US health insurers deliberately design sludge to ration care and cut costs — and Stanford economists found consumers spend 200% more on forgotten subscriptions than they'd choose to.
Freakonomics Radio
US health insurers deliberately design sludge to ration care and cut costs — and Stanford economists found consumers spend 200% more on forgotten subscriptions than they'd choose to.
TL;DR
Freakonomics Radio explores "sludge" — the friction deliberately or negligently embedded in systems to slow, confuse, or deter people from getting what they want. Nobel laureate Richard Thaler coined the term as the opposite of a "nudge," and economist Ben Handel reveals that US healthcare sludge is partly intentional rationing by insurers [1] — Ben Handel "US health insurers use administrative complexity — prior authorizations, impossible provider searches, endless paperwork — not out of incom…" 21:20 . Stanford's Neil Mahoney shows that consumers spend 200% more on forgotten subscriptions than they would if they were paying attention [2] — Ben Handel "94% of physicians say admin burdens from insurers are massive. 64% report burnout. The result: independent doctor practices are being hoove…" 37:10 , and that junk fees cost households roughly $650 a year. The single most useful takeaway: sludge rarely just happens — follow the money [3] — Neil Mahoney "Junk fees cost ~$650 per household: The Council of Economic Advisers estimated Americans pay roughly $90 billion total, or about $650 per h…" 52:00 .
Insurance forms that make no sense. Subscriptions that can't be cancelled. A never-ending blizzard of automated notifications. In this update of a 2025 episode, Stephen Dubner discovers where all this sludge comes from — and how much it's costing us.
The episode opens with back-to-back sponsor reads for Hotels.com, Amica insurance, and TalkAboutPD.com before Dubner delivers a brief personal note to listeners. He mentions that Congress is considering the Unsubscribe Act — a bill to make subscription cancellation easier — but notes it is moving slowly, which is itself a kind of meta-sludge. This framing note explains why the show is replaying and updating an episode first published a little over a year earlier, flagging that facts and figures have been refreshed where needed. It's a light but purposeful on-ramp that connects the political moment to the episode's themes before the main content begins.
Stephen Dubner sets the scene with a relatable ordeal: he received a letter saying he could renew his driver's license at an AAA office, made an appointment online, and arrived confident and prepared — only to find a queue of walk-ins and a staff member who cheerfully explained that 'the line is the line.' The promised 15-minute appointment had become a 2-to-3-hour wait. The story is both funny and pointed: the existence of appointment emails, confirmations, and requests to notify if late all implied a real appointment that turned out to be meaningless. Dubner uses this as a launching pad to ask whether the confusion was accidental, intentional, or structural, and to introduce the term that will anchor the next hour.
Stephen Dubner brings in Richard Thaler, a University of Chicago Booth professor and Nobel Prize winner, to define the episode's central concept. Thaler explains that 'choice architecture' — the design of decision-making environments — can either smooth the path (nudge) or clog it (sludge). A nudge is WD-40; sludge is gunk. Thaler claims credit for coining the term, with characteristic wit noting that while others have made the same claim, 'they haven't written a book that rhymes with it.' Dubner adds biographical color: he once spent a memorable afternoon with Thaler visiting London cabinet ministers, watching him dispense nudge advice about tax forms and attic insulation. Thaler is described as unusual among academic economists for his can-do, real-world engagement — a trait that makes him a natural guide to understanding and fighting sludge.
Thaler begins with what he calls 'inadvertent and/or incompetent sludge' — design failures like Norman doors, where the physical affordance of a door handle tells your brain to pull when you need to push. These aren't malicious, just thoughtless, and the architects responsible deserve 'a special place in hell.' He then pivots to the unsubscribe trap: where one click signs you up for a service but cancellation requires a phone call, a wait, and a sales pitch. That, Thaler says, is clearly intentional. He cites gyms during COVID that required members to physically enter a closed facility to cancel their membership — nobody designs that innocently. He notes he has personally tried to convince subscription companies to stop these practices, and been told bluntly that it would cost too much. Thaler's rough estimate: healthcare sludge alone costs the US hundreds of billions annually, though almost none of it is formally measured.
After Thaler's theoretical framing, Dubner grounds the conversation in raw human experience by reading out listener-submitted sludge stories, almost all of them involving healthcare. One listener's wife spent six months trying to get reimbursed for an RSV vaccine, caught between health insurance, pharmacy benefit managers, and the pharmacy chain. A psychologist working in a hospital had to mail a patient report — physically, by post — to another agency in the same city because electronic transmission wasn't possible and the patient had to pay money to access their own health information. A third listener described reconciling 17 pages of printouts in their own Excel spreadsheet and discovering $350 owed back from a provider due to a deductible recalculation. These stories make visceral what could otherwise be an abstract economic concept: sludge is not a metaphor, it is hours of wasted life.
Thaler redirects Dubner to 'talk to Ben,' meaning Ben Handel, an economics professor at UC Berkeley who works at the intersection of healthcare economics, behavioral economics, and industrial organization. Handel opens with a deceptively simple example: try to find a covered doctor on your insurer's website. The database is outdated, disorganized, shows no waiting list information, and could require you to call 25 doctors before finding one with availability. Dubner asks the obvious question — is this negligence or strategy? Handel argues the distinction is harder to draw than it seems. Large insurers like UnitedHealthcare have immense resources. Amazon uses those same resources to make shopping seamless. The healthcare insurer, by contrast, has a website that looks like 2004. Handel's verdict: they are not actively making it worse, but they are visibly not applying the tools that would make it better — and that passivity is itself a form of sludge.
The conversation turns to the deeper architecture of healthcare sludge, and Handel makes his most explosive claim: in all healthcare systems worldwide, care must be rationed because society refuses to let price alone determine who gets treatment. The UK does this via NICE — a body that makes explicit, published cost-benefit decisions and via waiting times. Canada and other countries have similarly organized mechanisms. The US, having a privatized system, has pushed this rationing responsibility onto private insurers. Each insurer constructs its own opaque basket of rationing policies — prior authorizations, provider network mazes, confusing deductible structures — none of which consumers understand when they pick their plan. You only discover the rules after you need care. This, Handel confirms plainly when Dubner asks: healthcare is rationed by sludge. And no, it is not unintentional. Coming back from a break, Dubner notes that UK Prime Minister Keir Starmer announced plans to abolish NHS England to cut bureaucracy — calling it 'stodge,' sludge by another name.
Four sponsor messages fill the mid-episode break: Figure promotes its home equity line of credit product, promising approval in 5 minutes and funding in 5 days; Ozempic advertises its semaglutide pill for GLP-1 therapy; Southern Company highlights its $80 billion infrastructure investment commitment; and a second Ozempic spot closes the break. The ads are cleanly separated from editorial content and provide a natural pause point between the macro analysis of healthcare rationing and the imminent discussion of how sludge is destroying individual physician careers.
Returning from the break, Dubner observes that sludge does not just frustrate patients — it does quantifiable damage to the healthcare workforce. Handel explains that insurers impose massive administrative burdens directly on physicians: prior authorization fights, billing disputes, and endless paperwork all designed to discourage or delay care utilization. A survey of 500 physicians published in the American Journal of Managed Care found 94% describe these issues as a huge burden, and 64% have experienced burnout partly because of them, with some considering leaving medicine entirely. The structural consequence, Handel argues, is that in the past 5–10 years, insurers and venture capitalists have been 'hoovering up' independent doctor practices because solo physicians can no longer afford to process the sludge on their own. It is now nearly impossible in the US to sustain a small independent physician practice. Handel's line crystallizes the episode's tragedy: 'If you don't have that, you're not a doctor, you're a sludge processor.' Dubner extends the metaphor: sludge is not a nuisance but a cancer — a malignancy that turns healthy tissue sick, driving consolidation that produces still more sludge. Handel also revisits his earlier research on dominated health plan options (where employees lose at least $1,000 choosing objectively worse plans) and the striking finding that 40% of workers falsely believe a more generous plan gives access to more doctors, making them willing to pay $2,000 more per year for something that isn't real.
Before introducing the final guest, Dubner zooms out to place healthcare sludge within a broader digital phenomenon. He notes that early internet was relatively sludge-free, but the digital revolution has turbocharged sludge's spread. In 2023, the American Dialect Society named 'enshittification' — a term coined by writer Cory Doctorow — its word of the year. Dubner reads Doctorow's crisp four-stage diagnosis: platforms first serve users well, then abuse users to serve business customers, then abuse business customers to claw back value for themselves, then die. Dubner emails Doctorow, who confirms that automated notification spam overlaps directly with enshittification: concentration of suppliers, absence of regulation, and the speed of digital tools all enable 'new kinds of fuckery not seen in previous eras.' The passage lands as the episode's most quotable cultural critique.
The second major ad break features Cash App promoting Bitcoin functionality with a $10 new-customer offer using code CashApp10 (subject to sending $5 within two weeks); a repeat Ozempic semaglutide tablet ad; and Southern New Hampshire University promoting its 200-plus online degree programs with no set class times. The break cleanly separates the healthcare and enshittification sections from the incoming subscription-economy segment anchored by Stanford economist Neil Mahoney.
Dubner transitions to subscription sludge by playing listener audio. Travis Tapman from Ohio describes canceling a UK political journal subscription: no digital option was visible, so he called the toll-free number, navigated an automated system, eventually reached a human who insisted on asking questions despite his repeated requests to cancel, and spent 20 minutes escaping a subscription he entered in 30 seconds. The anecdote is a crisp, comedic dramatization of exactly what Thaler described earlier — and it sets up Neil Mahoney's rigorous academic evidence for how big this problem really is.
Neil Mahoney, director of Stanford's Institute for Economic Policy Research, enters the conversation as both a personal victim of the subscription trap (he accidentally paid for four months of unwanted soccer streaming subscriptions) and its most rigorous academic investigator. He had a key methodological insight: when credit cards expire, consumers must actively re-enter their payment details, creating a natural experiment in what people do when forced to make an active rather than passive decision. Using data from tens of millions of credit and debit card holders — anonymized, from one of the four major card networks — his team focused on subscriptions to streaming services, news outlets, beauty boxes, and home security products. Their finding: in steady-state months, roughly 2% of subscribers cancel each month. In months when a card expires, cancellations jump to 4 times that rate. This spike is the signature of passive, inattentive spending — people who would have canceled if they'd been paying attention.
From the cancellation spike, Mahoney builds a model: if people cancel at 4x the normal rate when forced to make an active decision, and you assume 100% attention during expiry months and some lower rate during regular months, you can back-calculate that consumers pay attention roughly 25% of the time. Applying this to subscription spending reveals that for high-forgetfulness products — credit monitoring apps, niche digital services with no physical delivery — consumers are spending 200% more than they would under full attention. For products with an information feedback loop (groceries, coffee), the overspend is only 15–20%. Adding it all up, Mahoney references a Council of Economic Advisers study that puts the total annual US junk fee bill at approximately $90 billion, or roughly $650 per household. He acknowledges this both overestimates (firms would raise other prices if these fees were banned) and underestimates (junk fees warp market incentives, encouraging new forms of extraction rather than quality improvement).
Mahoney shares the StubHub story as a case study in the structural trap honest firms face: in 2015, StubHub rolled all service fees into its upfront ticket price. Consumers responded by choosing cheaper back-row seats, buying less overall, and failing to fully believe the 'what you see is what you pay' advertising. After 6–9 months, StubHub reversed course and reintroduced drip fees. The lesson, Dubner notes, is that behavioral economics cuts both ways — the same insight that says make things easy to encourage action also says make the initial price low so buyers commit before seeing the full cost. Mahoney illustrates drip pricing with a food delivery example: a $13 Chipotle burrito becomes $25 after fees on Uber Eats, and genuinely comparison-shopping would require running the entire checkout process on every competing app. Almost no one does. This means no competitive pressure is ever generated to bring prices down, and the market fails. Dubner and Mahoney agree that firms rediscover these behavioral tricks through A/B testing rather than textbooks — and that the solution must come from policymakers rather than from firms voluntarily restraining their own profit-maximizing.
Dubner asks Mahoney the question the whole episode has been building toward: has sludge peaked? Mahoney responds with measured hope: he doesn't know, but the signals are encouraging, and he refuses to let that lessen his resolve. Dubner closes out the episode with warm thanks to all three guests — and a behind-the-scenes joke about how his team mispelled 'Mahoney' internally so often they invented a mnemonic (Massachusetts Honey Boy), and that listeners don't want to know what they call Richard Thaler. He points listeners to two related episodes — episode 628 on public sector sludge and episode 456 on US healthcare — before wrapping with production credits for Renbud Radio, acknowledging producer Augusta Chapman, editor Gabriel Roth, and the full network staff.
After the formal episode close, the audio continues with a brief clipped exchange of Mahoney joking that Dubner has been 'stalking' him by researching his background, followed by the Freakonomics Radio Network stinger. A Vitamix blender ad and a Cosentyx (secukinumab) prescription medication ad featuring Cyndi Lauper's voice round out the post-roll. There is also a cross-promotional spot for '99% Invisible' and BBC Studios' new podcast 'A History of the United States in 100 Objects.' These closing minutes are standard network packaging that do not carry editorial content from the main episode.
Chapter 3 · 06:20
Stephen Dubner brings in Richard Thaler, a University of Chicago Booth professor and Nobel Prize winner, to define the episode's central concept. Thaler explains that 'choice architecture' — the design of decision-making environments — can either smooth the path (nudge) or clog it (sludge). A nudge is WD-40; sludge is gunk. Thaler claims credit for coining the term, with characteristic wit noting that while others have made the same claim, 'they haven't written a book that rhymes with it.' Dubner adds biographical color: he once spent a memorable afternoon with Thaler visiting London cabinet ministers, watching him dispense nudge advice about tax forms and attic insulation. Thaler is described as unusual among academic economists for his can-do, real-world engagement — a trait that makes him a natural guide to understanding and fighting sludge.
Nudge is the WD-40 of life — it makes things easy. Sludge is gunk: the deliberate or careless friction that makes life harder than it needs to be. Richard Thaler, who coined both terms, makes the case that most sludge is either incompetent or intentional, and rarely innocent.
Chapter 4 · 09:30
Thaler begins with what he calls 'inadvertent and/or incompetent sludge' — design failures like Norman doors, where the physical affordance of a door handle tells your brain to pull when you need to push. These aren't malicious, just thoughtless, and the architects responsible deserve 'a special place in hell.' He then pivots to the unsubscribe trap: where one click signs you up for a service but cancellation requires a phone call, a wait, and a sales pitch. That, Thaler says, is clearly intentional. He cites gyms during COVID that required members to physically enter a closed facility to cancel their membership — nobody designs that innocently. He notes he has personally tried to convince subscription companies to stop these practices, and been told bluntly that it would cost too much. Thaler's rough estimate: healthcare sludge alone costs the US hundreds of billions annually, though almost none of it is formally measured.
Claims made here
The sludge cost of the US medical system is in the hundreds of billions of dollars per year.
During COVID lockdowns, some gyms required members to physically show up at a closed gym to cancel their membership. Richard Thaler's verdict: nobody designs that innocently — it is pure, strategic sludge.
Nobody has a precise figure for the cost of healthcare sludge, but Richard Thaler puts it in the hundreds of billions per year for the US alone. The problem is that so much of it is consumed time — invisible on any balance sheet.
Richard Thaler estimated the sludge cost of the US medical system alone is in the hundreds of billions of dollars per year.
Chapter 5 · 12:55
After Thaler's theoretical framing, Dubner grounds the conversation in raw human experience by reading out listener-submitted sludge stories, almost all of them involving healthcare. One listener's wife spent six months trying to get reimbursed for an RSV vaccine, caught between health insurance, pharmacy benefit managers, and the pharmacy chain. A psychologist working in a hospital had to mail a patient report — physically, by post — to another agency in the same city because electronic transmission wasn't possible and the patient had to pay money to access their own health information. A third listener described reconciling 17 pages of printouts in their own Excel spreadsheet and discovering $350 owed back from a provider due to a deductible recalculation. These stories make visceral what could otherwise be an abstract economic concept: sludge is not a metaphor, it is hours of wasted life.
Claims made here
US healthcare makes up nearly 20% of GDP and employs more people than any other industry.
US healthcare makes up nearly 20% of GDP and employs more people than any other industry, making its sludge unusually costly.
Chapter 6 · 14:35
Thaler redirects Dubner to 'talk to Ben,' meaning Ben Handel, an economics professor at UC Berkeley who works at the intersection of healthcare economics, behavioral economics, and industrial organization. Handel opens with a deceptively simple example: try to find a covered doctor on your insurer's website. The database is outdated, disorganized, shows no waiting list information, and could require you to call 25 doctors before finding one with availability. Dubner asks the obvious question — is this negligence or strategy? Handel argues the distinction is harder to draw than it seems. Large insurers like UnitedHealthcare have immense resources. Amazon uses those same resources to make shopping seamless. The healthcare insurer, by contrast, has a website that looks like 2004. Handel's verdict: they are not actively making it worse, but they are visibly not applying the tools that would make it better — and that passivity is itself a form of sludge.
Health insurer websites are stuck in 2004 while Amazon's shopping experience is frictionless. Ben Handel argues insurers aren't actively sabotaging their provider databases, but they are conspicuously not applying the obvious tools that every other industry uses to make search easy.
Chapter 7 · 18:20
The conversation turns to the deeper architecture of healthcare sludge, and Handel makes his most explosive claim: in all healthcare systems worldwide, care must be rationed because society refuses to let price alone determine who gets treatment. The UK does this via NICE — a body that makes explicit, published cost-benefit decisions and via waiting times. Canada and other countries have similarly organized mechanisms. The US, having a privatized system, has pushed this rationing responsibility onto private insurers. Each insurer constructs its own opaque basket of rationing policies — prior authorizations, provider network mazes, confusing deductible structures — none of which consumers understand when they pick their plan. You only discover the rules after you need care. This, Handel confirms plainly when Dubner asks: healthcare is rationed by sludge. And no, it is not unintentional. Coming back from a break, Dubner notes that UK Prime Minister Keir Starmer announced plans to abolish NHS England to cut bureaucracy — calling it 'stodge,' sludge by another name.
Claims made here
Most Western countries spend 11–12% of GDP on healthcare, compared to the US at about 20%.
The UK uses a centralized body (NICE) to make explicit cost-benefit decisions about what care to cover; the US achieves similar rationing through opaque administrative sludge.
US health insurers use administrative complexity — prior authorizations, impossible provider searches, endless paperwork — not out of incompetence but as a rationing tool. Ben Handel confirms: this is not unintentional. Every healthcare system rations; America just uses sludge instead of a waiting list or a published rule.
Chapter 9 · 26:00
Returning from the break, Dubner observes that sludge does not just frustrate patients — it does quantifiable damage to the healthcare workforce. Handel explains that insurers impose massive administrative burdens directly on physicians: prior authorization fights, billing disputes, and endless paperwork all designed to discourage or delay care utilization. A survey of 500 physicians published in the American Journal of Managed Care found 94% describe these issues as a huge burden, and 64% have experienced burnout partly because of them, with some considering leaving medicine entirely. The structural consequence, Handel argues, is that in the past 5–10 years, insurers and venture capitalists have been 'hoovering up' independent doctor practices because solo physicians can no longer afford to process the sludge on their own. It is now nearly impossible in the US to sustain a small independent physician practice. Handel's line crystallizes the episode's tragedy: 'If you don't have that, you're not a doctor, you're a sludge processor.' Dubner extends the metaphor: sludge is not a nuisance but a cancer — a malignancy that turns healthy tissue sick, driving consolidation that produces still more sludge. Handel also revisits his earlier research on dominated health plan options (where employees lose at least $1,000 choosing objectively worse plans) and the striking finding that 40% of workers falsely believe a more generous plan gives access to more doctors, making them willing to pay $2,000 more per year for something that isn't real.
Claims made here
A large share of older adults struggle to use medical documents like forms or charts.
Employees in Ben Handel's study were losing at least $1,000 annually by choosing dominated (objectively worse) health insurance options, and these were often workers earning under $40,000 a year.
About 40% of employees surveyed incorrectly believed a 'more generous' health plan gave access to more doctors when both plans covered identical provider networks.
Employees who falsely believed a more generous health plan gave access to more doctors were willing to pay $2,000 more per year for that plan.
A survey of approximately 500 physicians published in the American Journal of Managed Care found 94% say administrative issues from insurers are a huge burden.
64% of physicians surveyed have experienced burnout partly due to administrative frictions and said they might want to leave medicine.
Ben Handel argued that sludge probably lowers overall healthcare spending because rationing mechanisms are designed to reduce utilization of care.
Ben Handel's landmark research found that most employer health plan menus include at least one 'dominated option' — a plan that is objectively worse than every other choice. Workers kept choosing it anyway, losing at least $1,000 a year. The worst-hit were people earning under $40,000.
Ben Handel's research found employees were losing at least $1,000 annually by choosing a dominated (objectively worse) health insurance option, often lower-income workers.
When a company offers two health plans covering identical doctor networks, 40% of employees still believe the 'more generous' plan gives access to more doctors. That false belief makes them willing to pay $2,000 more per year. The confusion is by design — or at minimum, by neglect.
Surveys by Handel and co-authors found about 40% of employees mistakenly believed a more generous health plan gave access to more doctors when both plans covered identical networks.
People who incorrectly believed a more generous plan gave access to more doctors were willing to pay $2,000 more per year for that plan.
94% of physicians say admin burdens from insurers are massive. 64% report burnout. The result: independent doctor practices are being hoovered up by insurers and private equity because solo physicians can no longer survive the paperwork alone. If you don't have a corporate shield, you're not a doctor — you're a sludge processor.
A survey of 500 physicians in the American Journal of Managed Care found 94% say administrative issues are a huge burden.
The same survey found 64% of physicians have experienced burnout partly because of administrative frictions and said they might want to leave medicine.
Sludge isn't just a nuisance — it's a malignancy. Administrative burdens force independent physician practices into corporate consolidation, which produces more sludge, which forces more consolidation. Each cycle of infection spreads to more healthy tissue. The term 'cancer' is not hyperbole.
Chapter 10 · 39:55
Before introducing the final guest, Dubner zooms out to place healthcare sludge within a broader digital phenomenon. He notes that early internet was relatively sludge-free, but the digital revolution has turbocharged sludge's spread. In 2023, the American Dialect Society named 'enshittification' — a term coined by writer Cory Doctorow — its word of the year. Dubner reads Doctorow's crisp four-stage diagnosis: platforms first serve users well, then abuse users to serve business customers, then abuse business customers to claw back value for themselves, then die. Dubner emails Doctorow, who confirms that automated notification spam overlaps directly with enshittification: concentration of suppliers, absence of regulation, and the speed of digital tools all enable 'new kinds of fuckery not seen in previous eras.' The passage lands as the episode's most quotable cultural critique.
Claims made here
The American Dialect Society named 'enshittification' its word of the year in 2023.
Platforms start by being good to users. Then they abuse users to please business customers. Then they abuse business customers to recapture value for themselves. Then they die. Cory Doctorow's 'enshittification' is the linguistic crystallization of what everyone feels but struggles to articulate about today's internet.
Chapter 13 · 44:40
Neil Mahoney, director of Stanford's Institute for Economic Policy Research, enters the conversation as both a personal victim of the subscription trap (he accidentally paid for four months of unwanted soccer streaming subscriptions) and its most rigorous academic investigator. He had a key methodological insight: when credit cards expire, consumers must actively re-enter their payment details, creating a natural experiment in what people do when forced to make an active rather than passive decision. Using data from tens of millions of credit and debit card holders — anonymized, from one of the four major card networks — his team focused on subscriptions to streaming services, news outlets, beauty boxes, and home security products. Their finding: in steady-state months, roughly 2% of subscribers cancel each month. In months when a card expires, cancellations jump to 4 times that rate. This spike is the signature of passive, inattentive spending — people who would have canceled if they'd been paying attention.
Claims made here
Subscription service cancellation rates are 4 times higher in months when consumers must re-enter credit card details after card expiry.
When consumers are forced to re-enter credit card details after expiry, cancellation rates on subscription services jump four times higher than normal months. Mahoney's model shows people are only paying attention about a quarter of the time. The implication: most subscription spending is involuntary.
Neil Mahoney's research found subscription cancellation rates jump four times higher in months when consumers must re-enter credit card details.
Chapter 14 · 49:20
From the cancellation spike, Mahoney builds a model: if people cancel at 4x the normal rate when forced to make an active decision, and you assume 100% attention during expiry months and some lower rate during regular months, you can back-calculate that consumers pay attention roughly 25% of the time. Applying this to subscription spending reveals that for high-forgetfulness products — credit monitoring apps, niche digital services with no physical delivery — consumers are spending 200% more than they would under full attention. For products with an information feedback loop (groceries, coffee), the overspend is only 15–20%. Adding it all up, Mahoney references a Council of Economic Advisers study that puts the total annual US junk fee bill at approximately $90 billion, or roughly $650 per household. He acknowledges this both overestimates (firms would raise other prices if these fees were banned) and underestimates (junk fees warp market incentives, encouraging new forms of extraction rather than quality improvement).
Claims made here
Consumers pay active attention to their subscription charges only roughly 25% of the time in regular billing months.
For subscription products with no information feedback loop, consumers spend 200% more than they would if paying attention all the time.
The Council of Economic Advisers estimated Americans pay approximately $90 billion per year in junk fees, roughly $650 per household.
Mahoney's model estimated that consumers pay active attention to their subscription charges only about one quarter of the time during normal billing months.
For subscription services with no information feedback — no delivery at your door, no regular reminder you're using it — consumers spend 200% more than they would if paying attention every month. This isn't a small problem: the Council of Economic Advisers pegs junk fees at $90 billion a year, or about $650 per household.
For subscription products with no information feedback loop, consumers spend 200% more than they would if they were paying attention at all times.
The Council of Economic Advisers estimated Americans pay roughly $90 billion total, or about $650 per household, in junk fees annually.
Chapter 15 · 52:55
Mahoney shares the StubHub story as a case study in the structural trap honest firms face: in 2015, StubHub rolled all service fees into its upfront ticket price. Consumers responded by choosing cheaper back-row seats, buying less overall, and failing to fully believe the 'what you see is what you pay' advertising. After 6–9 months, StubHub reversed course and reintroduced drip fees. The lesson, Dubner notes, is that behavioral economics cuts both ways — the same insight that says make things easy to encourage action also says make the initial price low so buyers commit before seeing the full cost. Mahoney illustrates drip pricing with a food delivery example: a $13 Chipotle burrito becomes $25 after fees on Uber Eats, and genuinely comparison-shopping would require running the entire checkout process on every competing app. Almost no one does. This means no competitive pressure is ever generated to bring prices down, and the market fails. Dubner and Mahoney agree that firms rediscover these behavioral tricks through A/B testing rather than textbooks — and that the solution must come from policymakers rather than from firms voluntarily restraining their own profit-maximizing.
Claims made here
StubHub introduced all-in transparent pricing in 2015 but reversed course after 6–9 months after losing market share.
In 2015, StubHub rolled all its fees into a single upfront price. The result? Consumers bought cheaper seats, bought less frequently, and the company hemorrhaged market share. After 6–9 months they reversed course. The lesson: when competitors hide fees, transparency alone becomes a competitive disadvantage.
StubHub tried all-in transparent pricing in 2015 but reversed course after 6–9 months because consumers stopped buying front-section tickets and market share fell.
A $13 Chipotle burrito on Uber Eats becomes $25 by the time fees drip in at checkout. To comparison-shop, you'd need to repeat the entire checkout process on every competing app. Almost nobody does. That gap — between the effort required and the effort exerted — is exactly what drip pricing exploits.
Neil Mahoney illustrated drip pricing by showing a $13 Chipotle burrito bowl on a food delivery app ends up costing $25 after fees are revealed at checkout.
Chapter 16 · 57:20
Dubner asks Mahoney the question the whole episode has been building toward: has sludge peaked? Mahoney responds with measured hope: he doesn't know, but the signals are encouraging, and he refuses to let that lessen his resolve. Dubner closes out the episode with warm thanks to all three guests — and a behind-the-scenes joke about how his team mispelled 'Mahoney' internally so often they invented a mnemonic (Massachusetts Honey Boy), and that listeners don't want to know what they call Richard Thaler. He points listeners to two related episodes — episode 628 on public sector sludge and episode 456 on US healthcare — before wrapping with production credits for Renbud Radio, acknowledging producer Augusta Chapman, editor Gabriel Roth, and the full network staff.
No indexed bits in this chapter.
US health insurers use administrative complexity — prior authorizations, impossible provider searches, endless paperwork — not out of incompetence but as a rationing tool. Ben Handel confirms: this is not unintentional. Every healthcare system rations; America just uses sludge instead of a waiting list or a published rule.
When consumers are forced to re-enter credit card details after expiry, cancellation rates on subscription services jump four times higher than normal months. Mahoney's model shows people are only paying attention about a quarter of the time. The implication: most subscription spending is involuntary.
This episode
UC Berkeley economics professor specializing in healthcare economics and behavioral economics, cited research on dominated health plan options and physician burnout.
Stanford economics professor and director of SIEPR who researched the subscription trap using credit card data from tens of millions of consumers.
Nobel Prize-winning economist at University of Chicago Booth School, co-author of 'Nudge' and credited with coining the term 'sludge' in this context.
Writer who popularized the term 'enshittification' to describe the lifecycle of digital platform decay, cited by Dubner in the context of internet sludge.
Design scholar who documented bad door design (now called Norman doors), used by Richard Thaler as the prime example of inadvertent, incompetent sludge.
UK Prime Minister who announced plans to abolish NHS England oversight body to cut bureaucracy, using the term 'stodge' instead of sludge.
Used repeatedly as the benchmark for seamless, consumer-friendly digital experience against which health insurer websites are unfavorably compared.
Secondary ticket marketplace that experimented with transparent all-in pricing in 2015 but reversed course after 6–9 months due to market share loss.
Automobile club whose appointment system for DMV license renewals Dubner describes as the opening illustration of sludge — appointments that turned out to mean nothing.
Neil Mahoney's institution and the base for his subscription-trap research using credit card data.
Used as the prime example of a large insurer whose provider network search tools are clunky and whose rationing mechanisms impose heavy administrative burdens on physicians.
US government body cited by Neil Mahoney for its study estimating Americans pay $90 billion per year in junk fees, roughly $650 per household.
UK health system oversight body that Prime Minister Keir Starmer announced plans to abolish in an effort to cut bureaucracy, described as sludge reduction.
UK body that uses cost-benefit analysis to decide what the NHS will cover, presented as an example of organized rather than disorganized rationing.
Ben Handel's academic home institution, mentioned when he introduces himself.
Richard Thaler's academic home institution, mentioned when he introduces himself.
Medical journal that published a survey of 500 physicians cited by Ben Handel showing 94% report administrative burdens as a huge problem.
The podcast hosting this episode, produced by Renbud Radio, focused on exploring hidden economic forces in everyday life.
Stats
This episode
Factual claims made this episode, and whether a source was named.
US healthcare makes up nearly 20% of GDP and employs more people than any other industry.
The sludge cost of the US medical system is in the hundreds of billions of dollars per year.
A survey of approximately 500 physicians published in the American Journal of Managed Care found 94% say administrative issues from insurers are a huge burden.
64% of physicians surveyed have experienced burnout partly due to administrative frictions and said they might want to leave medicine.
Subscription service cancellation rates are 4 times higher in months when consumers must re-enter credit card details after card expiry.
Consumers pay active attention to their subscription charges only roughly 25% of the time in regular billing months.
For subscription products with no information feedback loop, consumers spend 200% more than they would if paying attention all the time.
The Council of Economic Advisers estimated Americans pay approximately $90 billion per year in junk fees, roughly $650 per household.
Employees in Ben Handel's study were losing at least $1,000 annually by choosing dominated (objectively worse) health insurance options, and these were often workers earning under $40,000 a year.
About 40% of employees surveyed incorrectly believed a 'more generous' health plan gave access to more doctors when both plans covered identical provider networks.
Employees who falsely believed a more generous health plan gave access to more doctors were willing to pay $2,000 more per year for that plan.
Most Western countries spend 11–12% of GDP on healthcare, compared to the US at about 20%.
StubHub introduced all-in transparent pricing in 2015 but reversed course after 6–9 months after losing market share.
A large share of older adults struggle to use medical documents like forms or charts.
The American Dialect Society named 'enshittification' its word of the year in 2023.
We scan show notes for social handles, websites and apps. Nothing matched on this episode.
We use essential and analytics cookies to run Vuci. To understand how the site is used: Privacy Policy.
Install Vuci on your phone
Add it to your home screen for a faster, app-like experience.
Install Vuci on your phone
Tap the Share button, then “Add to Home Screen”.
A new version is available
Reload to get the latest Vuci.