This picture was taken during the recent announcement about the Trump administration’s drug-price reduction efforts … a noble and overdue objective to be sure. While I applaud the effort, I am concerned about how the savings are presented and why few are objecting. My only conclusion is that the average American is not mathematically able to understand what is wrong. Go figure!
I remember when the Truth in Lending Act was passed in 1968 promoting the informed use of consumer credit by requiring standardized disclosures of credit cost and terms. A major driver at the time was that consumers were signing up for credit cards with very high, compounded annual interest rates that many could not clearly see.
Noble as it was, and as common as it is in our lives, I really wonder whether the average American knows how important it is to pay off these loans, even when the cumulative interest is clearly indicated in those disclosures. I have written about this in recent blogs.
Perhaps you have also noticed that almost all restaurants now print the
suggested tip range near the tip line. As the picture here indicates, it irritates me that this range typically starts at 18%, well above my comfort level at 12-15%, and that range doesn’t even appear among the computed suggestions.
I get the problem they face … many customers simply can’t do the math in their heads or are too lazy to grab their phones to use a calculator.
One of my daughters had difficulties with math, and I can still remember working with her on her homework in grade school. She just couldn’t get it, no matter how hard I tried to tell her stories and situations to bring it to life.
The picture above should give us all pause. How can you get discounts of more than 100%? Remember, a 100% discount means it is free.
If your math skills are challenged, go to the website shown here, take the diabetes claim, and enter some sample values. 
If you normally paid $100 for your prescription and you had a 230% discount, you would have been paid $130 to take it!
The answer is in the fine print right above the numbers in the picture at the beginning of this blog. The discount is calculated as the percentage savings compared to the FINAL PRICE, not the original price.
You were never taught percentages this way, and for good reason … it is terribly misleading. Fortunately, there is an easy correction. You simply divide 100% by these discount statements to get the conventional way of expressing it. So, a 230% discount is really about 44%. You would save about $56.50 for the prescription, paying $43.50 instead of $100. Divide $100 by $43.50, and … voilà… you get 230%.
Doing the math with 654% the right way, your original prescription cost of $100 would now cost you $15.30 … about an 85% reduction in costs. Nice. Very impressive. Just misleading as presented.
Another more correct way to express this price reduction is that this program avoids these percentage markups over what the government has negotiated as a fair price. There are lots of good ways to explain things like this … the method used is just not one of them.
And for complete contextual relevance, we all know that an optimist declares the glass half full, while a pessimist defines it as half empty. The engineer most accurately explains that you appear to have twice as much glass as you really need.
This is why you should invite engineers to your parties. They will come because they have nothing else going on. Don’t worry, they won’t interact with your other guests and make cleanup a snap because they will eat whatever you serve. And if they’ve had a good time, they will fix your garage door opener and phase-align your speakers 😊.