Plain English with Derek Thompson
The Trump-Musk Doctrine: F-ck Around and Find Out
Tue, 18 Feb 2025
For the past month, chaos and confusion have gripped Washington and the federal government. Elon Musk and his Department of Government Efficiency, or DOGE, have served as an iron fist of the Trump administration—ransacking government agencies, lighting fires in various departments, and generally firing as many people as they can get away with. Much of this work is plainly illegal. Every 12 hours, it seems, another federal judge rules that the Trump administration has exceeded its executive authority. Efficiency is a worthy goal, and some of the programs that Musk and his team cut may turn out to be wasteful. Still, the way Musk has gone about his work—destroying life-saving programs at USAID, mistakenly offering buyouts to nuclear assembly engineers and essential doctors with Veterans Affairs, slashing funds for important studies and data collection programs across government—suggests that his bureaucratic blitzkrieg isn't just illegal; it's careless and harmful. The U.S. deserves a theory of government more sophisticated than "F-ck around and find out." So, what would an effective DOGE look like? Today’s guests are Michael Geruso, an associate professor of economics at the University of Texas at Austin, and Tim Layton, a professor of health care policy at UVA. We explain why any sensible waste and fraud search-and-destroy effort should start with health care spending. Then we get very nerdy about waste and fraud in health care. Most importantly, we talk about trade-offs. It’s a myth that there is some pot of $10 billion just lying around, doing nothing, gathering dust. Every dollar of federal government spending goes to a person in a place doing a thing. And that means that every dollar we cut will have a recipient on the other end who is losing a dollar. Taking government efficiency seriously requires thinking about both sides of this equation: What do we get when we spend this dollar, and what do we lose when we take that dollar away? If you have questions, observations, or ideas for future episodes, email us at [email protected]. Host: Derek Thompson Guests: Michael Geruso and Tim Layton Producer: Devon Baroldi Learn more about your ad choices. Visit podcastchoices.com/adchoices
Chapter 1: What are the implications of the Trump-Musk Doctrine?
By reputation, Elon Musk and Donald Trump are builders. Musk has grown two of the largest hardware innovation companies in the world with Tesla and SpaceX. And as for Trump, he once told Golf Digest magazine, quote, I own buildings. I'm a builder. I know how to build. Nobody can build like I can build. Nobody. End quote.
But now these two are united in Washington, and the duumvirate of Trump and Musk has made their mark in the first month of this administration, not by building, but rather by its opposite, which is demolition.
Chapter 2: How is the Department of Government Efficiency affecting federal agencies?
With the creation of the Department of Government Efficiency, aka Doge, Musk has claimed for himself an extraordinary amount of power, serving as the iron fist of the White House, rooting out what he sees as the plague of wokeism in government, halting grants, freezing payments, lighting fires in various departments, and generally firing as many people as he can get away with.
For the past month, chaos and confusion have gripped Washington, D.C., and the federal bureaucracy, A slew of federal judges have already ruled that Trump and Musk have violated the law, typically by exceeding the powers of the executive branch and attempting to defund agencies that were initially funded by Congress, the legislative branch.
But what I want to focus on today is not Musk's methods or his motivations, but rather to judge him by his outcomes. Doge exists, in theory, to seek efficiency. And the need for efficiency today is understandable. The federal government is deep in debt. Our interest payments now exceed what we spend on defense. And even if the U.S.
had no issue with its debt, it would still be a mitzvah to find ways to make government work better. To take the same tax dollar further. To do one more unit of good. but like some out-of-control chemotherapy that attempts to kill a cancer and instead ravages the healthy cells. The first few weeks of Doge have showed us an out-of-control organization wrecking blind havoc across government.
Their effort to trim the fat keeps cutting deep into bone over and over again in a way that I worry will eventually do serious damage, even if it's hard to specifically predict what the worst damage will look like.
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Chapter 3: What are the consequences of staffing cuts at government agencies?
When you consider very closely what Musk and Doge have attempted to do in the last few weeks, I think the only objective conclusion one can reach at this point is that what's happening in government is not just a reign of terror. It's a reign of ineptitude. Let's start at the Department of Energy, where Doge recently laid off more than 1,000 workers.
Among those laid off were 300 staff at the National Nuclear Security Administration. We're talking scientists, engineers, and safety officials responsible for safeguarding nuclear warheads. Roughly 100 people were reportedly laid off from the Pantext plant in Texas, the most important nuclear assembly and disassembly plant in the country, before they were called back into the office.
Daryl Kimball, the executive director of the nonpartisan Arms Control Association, said, quote, the Doge people are coming in with absolutely no knowledge of what these departments are responsible for, end quote. Next, we have Veterans Affairs, where the Trump administration offered buyouts to tens of thousands of employees before realizing that, once again, they'd made a mistake.
Now, maybe your impression of the typical federal employee is somebody who pushes paper around all day, but if you're familiar with the VA, you know the agency provides health and psychiatric care to millions of U.S.
war vets, which means if you offer buyouts to Veterans Affairs, what you're going to get is a lot of underpaid doctors, nurses, and psychologists saying, okay, see ya, and leaving offices that are already understaffed. which is exactly what was about to happen, until days after the buyout offer went out, thousands of doctors, nurses, and psychologists and other essential staff got a second notice.
Oops, sorry, no, your buyout offer has been rescinded. At the Department of Education, which the Trump administration seems very intent on destroying, Doge recently terminated $1 billion in contracts.
But rather than end these ideological programs that Musk says he wants to eliminate, these cuts decimated the Institute for Education Science, which funds many of the most famous and longstanding studies in all of education research, including several longitudinal studies on student achievement and school effectiveness.
In the big picture, it's hard to think of a better nonpartisan role for government than data collection, or sort of uniquely positioned to do it. But Trump and his team have gutted now some of the best education data tools we have. It's not just progressives who are aghast at this.
Nat Malkus, a senior fellow at the American Enterprise Institute, a conservative think tank, told the Washington Post, quote, there's a lot of bloat in IES. There's a lot of problems to be solved. But these are problems you solve with a scalpel and maybe a hatchet, not a bulldozer. Doge's cuts will go much further.
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Chapter 4: Why is healthcare spending a target for efficiency?
Once again, an actual department of government efficiency, one that operated within the bounds of the law, one that sought to carefully understand what government does before seeking to identify waste and fraud, would be a wonderful thing to have. So what would it look like? Where would we start?
What would Derek's doge begin to look for in savings? I'd start like this.
In the biggest picture, the federal government has three dominant jobs, healthcare, social security, and defense. Those three areas account for between 60 and 75% of total federal spending every year. And according to the US Government Accountability Office, it's healthcare spending in particular that is growing the fastest and where the size of waste and fraud is likely the greatest.
In particular, the GAO has scrutinized excess payments made by the government to private insurance companies under the Medicare Advantage system. So I read that GAO report and I thought to myself, I don't know much about the Medicare Advantage system or the reasons behind excessive payments. So I want to talk to experts who do.
Today's guests are Michael Jerusso, an associate professor of economics at the University of Texas, Austin, and Tim Layton, a professor of healthcare policy at UVA. We talk about why it makes sense to look for savings in healthcare first, where excess payments come from, how so-called upcoding costs the US up to $100 billion a year, why it happens, and how to fix it.
But most importantly, We talk about trade-offs.
It is a myth that there exists some pot of $10 billion just lying around, doing nothing, gathering dust, allocated for some dead person. Every dollar of federal government spending goes to a living person in a real place doing a thing. No bushels of cash are being shipped to Mars. And that means that every dollar we cut will have a recipient on the other end who is losing a dollar.
To take government efficiency seriously requires thinking about both sides of this equation. What do we get when we spend this dollar versus what do we lose when we take that dollar away? I'm Derek Thompson. This is Plain English. Michael Geruso, welcome to the show. Thank you so much. Happy to be here. Tim Layton, welcome to you as well. Thanks. Excited to chat.
Mike, so we've got Doge out there scouring the government for savings, and I wanted to bring on some economists to talk about where a search and destroy effort for wasteful spending might actually find billions of dollars in waste. So first question, why am I even talking to you? Why are we starting with health spending?
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Chapter 5: How does the capitation system in healthcare work?
Medicare, the program for the elderly. Medicaid, the program for lower income Americans. And the rest of what the government spends has to fit into what's left over. Medicare alone is about $900 billion a year, so almost a trillion dollars in Medicare. And so in a program that big, even finding 1% of fat to cut is $10 billion, right? Most of federal agencies have budgets far below $10 billion.
And so even a small slice of that very big base, you could imagine finding some real savings in.
Right, like cutting NIH by $10 billion is a 20% cut, one out of every $5 that universities are getting for medical research suddenly gone. But in Medicare, you're talking at about 20%, but 1%. So that's why it makes sense to focus on these bigger buckets. Tim, we're talking about government acting essentially as the nation's largest insurance company, Medicare, Medicaid, Veterans Affairs.
And if we're gonna understand how to hunt for waste and even fraud in government health spending, I think we should understand a little bit about how government spending on healthcare actually works. So, Tim, let's say I go to the doctor with chronic leg pain.
The doctor could prescribe me Tylenol, or he could send me off to get five blood scans, an MRI scan, a CT scan, and a prescription for new nerve pain therapy that costs $10,000 a month, right? Washington doesn't know what treatment plan is right. Is it the Tylenol that's like two cents? Or is it this other plan that's like 20,000 bucks a month?
So how does the government, acting on behalf of the taxpayer, approaching this very challenging question of how to reimburse good care with an eye toward controlling costs?
Yeah, I think your example is perfect here. I think first you need to understand that the government has essentially decided that if people want to, they should be able to choose to enroll with a private insurer in most of the public health insurance programs. And today, over 50% of Medicare beneficiaries are in a private plan. That number is over 70% in Medicaid.
So loads of people prefer Medicare. private plans and we want to support that decision. But we also want that private option to be budget neutral, to not cost any more than if folks had chosen the traditional public plan. And so how do we set payments to these plans to support choice and budget neutrality?
Well, we wouldn't really want the government to simply reimburse every expense that the insurers incur. plus some fee for administering the plan, that would mean that no party in that case, not the doctors, not the insurer, have any incentive to control costs. And that would lead to the second situation that you described, right?
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Chapter 6: What challenges arise from diagnostic coding in Medicare?
And their hope is that if they do this, these folks will opt for a different plan. or more likely for the public system instead. And you'd expect insurers to offer my in-laws subsidies for purchasing a new bike, maybe provide really good coverage for physical therapy, free gym memberships, things like that.
Or maybe they advertise in places where people are healthier, or it's widely known that like Hispanic Medicare beneficiaries are much cheaper than others. So maybe they advertise aggressively on your favorite Bad Bunny radio station or something like that, right? And so this is a system that we don't exactly want.
We don't want a system where the plans are trying to avoid the sick patients and attract the healthy patients. And equally importantly, if the government is paying a private insurer $5,000 per year for someone who would cost $1,000 in the public program, like my in-laws, government costs are going to spike, right? And remember...
We want this private option to be budget neutral, but now it's definitely not, right? That private option is enrolling all the cyclists, none of the cancer patients, and the cyclists cost the government $1,000 in the traditional public program, but $5,000 in the private plan. And this can lead to this type of runaway government spending, right?
It seems to me like you're outlining two ways that healthcare spending can go awry. In a fee-for-service, FFS system, doctors or insurers are biased to deliver more and more and more services even when patients don't need it, and that drives up costs across the system. But in the alternative scenario of capitation, now you're encouraging healthcare
insurers to turn away or find ways to deny care for the sickest patients. And that means, you know, not including oncologists in your network. So there's these two rocks that we're trying to navigate between. Mike, I want to keep the explanatory pace here slow and steady so everyone's on the same page. But what Tim has outlined is that the government has a very serious interest
in properly reimbursing doctors who care for sick patients. We want to align government payments with actual patient illness. Like that's the gold standard here, right? But that means that the government needs a way of actually determining, actually seeing which patients are actually very sick and need more treatment. So how are doctors telling the government how sick their patients are?
Let's use, say, a diabetes patient as an example.
Yeah, that is the hard part. The hard part is for the government to know how sick somebody is. The doctor may know it, the patient may know their own health conditions, but for the government to know it, they need to see it in their records. And so, like Tim outlined, there's two parts of Medicare.
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