the podcast. Thanks so much for joining. Thanks for having me on, guys. Julie, what has struck you about Mark's contributions in this space? What have you always found fascinating about what Mark's been up to with cost plus drugs and just in general and why we invite him onto the show? I mean, Mark, first of all, just had the courage to enter into the morass that is healthcare in a way that made such a splash and that many, many people who also are in the privileged position that Mark is in to just have such a huge audience have been intimidated to do over many, many decades. And so I've loved watching the market react to what Mark has done in healthcare. I think the one thing that I know, Mark, you and I have talked about this in the past, but one of the many ills of healthcare is that it completely lacks competitive dynamics and competitive courses, free market dynamics, all that kind of stuff. And what's been fascinating to watch is just merely by the presence of cost plus drugs as one example, and we'll talk about others that you've done too, but just merely by the presence of that entity and what you represent and what you're doing, you've actually forced change in the incumbents that otherwise, even with policy, even with all sorts of other forces, never changed over the course of many, many decades. So that's one of the things that I think. I appreciate that, thank you. Yeah, because I don't get to see that stuff because I don't talk to those guys. And then I think to your point, even absent a contract, I think people are recognizing from the demand side of the market that they need to show that there is some pathway for people to get your product, right? And so perhaps even in the absence of a direct contract, I do hear people talking about your solution as part of their network. It truly does not surprise me when the big three or even the big six use our name as kind of a way to counter the request and the discussion of pricing because they know that our prices are public, that anybody can take our API. And big companies that have half a brain are pulling that data on a daily basis and they're saying, you have to beat this price. And so I can see that, but I've had at least one company and probably more that have said, oh yeah, one of the big three has told us that you're part of their network and we get your prices where you're cheaper and we don't have an agreement at all with any of the big three. Mark, let's zoom out and take stock about where you're at with the business. You launched in 2022 with a few dozen drugs. In April this year, you said you were up to roughly 4,000. You're getting into manufacturing, hospital contracts, potentially AI-based care. Why don't you take stock a little bit of where the business is a few years in? Sure, I'll give you the rundown. So we launched costplusdrugs.com January 19th of 2022. 111 medications, purely generic, and we didn't know what to expect at all. I went out and started talking about it and it immediately blew up, right? And then our volumes there led the manufacturers to expand their portfolio with us and we were able to add additional manufacturers. So now, as you said, we have 4,000 SKUs, give or take, and our business every week is up and to the right. So our biggest challenge is just keeping up with it. So that's segment number one. Then the obvious response to mail order is, well, I would need to pick things up today. And so we created what's called the TeamCubanCard.com. I did not name it. And it's basically a discount card that allows you to go to any of the 17,000 pharmacies that have affiliated with us and pick up most of our drugs locally. Because we pay, I'm a big believer in supporting independent pharmacy, so we pay our affiliate pharmacies $12 fill fee, which means that's gonna make us more expensive for the lowest cost drugs. Because if you have a $5 stat and plus $12, you're gonna get it cheaper somewhere else. But at the same side, if you really wanna support your independent pharmacies, you can pick up the cheap drugs. But on the more expensive drugs, the specialty generics, the biosimilars, we're actually much cheaper. And for things like biosimilars and insulin and things that have cold shipping, it's actually cheaper to buy it and pick it up locally through our TeamCubanCard. So that's the second stool in what we offer. Third is Cost Plus Marketplace. Well, before I get to Cost Plus Marketplace, let me go back to our Dallas Manufacturing. So a big part of Alex, my co-founder, Dr. Alex Sosmiansky, his original cold email to me was he wanted to manufacture drugs that were generic drugs that are on the FDA short supply list. Because there are pediatric cancer drugs, there are things that are widely used in hospitals, pitocin, epinephrine, this long list of drugs. And we were able to use AI and to use robotics to shrink what would have been a football field or more into 5,000 square feet. And not only that, but we were able to turn drugs every four hours. So we can make a six month supply, turn the line, and then go to the next drug and continue doing it. We sell those products to hospitals and clinics. An extension of that, because we started working on that five years ago, we've been able to take those same robotics and AI and shrink it into a manufacturing plant, if you will, the size of a tractor trailer. And we call those pods. And those pods can be used for anything and shipped anywhere. The government was our first customer. We've shipped the first one here recently where we just got an order for a second and they told us there's more behind that. Because if there's an ecological disaster, we can send it to FEMA, if FEMA's around. If there is weather disaster, military disaster, God forbid, we can ship them there and configure them to make any specific type of drug. So we can configure a pod for sterile injectables, for multiple pods. It can be daisy chained together so we can scale. And, or you can have one as being a sterile room and another doing the tablet and work for generics. And I'm not the expert on this. Alex can go into this in precise detail. But the thing I'm most proud of, and actually Stat News just wrote a story on this yesterday or the day before, is that we can take these pods and configure them to do end-of-one therapies so that we can ship the pod to a research hospital. And these pods cost about $20 million. Ship it to a research hospital. And if they specialize in any types of therapies, for those people that are in the end-of-one category, they can make it and iterate very quickly there. And then now we're doing these ASO drugs, and don't ask me what ASO stands for because I can't pronounce it, out of our first manufacturing facility in Dallas. So that's part two. From that manufacturing, we created Cost Plus Marketplace. And Cost Plus Marketplace takes those sterile injectables we make and that we also, others that we source from other providers or other manufacturers, and we sell them at a cost plus 10 or cost plus 12 to clinics, hospitals, providers, whoever want to buy them at the cheapest price. And we literally can save hospitals millions of dollars a year. But our biggest challenge there is we convince the CEOs, but we can't always convince the purchasing people to do it. And then finally, because of my own experiences as a self-insured employer, and going around and talking to hospital CEOs and CFOs and learning the relationship with the big carriers, the big vertically integrated carriers and all the things they like and dislike, mostly dislike, I went to them and said, look, I know you hate the delays, the denies, the prios, the late pays, the clawbacks, the fact that your plans or the carrier plans keep on increasing deductibles, turning the providers into subprime lenders because they have to collect the deductibles before they can offer the care or before they can get access to your insurance money. Knowing all these things, I'd like to work out a direct contract, but I want two things. I'm going to tell you what I'm going to give you in exchange for those two things. One, I'm going to trust the doctor. Unless it's something crazy, trust the doctor. So you're not going to need a prio. There aren't going to be denials. Now we had somebody who had Munchausen's disease that required a denial, but other than that, if it's something crazy, I'm going to pay the price that we contract for on time. I'm going to take responsibility for the patient out of pocket. Either I'll pay it or I'll take the credit risk for the patient itself. So you're not a subprime lender. And in exchange for all that, I want two things. I want a better price because your associated administration and overhead and doctor time is much less. Your yield is going to be higher. And I want the ability to take the contract we signed, this direct contract between us and publish it on costpluswellness.com so it can act as an open source for all of these contracts so that any employer can use them and any provider can post their contract. And even if you don't want to post or use, you can use them as templates in your own negotiations. Well, I love the last piece, Mark, because I think that was the genesis of our thread back and forth when I published a piece a few weeks ago on what I'm calling like the great replacement cycle of health plans. And for, I mean, for so long. So, you know, employer-sponsored health benefits is the largest class of insurance in our country, if you think about it that way. So, you know, roughly about, I think, 155 million Americans are covered by an employer-sponsored benefit or more. Yeah, more. But in any case, it's more than half the country, 60% of the country. And historically, it's been completely, you know, monopolized by the BUCAs, like these national carriers. And it's been an unaddressable market from a startup perspective, right? Like the relationships were super entrenched. You needed these national networks to, you know, be able to play in the game. And so, the like starting cost to sort of enter the arena was too high for startups to get into and the relationships were just too entrenched. Now, the premium increases are just freaking ridiculous, right? Like this year, we're seeing, even amongst our startups, some BUCAs are forcing like 60% year-over-year increases in premiums. And it's just- It's even worse than you think, Julie, you know, not to step in, but because they're vertically integrated. So, UnitedHealth, 3,000 plus subsidiaries, $150 billion in intercompany transfers annually. That would make them number 14 in GDP in the United States amongst states. And so, that tells you how big they are and CVS Sigma are not far behind. And so, there's oftentimes when they'll increase premiums, increase deductibles, increase out-of-pocket costs, and at the same time, redirect you or actually force you into a relationship with a company they already own and you don't know they own them. And you talk about, you know, employer-based insurance, particularly those who self-insure, 60% of people who get their healthcare from companies get it from self-insured employers. And those employers need someone to process all the medical claims, put aside pharmacy, the medical claims, those things are called third-party administrators. And if they're owned by the big BUCAs, they're called ASOs, administrative services only. And those administrators, you know, we hear all the time about the problems with PBMs and how they spread price. Well, on the medical side, it's a million times worse because as much as- It's also the bigger chunk of the market. What's that? It's also the bigger chunk of the market relative to pharmacies. Yeah, of course, yeah. The medical side is much bigger, you know, 10% and growing versus the other 90%. And what they do is, the plans and the hospitals have their own contracts. And the hospitals, unless they're market dominant, hate the BUCAs in those contracts. But more importantly, whatever that relationship is, the self-insured employer has no idea what the terms of that relationship is, right? Even though it's possible you can go on the hospital and look up the tick file, you know, the transparency files for that relationship in that plan, they're not always correct. They're not always right. But what ends up happening is, the price that the employer pays, the self-insured employer pays, rarely matches the amount that was charged or the amount that was paid to the hospital. So there's a spread pricing there. And to make matters worse, those ASOs that are owned by the BUCAs make it impossible to reconcile the numbers so that you can see if you're paying more or less. And they do things, you know, there's these things called 835 and 837 files, which is the data that's sent to the hospital and the amount of money that's paid in response to those claims. And the employers have no access to it. And in many cases, they don't even have access to their own claims. It is just so rigged to your point, Julie, trying to, you know, remove them, disintermediate them is the key, the holy grail to what's happening in healthcare right now. Yeah. And we're, I mean, we're super excited to see just an influx of startups that are now able to go after this market. A big reason why, in addition to all these market forces and again, like the economics just getting to a breaking point, is the fact that AI can play a significant role in enabling a full stack like health plan offering to be built in a way that reduces all the cruft that you're describing in a very short period of time. But this all comes down to who takes the risk. Well, AI, I'm a huge AI fan, live it, love it. I think it's important on the clinical side. I think it's important on the operational side. I think it's most important short term on the contractual side. But the reality is in a broken financial system, even when you introduce AI into the economics and the operations and the processes, when it's already broken, you can't fix it. Because you brought the point right at the beginning, Julia, and you're 100%. that right. We are not in an efficient healthcare market. The economics are broken. And you see that because if you don't have price discovery, that's one thing that protects you, that keeps you from having an efficient market. But what's even worse, and here's where the market, the economics really start to fall apart, and what makes it tough for AI in the short term, less so clinically. The contracts are so big and so long, the BUCAs through their ASOs get to be contractual terrorists. And what I mean by contractual terrorism, the city of Dallas on their PBM contract, I haven't been able to see their ASO contract yet, 1,335 pages. There's no group of humans with enough coffee on the planet to be able to catch everything they try to squeeze by. And so as a result, no matter what AI, once you sign a contract, now hopefully you use AI to prevent yourself from signing a bad contract, and I think that's the low-hanging fruit for everybody. But once you sign that contract with terms you don't fully understand and conditions you don't fully, you can't even protect yourself against, they win. There's no AI in the planet that can protect you. And when you try to compete with them on plans, that sounds good, and I'm all for it. What Sidecar is doing and so many others are doing is really smart, but they're having problems because yes, the wraparound networks are needed, and yes, putting together a network is hard, but those BUCAs have so many subsidiaries, they fuck with you somewhere and you don't even realize it. And that's the ultimate challenge. And that's why I'm so big on the breakup big medicine bill and going after these companies, because I want this to be an open market for every entrepreneur, to use AI in every way possible. And so you went exactly where I was going to go, Mark, which is one of the areas where AI is playing a role, for better or for worse, is that it is just shining a light on how broken the underlying system that humans designed is, right? So the whole prior-auth-bot-war situation that's happening right now between payers and providers is one of, you know, people blame the AI, but it's actually, no, it's like AI is just implementing the existing fee-for-service billing system to the full extent and showing us how broken that system is. So I'm curious, like, what your take is on what's the end state of that? Like, clearly your direct contracting methodology, it sounds like, is able to reduce a lot of the information asymmetry and contract clarity and things of that sort. Is that what it's going to take? So the bot wars in terms of claims and upcoding and downcoding, that's short-term stuff, right? That's just like, you know, okay, I need to lose some weight. I'm not going to eat, you know, my rice, I'm not going to eat my frosted flakes every day, right? It's nice on the periphery, and it's a good short-term play, but it doesn't really change everything because AI is a great equalizer. Your AI, my AI, your, you know, open AI, my anthropic, whatever it is, we're going to battle each other out, and you might win a couple winnings, I'll win a couple winnings, but they're going to net out at some level. So I don't see dramatic change in the long term. Maybe if you're first in, you can pick up some things and you see some lawsuits and you see some challenges when one side has it and the other side doesn't, but the revenue cycle management on the hospital side is pretty darn good. And the BUCAs have a big problem, in my opinion, because they grew through acquisitions. We mentioned these 3,000 subsidiaries. That's a lot of siloed data. And even though you can try to find ways to get access to claims and specific things that allow you to upcode and they're doing that, it's going to be hard for them to become AI native companies on the BUCA side. And I think over the long term, they're going to be challenged, but all of this starts, and I can't say this enough, all of this starts before those employers sign their contracts. If every one of your portfolio companies said, you know what, I'm going to run my existing benefits contract. If I have a broker, if I have a consultant, if I have TPA, if I have a PBM contract, I'm running my existing contract through AI and I'm asking, I'm using a prompt that asks a single question, where are they fucking me over and what should I do about it? And within 30 seconds, you're going to see bam, bam, bam, bam, bam, bam, bam, bam, bam. And the things I've seen running through contracts, because let me just tell you how much I love AI agents. So I use them all. I use RockBot, I use, Eric and I are NBA fans. And so I got the LUCA DOTCHICS plan because it's $77 and 69 cents or something. I'm like, this is brilliant. RockBot, $77, the LUCA plan, I got you. And then I have the Gemini plan, and then I have OpenAI's plan, et cetera, et cetera. And I use the agents, and Instinct too, and DOT, and I use the agents and I say, you go out and find me every state entity, organization, enterprise that has an open records opportunity. And I want you to find me every single contract, RFP, whatever it is you can find from those entities. And I want you to write the letter to request it, put it in an email, put it in my draft, let me personalize it some, tell me when it's there and I'll hit send. And it's amazing, right? Stuff that's always been at the bottom of the list that I always wanted to get to, but never could. Now it's just like, this stuff is coming. So I put it up on Google Drive and each of the different LLMs has access to it. And I just tell them all, every time there's a new, something new loads on the drive, you go through, you tell me, you give me the good news, you give me the bad news, you give me what should be done, and then you give me the simple version so I can send to the company or school or whatever it is. And bam, bam, bam, bam, bam. And that's where I get to see all these contracts that the big three on the PBM side and the BUCAs on the ASO side are signing. And so I get to see specifically how all these enterprises are getting ripped off. These school districts, oh my God, cities from Denver to Dallas, to Fort Worth, unions. I mean, and if you think about it, again, going back to your perfect point, Julie, is if that 67%, if the employers representing 67%, the 160 million plus Americans, actually did one thing, one thing, ran their contracts through AI before they signed them and negotiated from that, the entire system for the big BUCAs and big PBMs and all their subsidiaries would collapse. The cost of healthcare in this country would drop like a rock. And so when I go and I talk to employers, when I go talk to investors and talk about their portfolio companies, and they're like, do we need legislation? Do we need this, that? I'm like, no, you need to be smart and do your job and bring in somebody that I call a healthcare CEO or CFO, whose only job is to manage the contracts and everything associated with it. And you will find that your healthcare costs will go down. And then once we get you there, then we can talk about carving out for direct contracts and doing all these other things. Immediately, there's a couple of public companies that I told to do this and came back to me and were like, oh my God, we had no idea how badly we were ripped off. And I'm begging them to mention it on their quarterly earnings conference calls. And they won't do it because they still have to do business with those BUCAs, even though if they left them for whatever reason. And so if we just do that one thing, run the contract through, literally, if you have more than 1500 employees, the quickest way for, or members, I should say, the quickest way for that startup, that tech company, maybe depending on how bad you're ripped off into the millions or more, is to just do what I just said, run your contracts through AI. Yeah. Mark, maybe zooming out, can you share more about sort of the grand vision for the business a few years out and maybe how you think about sequencing to get there? Sure. A couple of things. One, I mean, the ultimate mission is to disrupt healthcare so that it's affordable again. And I'm a fan of universal healthcare, but you can't get to universal healthcare until you have correct data and people can make decisions based off of real data. So that's bigger system, whatever direction it ends up going. I just want to disrupt healthcare so that when people think about the economics, it becomes, okay, I know exactly what's going on. How we get there, more education than anything else. Like I mentioned before, in terms of the business of cost plus drugs, look, somebody could come along for the retail site and say, we're going to do cost plus 1%. Okay. Trust is still our primary product. That's what I try. We don't spend any money on marketing or advertising. And when we first got started, all the people who came from pharmacy, oh, you're going to get killed. I'm like, no, you know, people are going to tell others how much money they saved and then they're going to trust us. And that's the one thing missing in all of healthcare economics, trust. And so once we gain their trust by doing exactly what we said, by being fully transparent, only having a set mark of a 15% will garners people trust. So that'll protect us elite to some level, but the grandiose vision, those pods I told you about that sell for $20 million, there's good margin in those. And we think we can sell within two years, a couple hundred a year within five years, a couple of thousand a year. So you give me a thousand pods to sell at $20 million each. We're going to be doing really, really, really good. And it'll completely change healthcare because we can daisy chain those things. Like literally we could manufacture a tablet, a generic drugs in Dallas, Texas, using these and make them for less than we pay India, the manufacturers we partner with in India. Now we don't go for the cheapest price. We go for the best manufacturer. So we pay a little bit more, but still we can make it for less. The only thing holding us back is that for each generic, we have to fill out, we have to apply for something called ANDA, another new drug application. And each one of those things costs $365,000 plus other fees. So you want to do a thousand of them, that's $365 million plus all the costs of the pods. We're trying to say, look, if we truly want to bring manufacturing and on short for medications, we're here for it and we can do it. You're already working with us in other areas. And so we think we'll get there as a big part of what we'll do. And we've already planned so that on costplusdrugs.com, we'll put a little American flag when something is manufactured by us here in the US, but that's probably two years away, just because of all the work we have to do with the FDA. But that's the big picture. If we're selling $20 billion worth of pods a year, watch out, Elon. So is your view that as we look out the next few years, no matter how good the technology gets, it's not going to disrupt healthcare on its own and that there needs to be other more structural changes that need to happen? Yeah, there's regulatory capture and there's scale capture. Right now on the economic side, it's all scale capture. And when you listen to the Cordialians conference calls or read the transcripts for all those big vertically integrated companies, they talk about technology, but the one thing they never say is this is going to translate into lower costs for employers and patients. They always say this is going to improve our earnings. We're going to return more to shareholders. We're going to buy back stock. But until I'm able to educate all these employers, they're going to keep on making it nearly impossible, which is why when Julie talked earlier about CVS, I mentioned we don't deal with any of them directly because we have to work outside of them, because otherwise you fall into their trap and they game you with their contracts. Mark, in all of this, you're talking a lot about structural things, but there is a reality of what you described earlier. AI will change the nature of people's jobs in this industry quite a bit. I've heard you talk a lot about how do we future-proof our young pools of talent and what is being career-ready look like in this day and age. What do you think that looks like for healthcare? What does the workforce of healthcare look like in the next five years? I mean, it looks the same as any other industry. You have to still hire entry-level people, because no matter what the model is, the minute it's released, that's it, right? It's behind. And so there's latency associated with every model. And so you need people who are aware of everything that's going on that create context and deal with the models, be the human in the loop, understand the consequences, et cetera. And you need those people to grow with the organization over time so that as all these things change, they've seen the history of the implementation and they can bring value to the organization. So that's part one. You can't just get rid of all entry-level positions. Part two, you have to enable those people and everybody else, white-collar oriented, how to use AI, because AI doesn't replace jobs. People who know how to use AI replace the jobs of people who don't know how to use AI. So that's part two. And then part three is the bigger picture stuff. The first step to that is trying to educate the C-suite on how AI even works, teaching them how agents work, teaching them how to use a model, teaching them the difference between open source and closed models and the different things you have to do, helping them understand the latency of a model that this brilliant conversation the three of us are having is in no model anywhere and won't be until it's published. So if we say something that we can all go out and use, the models are all behind and AI is all behind. So that's a given. And of course, LLMs are text in some pictures and don't deal with all the real world things that are going on in video. So you have to be able to understand as a CEO and in the C-suite how all those things impact your company. Once you get a good grasp on that, then you just start fooling around, right? Because there you can just find new ways for things to happen that benefit your customers or create new opportunities. And that's the brilliance of AI, right? AI is not smart. It's book smart, maybe, but it's not street smart. It's not entrepreneur smart. You've got to have somebody there who guides it and helps it. But until you have a C-suite that understands how it works, it's going to be very difficult for that organization. I mean, I literally sat with the head of a consumer for food company. And he was talking to me about acquisitions. And this was months ago. And he was like, yeah, because of GLP-1s, yada, yada, yada. And I'm like, okay, well, let's do this. Let's take your number one product, your cookie, right? And I'm gonna ask Chats GPT to create a competitor that is more GLP-1 friendly and will be priced lower. And I want a full bill of materials, I want sources, everything, I'm manufacturing what I have to do. And then about three minutes we got back to it and he was like, oh shit, he had no idea. Now, if you have no idea, that's a question you can ask an LLM. You don't have no idea on how to enable your company to use AI. And that to me is the greater struggle for most organizations. Now, for entrepreneurs asking that question and trying to implement no matter what it is, there's no better time to be an entrepreneur than right now. There will be the trillionaire in the basement. There will be somebody who puts out their own agent swarm but does it on a entrepreneurial basis. Now, there's still challenges, particularly for agents. So agents don't see social media posts. They can't review them, right? And it's hard to get transcripts for any material amount of them. They can't watch ads or see ads. And so if we're moving to an agent-driven economy for individuals, there's gonna have to be a lot of changes that occur in how we communicate commerce to those agents. Like literally, I was fooling around with one of the guys in my company. We created this thing and you can go check it out. It's not truly active. It's called agentfeeds.dev. And the whole idea is you take the transcript of your posts and you just put it into agentfeeds.dev and then you copy and paste it. Anybody can copy and paste, anybody you follow into their agents. Hey, follow all the feeds for this and it takes all the ads and gives you all the information you need so your agent is more up to date on those categories or whatever. You're gonna see an explosion of those types of things but we still have to get through trust and all the things we all know about AI and the issues we all know about AI. But in terms of opportunities, going back to healthcare, the biggest challenge and where AI, I think, is going to have the biggest impact other than clinical is by patients, by consumers, right? And being able to look at the things that you are given on the economic side, that, you know, the benefits bill, right? The EOB, right? The explanation of benefits, right? And here's where I think consumers will get the greatest benefit. So right now there's terror in, I don't know, half the country, right? 40% of people in the country can't afford a $400 emergency bill. And so what I always tell people is, before anything happens, go into your favorite AI model and say, get me a list of all the nonprofit hospitals. Go to them and ask them what their financial support services are because all nonprofit hospitals have to have financial assistance programs. And some of them are really good. And for some people, you're better off, and I don't wanna make the decisions for people but you can ask the questions of the AI to say whatever my insurance plan premium was going to be, I'm gonna put it in a money market fund and let it collect interest because I've already discussed my situation with the local nonprofit hospital. And I know everything there is to know about their financial assistance plan. Now, those financial assistance plans are created and the pricing is a reference price to the federal poverty levels in most cases, but it can go up to 600% of federal poverty level, which can be over $100,000 for some families in some states. So patients slash consumers slash families, understanding what their options are and how to procure those options from particularly nonprofit hospitals is going to be enormous. If I was going to start a company in this space, I would go to every nonprofit hospital and set up a plan that post agents that I enable people to use. Hey, if you're concerned about how you're gonna be able to pay for your bills or your family bills and you don't have much money in the bank, whatever you're making under X number of dollars, copy and paste this into your muse or into your dot or into your cloud cowork, whatever it is, and it'll know to come here to us and ask questions. And so when I talk to the heads of hospitals, I'm like, you don't understand, you guys suck at marketing. You are dependent on the bookers and their plans and being part of their network to feed you patients. That's ridiculous, right? If you make it easy for people to use your financial assistance programs, maybe go to a local bank, maybe show people how to use stop loss for smaller, medium-sized companies. So many options for them to use it to make things better for patients because that's really where the big disconnect is. You can offer better plans. You can use technology to reduce the price and become more efficient in how you create a network or negotiating direct contracts. But until the end user truly embraces it and knows how to use it, there's going to be challenges. But all of us at some level, just like we learned to use spreadsheets back in the day when we thought it was too complicated. I'm old enough to remember when people thought spreadsheets were hard, and you had to explain to them and they had to pay $500 for Lotus 1, 2, 3. But the same thing is happening now as we go through this transition and people, yeah, there's a lot of people who are anti-AI, but there are a lot of people who are anti-calculators, anti-everything. That's just a matter of time. But once you get, the way you get them to overcome AI is, of their fear of AI, is to show them how these are the things that can really benefit you and protect you and reduce the inherent fear that you have in the event that something goes really, really wrong. There's this famous Aaron Schwartz quote from many years ago, you know, information wants to be free. Yeah. And I know in healthcare, in a previous conversation, you've been a bit skeptical that that will happen because, as you mentioned, there's a lot of siloed data and there's a lot of strategic reasons why that data is siloed. That is their advantage to some degree. And so I say that to ask you, what do you think the ultimate impact of the Frontier Labs, you know, OpenAI and Thropic have very big ambitions in this space. Either them or others will be in reshaping healthcare or sort of, you know. I'll tell you exactly. I'll tell you exactly. And I'm selling my own book here a little bit. The cost of designing a drug personalized to you after reviewing your DNA and knowing everything that it knows will start approaching zero as the capabilities of models go up, right? We talk about GPUs and how they'll get faster, the networks behind them, the power required, but it's the algorithms that are gonna change everything and make them more efficient, right? And we don't even know what the speed of improvement are going to be on algorithms. But at some point in time, whether it's five years, 10 years, 20 years, they're gonna take something from Eric, Julie, and Mark, and they're gonna say, starting with over-the-counter, because if you think about it, right, you walk into a drugstore, you get this, you know, excuse me, whatever, Advil, Tylenol, right, ibuprofen, and we all think it's gonna impact us the exact same way. And we have to experiment to see how it impacts our body. The body makes no sense whatsoever. And so as the processing power and the analytics power of these models from the frontier models gets better, they will be able to really, truly personalize over-the-counter drugs without a lot of the mischievous you have to go through to try to figure these things out, right? And now all of a sudden, if here's my personal ibuprofen, here's my personal dose or mixture of whatever, these over-the-counter drugs, bam, you start to change it. Then you get into, you know, making other drugs that are personalized for you. Because again, the fact that we all take Eliquis and decide between Eliquis or Xarelto or Warfarin makes no sense whatsoever in the big scheme of things. And so being able to take those things and personalize that medicine, and what I have told two of the frontier models, I said, if you really want to be smart, you take your $20 or your $200 subscription and you include that service once it's available. Because your marginal cost for doing this at that point in time, look, the inference and everything that has to happen just to respond to a request today, expensive like this, right? Coming down very quickly, but the same thing is going to happen for this type of personalized medicine. Initially, it's going to be enormous, but as we understand the human body more and understand all the variables in our body more and our brains more, et cetera, and understand the medications and figure out how to do the N of one for everybody, it will be part of a normal subscription because there's no reason, it should be, how expensive is 23 and me? You pay $99 or less now to get your DNA looked at. And so maybe I pay $99 up front. I give them my DNA if I'm willing to do that, obviously for privacy concerns. They store it. They continue to bam, bam, bam, bam, bam, bam. Maybe you want to know what could be wrong. Maybe you don't want to know what could be wrong based off of your DNA. But if something does go wrong, they have access to all these drugs, all these opportunities, and the ability to create them in real time and selling my book, we want our pods to be right there to be able to manufacture them because we're the only ones capable of doing it. And I don't see that changing for a long time. I think one of the things also, Mark, that people probably don't appreciate as much as they should in that context is that as that happens, as what you just described happens, and as drugs become just better products for every individual in the country or in the world, that is actually one of the most disruptive forces for care delivery, right? Like how much of health care is actually the job of the doctor helping patients figure out why a drug doesn't work for them and calibrating and doing med titration and changing behavior to make your life work for the drug as opposed to the other way around. And so that's something that I think, you know. But remember, because of that latency I mentioned earlier, you're still gonna need doctors. If Mark walks into the hospital and I just tried this new personalized medicine and I just start puking my guts out. Yeah, you still need calibration. You can have it on video, right? And you can have a robot there and say, how do you feel, Mark, right? And the Terminator might walk in and say, your time is up, I don't know. But I'd rather have a human there with all five senses being able to take a look and ask questions and see the crying mom or the crying son or child or whatever and be able to include that in the context. And so I don't think ever that we'll replace doctors and we shouldn't even try because, and you guys know how adoption of technology is, particularly for this. You still have to know the questions to ask. You still have to know what the variables are that matter versus the ones that don't. You still have to realize that even as processing costs drop towards zero, hopefully at some point in time, that there's still a cost associated with it, even if that cost is only time. And so you need somebody there who's been educated in all those pieces. I think to your point, Julie, where things might change dramatically when it comes to the role of the doctor is how they'll be trained in medical school. They won't be taught the exact same things. They'll have to learn how to use open evidence or whatever else is available out there and how to extract information, even if it's just that DNA information and understanding what's in there and what the model thinks about it and being able to translate that to the person. Because effectively, in order for this to work perfectly, everybody has to have their own model. And that's gonna be difficult for everybody, even though there's gonna be millions, if not hundreds of millions or billions of models created and supported over the next years. And plus, on top of that, IP becomes a totally different problem that gets introduced into this equation and process because up till recently, it's been publish or perish. And if you're a doctor and you create something, you want everybody to have it, maybe you can even license it and make some money off of it. But now, if you try to patent something, every 12-year-old is saying, hey, look at this patent, change it just a little bit and make my own patent. Or if it's a new procedure in healthcare, you might say, no, you have to come to my model and you have to pay me $9,999 every access, or to use inference, you're gonna use this software that I require because nobody's gonna give away that IP for free. And that creates a lot more problems. I think part of the underpinning that a lot of AI entrepreneurs have is that, going back to Eric's information wants to be free, the information may wanna be free, but the person who owns the IP feels differently. And so that's going to change how we interact with models. And we can argue about front ends that choose which model is least expensive to answer the question, but we haven't had the discussion on where we find the IP that's needed to either train that model, post-train that model, rag that model, whatever it may be, if that person isn't making it available, but it's absolutely required. Does that make sense to you guys or do you guys think I'm an idiot? I think it's really interesting because it also brings up the point of what is the role of the doctor in the future? Number one, I agree that actually, I think we're gonna need more doctors in the future because as care advice becomes more abundant, more people are gonna demand healthcare, actual real-life healthcare services, and so we're gonna find we actually need more doctors. And there's something to be said about what you're describing as the role of the doctor today is very rote. It's kind of like, these are the tasks, you gotta do these quality measures, you barely need to use your brain, honestly, for a lot of the things that doctors are asked to do in the traditional healthcare setting. And what you're describing is what if the paradigm moves towards, physicians are actually more physician-scientists, right? It's actually, their job is to take the bleeding edge of information that we may not know at population scale yet, but on an individual basis, they're at the tip of the spear of collecting novel data, generating novel insights about how people are reacting to things. Novel data, by definition. That's a much more intellectually stimulating job description to me. Yes, yes, because by definition, you're exactly right, right? Novel data equals person. Exactly. And with like novel data, we're gonna have longitudinal monitoring, like the blood pressure is the one that we always talk about is where, the same principle as what you were saying, the fact that we take our blood pressure like once a year is kind of ridiculous because it changes. Not me, I got this shit right here. Yeah, you're cutting edge. But soon we're gonna have wearables that are just measuring it in real time like every single day. And like you'll have a much more precise understanding of how you're responding to different therapeutic interventions and even like diet and exercise and all that kind of stuff. And you know, that's gonna create. You bring up a good point, Julie, in terms of novel information. And that's everybody in terms of finding jobs, right? You're gonna need AI translators for people who may not keep up with these things. You know, regular people that are in wherever in this country or in the world who just, you know, wanna live their abundance life, whatever that may be. And you're gonna need people who are going to be the translators for what's novel about this circumstance or this individual and how do you, you know, make it valid to AI and the output of the AI valid to the novel, to the individual. That's gonna be a job. And it's gonna be very difficult to extract everything from an individual that the AI is going to need. And you're gonna need to have a person, I think, there to do it. Maybe somebody envisions a humanoid robot that is going to ask you those questions and somebody is gonna be comfortable. I don't, I don't think that's gonna happen. Yeah. By the way, Mark, I don't think I've ever heard you talk about another set of entrenched incumbents, which is the EHR companies. What's your theory of the case there on how that market changes or evolves or doesn't in the age of AI and what that looks like in the next few years? Honestly, I don't know. You know, the EHR is dominated by Epic and it's their world, you know, and so I've just kind of deferred to them and tried to stick where I can have an impact because, you know, we partner with them. We think offering pricing, particularly pharmaceutical pricing at the point of script, where the doctor is there offering them different options is a good start. Right, yeah, you guys are part of that new announcement that they just made about the Yeah, exactly, exactly. Game of Thrives. With Epic and Amazon, et cetera. So I think that's a big plus and I think that's needed, but in terms of their actual business and where it's disruptible, I'm not really the one qualified for that. Okay. My problem, by the way, with that announcement was that I love that they announced it and then they said, it's not gonna be available till May of next year and I was like, why? Yeah, I know. I think it takes a lot. I had nothing to do with that. Okay. But that's typical in this industry, right? Yeah. Do you guys think that in 10 years, you know, healthcare is still gonna be a fifth or a sixth of whatever it is now, of GDP and that there's kind of this just sort of terminal, as a sort of terminal state where there's just, you know, way more demand than sort of, you know, we can supply and just as it gets easier, as it gets more efficient, we're still, and as GDP grows, you know, even 5% a year, hopefully at some point, our demand is still gonna just cap at, you know, one-fifth of the economy? I do. Yeah. But the value that we get out of that spend should be. Well, the value you get out of the people will increase. Yeah. Because they'll be healthier. Yeah. So there's a difference when it's health, when it's sick care, right, as a lot of people refer to, versus when it's keeping people healthy and they're more productive and there's less downtime and, you know, they're smarter because it's easier to learn, et cetera. So I think we'll get greater productivity that'll more than account for it, which we don't get now. Zooming out a bit, you know, Mark, we both, we have a mutual friend who is a very prominent pollster. I won't out him here, but he believes that, or he's done some work to indicate that if you ever ran for office, he thinks you could win. Now, of course, you've said you'll never run. No. So we're just speaking hypothetically now, but if you were president or if you were advising the next president, I'm curious how you would, you know, think what is the leverage to most address sort of our healthcare challenges? And then I want to hear your broader sort of, you know, policy positions you'd be most excited. It's really easy. It's the same thing I tell states, you know, that I've testified for. One, make all contracts with anybody who takes taxpayer money public. No redactions. Because the minute that happens, you start to have an efficient market and the costs go down. Two, make it so that anybody who can find a better price for less than their current out-of-pocket with their plan, make it apply to the deductible. Allow it to apply to their deductible. Eight states do that at some level already. Three, for nonprofit hospitals, require them to publish their entire general ledger down to each detailed entry and all their procurement receipts and requirements, right? So that everybody gets to see it. It's our money. We're the taxpayers, right? Four, instead of current insurance plans the way we have them, 72% of those big carriers' revenue comes from taxpayers. They don't take risk anymore. They off it. Everything's an arbitrage for them. So knowing that, we also have to consider that the one debt we never pay off till the day we die is our insurance premiums. Think about that. Whether it's Medicare, unless you're on Medicaid, right? You're paying till the day you expire. And when you need it, you have to fight for it in the current system and probably foreseeable systems. To me, if we were able to create a program where you just deposited what would be, let's just say, how much you'd pay for a premium under an ACA silver plan in your state, and we just went and did a deal with the bank and we said, okay, in Texas for a family of five, that's $2,100 at your income, right? So you just keep on depositing $2,100 and it accrues and you own it, but it has to be deposited if you wanna participate in this program. And then if you have a medical incident or pharmaceutical incident, right? You can take that money. If it's not enough, we've worked out a deal with the bank where two things happen. One, the bank will loan you money up until a point where a stop loss kicks in, which means we're gonna take part of that money you deposit and use it for stop loss coverage. And two, the federal government or the state is going to guarantee that loan to you so that the provider is not out and we're still gonna deduct it from your payroll so that you pay it back. And if you're lucky and you never have an incident and you get to save all that money when you turn 65 and go on Medicare, you just get all that money and all the accrued interest. Because if you think about it, the federal government will cover or guarantee your student loans, they'll guarantee SBA loans, they'll guarantee home loans or give you a down payment, right? Third world country. We'll guarantee all these things, even agricultural things. But the most important thing, covering our healthcare, good luck. You're in a bad accident, good luck to you. And we'll maybe push it off to the hospitals, they have to take you in. So I would create a plan that says, you have to deposit this money, the bank will have a guarantee just like a mortgage or whatever, we'll loan you this money and then we'll have federal stop loss programs above some amount, 40,000, whatever it may be. Now, all of a sudden, bye bye insurance companies. Now, all of a sudden, you're not fighting back because it's your money to spend as you choose. Now, we'll have to set thresholds on where and how you can spend it so you don't just go give it to your cousin Billy who said he's gonna fix your broken toe, right? But within those constraints, I think now all of a sudden we have a better system. So that's what I would do if I was advising in terms of healthcare. What about, one of your gifts is storytelling and marketing more generally. What about the AI industry in terms of, obviously AI is uniquely unpopular in the US. If you were advising OpenAI, if you're advising Anthropic on how to sort of change those numbers and then there's a whole sort of data center sort of saga. I'm curious what your advice would be to the broader AI industry. I've had these conversations, right, with them and I told them they're idiots, you know, because what controls how pretty much everybody in this country thinks right now? Social media algorithms. Literally, I was having a conversation with a 23 year old friend that I work with and we're talking politics. We were discussing who we voted for yesterday and how and why. And I said, well, what about your friends, the other 23, 24 year olds? And they said that their friends didn't even know, living in Texas, didn't even know who Ken Paxson or James Tallarico were or are, right? Which is insane in my mind, right? Insane in this person's mind, but it reinforces the fact that you get more of what you seek via algorithms. And if you really have the best AI, you should be able to not only reverse engineer those algorithms, but put together a marketing program because you sure tell everybody you can do marketing programs through, you know, your bot or dot or whatever and really start marketing there because this applies to politics, it applies to AI, it applies to everything in this country. The divisiveness, we all have our unique AI feed in the social media platforms we use. And those platforms don't give a shit what it feeds you within some minimal constraints. And so everybody looks at the world differently. The days, particularly for younger people, of thinking, you know, just buy more ads and ruin our football games and our basketball games and everything's fine, you know, maybe older people vote more and that's maybe why, but it's useless when you're trying to change hearts and minds about AI specifically, even though the irony of it all, it's the AI behind the algorithms that's ruining everything. But as long as section 230 is there, we are where we are at. And as long as, you know, unless we take an Australia type approach or some states type approach of 16 and under, then my, what I told them specifically, you need to use your AI to segment everything and figure out the best way to put together marketing promotion and however else you want to do it, do it like the Russians do it. It doesn't matter, right? Because that's what's at stake for you. But people, you know, data center hate is just a proxy for not being able to understand AI and not know all the pieces there. And I don't blame people at all, right? And just like employers have been really dumb with their healthcare benefits, a lot of communities have been really dumb with the deals they've negotiated for data centers, you know, and they've fallen for the contractual terrorism in a lot of cases. But, you know, to me, educating them about social media and educating our legislators and whoever's president about social media, because I don't think they truly understand the impact that we don't all read the same newspaper, the same magazines, look at the same websites, watch the same news shows. We all have our own unique TikTok feed. Your feed is not like mine. Like the best way to find out about your kids is to just look at their social media feed. Like my 17 year old son, it's basketball, basketball, basketball. Now I'm starting to see a little bit of politics pop up, but then hot girl, hot girl, hot girl, basketball, basketball, car, car, car. And I'm like, okay, typical 17 year old guy, right? But until the big frontier models understand completely that they have to figure out how to become part of everybody's feed, they're gonna be putting out all these position papers that are useless. Yeah, no, I mean, Mark, we agree with you that what you said earlier about this is like the best time to be alive and an entrepreneur and, you know, so many things that, again, were intractable historically are now all of a sudden addressable. Is there an area of the market, and you meet a lot of entrepreneurs and see, you know, sort of people building in all sorts of areas of the world. Is there like some area where you're like, why is no one building here, like that you think is still a white space opportunity for entrepreneurs? All of them, you know, seriously, you know, when I go talk to kids, and I always tell them, there's gonna be two types of companies, those who are great at AI and those who have gone out of business. And if you take the time to learn it, and then there's two types of people and how they use AI, those who use AI to learn anything and those who use AI so they don't have to learn anything. And if you're one of those people who uses AI so that you can learn anything, and you realize what type of companies and problems aren't being solved by AI, don't be shy to just talk to your AI, you know, and I say this not just to kids, to 50-year-old, 60, 70-year-old entrepreneurs. The biggest challenge right now with people, entrepreneurs using AI is the comfort level of talking to your AI, whether it's by voice or typing, whatever it is, because there's still a lot of hesitancy. You know, just like back in the day, those first spreadsheets, people still had their 10-key adding machine and they would check it to make sure those spreadsheets were right. You do have to check the output, but you have the opportunity to take the output of Grok and put it into ChatGPT and the output of, like when I go through all these contracts I was telling you about, I start with one and said, hey, one of your peers came out and said this about this contract, what do you think? And spend a couple hours. That's all young entrepreneurs. So when you ask me, is there one thing, I truly believe it's everything. Everything will change. This is the greatest transitional technology we have ever seen. And I've been around for all of them, right? And this blows them all away. The hardest part is just going for it. And that's where Silicon Valley and kids from the Bay Area I think have a little bit of an advantage because they see their parents and friends and the culture there is low. Go, go, go, go, go. But I think the rest of the country and the rest of the world, once they get that confidence level, you're gonna start to see businesses we never imagined pop up. Because we're not seeing that yet. We're not seeing companies where it's like, oh, what is that? Why are they doing that? What is the opportunity there? And then they realized it before we did, right? It's kind of like Friendster first, like, whoa, what was that? And so I think the biggest thing to focus on if you're looking for something is ask anything. I mean, I do it all the time. It's just like, what do you think about this? What do you think about this? What do you think about this? this, you know, I've held phones up next to each other, take the output and have a conversation with each other. So I can listen in. Don't be shy about using AI and things that feel really uncomfortable and weird, because that uncomfortableness is probably the path to something that is groundbreaking and game changing. That's a great note to wrap on. Mark, thank you so much for coming on the podcast. It was fun. Thanks, guys. Thanks, Julie. Thanks, Eric. Thanks for listening to this episode of the A16Z podcast. If you liked this episode, be sure to like, comment, subscribe, leave us a rating or review, and share it with your friends and family. For more episodes, go to YouTube, Apple Podcasts and Spotify. Follow us on X at A16Z and subscribe to our sub stack at A16Z.substack.com. Thanks again for listening, and I'll see you in the next episode. As a reminder, the content here is for informational purposes only. Should not be taken as legal business, tax or investment advice, or be used to evaluate any investment or security, and is not directed at any investors or potential investors in any A16Z fund. Please note that A16Z and its affiliates may also maintain investments in the companies discussed in this podcast. For more details, including a link to our investments, please see A16Z.com forward slash disclosures. Transcribed by https://otter.ai