Sunday, September 9, 2012

Medicine and the Nash Equilibrium

Sand-pile Experiment

Stability of a system relies heavily on risk mitigation strategies; these evanescent little fingers that plug the holes of a universal breakdown are but band-aids of sorts, because risk mitigation strategies are based on observable risks only. The Bak–Tang–Wiesenfeld sandpile model is a dynamic system that displays self-organized self-criticality. The system is one sand particle away from a collapse.

Therein lies the problem.

Medicine has gone through its own risk mitigation for a long time. Every hole in the human behavior that potentially could lead to the fall of man is being plugged, band-aided or in some cases spackled over. Medicine has survived many upheavals in the past and it has done so by the artful, careful, considerate and thoughtful understanding by the doctor scientists of the past. Simmelweis utilized the art of hand washing to prevent obstetrical deaths. John Snow an Englishman was the first to show water contamination as the cause of Cholera that was causing 3 million deaths per year in the 1800s. Sabin and Salk used the vaccine to prevent further Poliomyelitis catastrophes in 1952. These are examples of the risk mitigation strategies that have heaped significant rewards for humanity.

As medicine improved humanity’s lot, a desire to help everyone ensued. The grand cathedral of safety was built to help elderly retirees. Medicare was created, as a safety net for the elderly in 1965. It was a monumental success. The price to get the benefit from the system was to pay into the safety net via taxes while a person was employed in the work force, deriving an income and then when a “fixed income” status was reached upon retirement, that money would help defray the cost of their care. On paper, it seemed, a laudable and a well-choreographed scheme. It was designed as a “Pay now Reap Later” concept. Another large gaping hole had been plugged for the senior citizens of the U.S. and many nations who promulgated the same policy. It was a tactical approach to a practical matter.

However over the years as all powerful and wealthy nations with a declining birth rate experience, the U.S. also fell into this trap, the number of workers started to recede in comparison to the numbers receiving the subsidy. Unfortunately this occurrence seemed to happen at the same time that the FICA paying individuals retirees come of age and started receiving Social Security benefits. The debacle that is, brought light to the fact that the government had been using the FICA tax to build bridges to nowhere and stuff the burgeoning public sector “business” with unnecessary expensive “schemes.” The flow of money was so great, free and limitless, that there was no urgency to keep the funds tied up for future retirees. More and more was promised by the politicians running for their congressional seats and the Senate seats in the United States. They brought federal tax payer capital to their states building large behemoth railway stations named after themselves and grand buildings in various municipalities that still lie vacant collecting dust, accruing cracks for the weeds to take hold. Out of guilt or desire for votes, more and more was promised, with less and less available to keep those promises. A picket fence American dream for all was in site and “cheap” money was bandied about so that a $30,000 earning individual was promised a half a million dollar home on cheap mortgage. While that was going on, some used it as an excuse to speculate and house jump reaping rewards for incurring their risks. But then as all bubbling brooks run out of water, credit froze because of the unraveling of the financial engineering and securitizations. Banks stopped taking the “empty” letters of credit and the whole Ponzi scheme came to a screeching halt taking down millions if not billions of people who were left looking through a dark tunnel. The final grain of sand had fallen on the tip of the sand-pile and the cascading landslide created a devastation that we all behold today.

The Landslide

What did that have to do with Medicine? Well, everything, I think. You see fingers of instability have been sewed into the medical system too. Medicine has become more about money then about care. The unstable probes that have been launched onto the medical landscape over time are about to test the fingers of instability. The, this and that was encouraging doctors to accept Medicare payments in part – up to 80% of total. While the money flow was unrestricted more physicians accepted assignments and patient felt they could and did fill the waiting rooms and Emergency Rooms because they did not have to resolve to pay out of their own pockets. Every cough and sniffle found its way into the halls of the hospitals. Each visit cost thousands (read thousands) of dollars. The physicians in the meantime inundated with the burgeoning rolls of patients added to their practices; managing scheduling, billing and other sundry things to handle the large volume of care delivery. Meanwhile insurance feeling the rising cost, limited bonuses and steady profits started raising the premiums and started a “pre-approval practice” forcing doctors to hire more staff to manage approvals and denials of reimbursements. Medicare and the other Insurance Companies initiated an automatic 10-12% denial policy. If the doctor’s office was not prudent in keeping an eye on fiscal matters or on top of their game in billing strategies, then it was too bad for them. They suffered the financial harm to their own detriment and to the thriving bottom line for the insurers.

Medicare feeling the pinch from the rising costs of healthcare due to the planting of miniature “time-bombs” of regulatory fiat, started the nationwide advertising of “fraud and abuse” and started training elderly Medicare recipients and turning them into “whistleblowers” against people perpetuating such fraud. Soon the multi-trillion dollar industry had it tattooed on the populace’s mind that the entire system of healthcare was a fraud being committed in perpetuity. The doctors were vilified and demonized for ordering too many diagnostics and those expensive therapies that “experts” believed should not be used were vilified in the press. The system devolved to the point that the “well-meaning” politicians decided that if they could show their magnanimity by instituting healthcare for all then they would be the grand designers for the future of humanity. But as all schemes done in anonymity are prone to ride slowly to the top of the mountain with banners, they also come down with an express spirit too. That scheme has approached the peak and the sand pile has collapsed. And that is where we are today.

While these ingredients are on a boil in the cauldron and the steam is rising, the detractors pinch and pull the curtains to keep reality from being visible to the masses. “Ah, this is this and that is that,” they say (in Flounder speak) and all the while the bubbles form and burst and the vile mixture is about to burst and splatter over the landscape.

"John Nash" in the movie "A Beautiful Mind"

John Nash the author of “Nash Equilibrium,” is the subject of “A Beautiful Mind” who suggested that as long as strategies are not changed in midstream the equilibrium of mutual benefit is expected.

Well as we have seen that the experts have continued to apply band-aids to the fingers of instability and now have decided to change strategies midstream for all the people - akin to burrowing a hole on the side of the sand-pile. This one-sided change of strategy has disenfranchised the entire population. The “Mutual benefit” is hardly mutual. If you ask the 270 million people who have borne the rising tide of insurance premiums and those that were supposed to be protected find themselves not being able to find good, or, for that manner any care, the entire system is wrought with something unpalatable. Additionally they, the patients, face rising scrutiny for the physician proposed therapies based not on need but on expense. The turgid torque of this volcano is about to expel an undigested reality and it will smell horrid.

The Real John Nash

Plugging small holes in the dam is a euphemism of thought in risk management without an eye towards the bigger picture. And the bigger picture is a calamity of proportions yet to play out. No, this is not a doom and gloom story, it is an unfortunate series of historical events.

Risk mitigation with an eye towards the bigger picture causes a more stable scenario. Piling on sand on sand-piles, eventually, will initiate instability that is sure to end in a calumny.

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