V&V

As a software/system engineer, I can't help but compare the process I follow to provide a product vs. the process our legislatures follow. Maybe I just don't get political science. The process I use may seem a little dry, but even cool products like the iPod and cell phone were not produced by a continuous stream of pizza parties and happy hours (or backroom deals).

Intro

Verification and Validation or "V&V" is the process of making sure that a product does what it was asked to do (Verification) and meets its intended purpose (Validation). In other words, verification is "I did what you asked me to do" and validation is "I met your needs".

In developing software, the process before V&V includes coding (writing the software), compiling (the computer converts your software into a program it can run), and testing (Make sure the program doesn't crash and appears to do what it should). For example, let's write a program that provides health care for every American.

Coding and Compiling

Which of the following two code samples will compile?

Code Sample 1:
for (american=1, american<=NUMBER_OF_AMERICANS, american++) {
provide_healthcare(american)
}

Code Sample 2:
for (american=1; american<=NUMBER_OF_AMERICANS; american++) {
provide_healthcare(american);
}

The answer is Code Sample 2, since a "for" loop uses semi-colons instead of commas and the "provide_healthcare" statement is not terminated with a semi-colon.

I think that one of the main complaints about the healthcare bill is that we don't understand the language required. The legal system is like a big compiler that expects the language to follow very strict rules that your average American is not familiar with.

Testing

Even though the code in sample 2 compiles, it crashes when we run it. The reason is that the computer starts with "0" when for the first American. Here's the fix:

Code Sample 2 Fixed:
for (american=0; american < NUM_AMERICANS; american++) {
provide_healthcare(american);
}

This compiles and runs, but we have to test to make sure the function provide_healthcare does what it says and has no side effects. One problem with software is what is called a "memory leak". This is where the software uses resources and doesn't properly return the resource to the operating system when it's done with it. Eventually the result is that the computer will start getting slow and then eventually crash. For critical applications, this can be very dangerous and precautions need to be taken in advance to recover from a computer crash to avoid catastrophe.

The "memory leak" problem is a big fear for health care reform. This is one of the main problems with Medicare.

Take the word of the Engineer

Another alternative to the above process is to ask the engineer "Is this going to work?". The answer is typically "Yeah, sure". The reality is that relying on this answer is like playing Russian Roulette. Even if the engineer is experienced and answers with confidence "I stake my reputation on this!!!", taking his word is no replacement for a rigorous V&V process.

Back to health care, it doesn't matter who voted for it, what the polls say, what groups (AMA, AARP, etc.) support it; the question is "Will it improve the health of Americans?" A second question (that V&V doesn't address) is "what will it cost?".

The Health Insurance Iceberg

The world is not run by those who are right. It is run by those who can convince others that they are right p 37

When you're debating something as big as health care reform, it seems that there are two sides that have each decided on a solution, and they simple report the numbers to convince others that they have the "right" solution.

Government Provided Health Care
For example, one solution is for a complete takeover of health care by the government. This side reports the high costs of medical insurance, excessive executive compensation, etc. The logic for government provided health care goes something like this:

1. Because of high costs, too many American's don't have health care.
2. It's the moral responsibility for a rich nation to assure all citizens have access to health care.
3. Therefore, the government should provide health insurance for all American's.

I've tried hard to come up with a valid syllogism to fit this argument. The form of a syllogism is:

All X is Y
All Y is Z
Therefore, all X is Z.

"All" can be replaced with "Some" or "No".
"is" can be replaced by "is not".

In order to be a valid argument, the premises need to be valid and the syllogism needs to be valid.

Valid Premises, Invalid Syllogism = Invalid Argument
Some health care is provided by the government
Smart people have health care
Therefore, smart people get their health care from the government.

In order for this to work, any value of X,Y and Z should work:
Some X is Y
Z is X
Therefore, Z is Y

To show how this is flawed, try:
Some lawyers are crooks.
Pres. Obama is a lawyer.
Therefore, Pres. Obama is a crook.

Another example (if you see no fallacy in the last example)
Some whites are racists.
Nancy Pelosi is white.
Therefore, Nancy Pelosi is a racist.

Valid Argument, Invalid Premise = Invalid Argument
Everyone deserves affordable health care.
Only the government can provide affordable health care (Invalid).
Therefore the government should provide health care for everyone.

Valid Argument, Valid Premise = Valid Argument
All health care for American's is _________
All _______ is health care provided by the government
Therefore, all health care for American's is provided by the government.

For those pushing government provided health care, a middle term is needed to make both premises valid. Good luck!

The Free Market Solution

For full disclosure, I am a proponent of the Free Market, but some of the arguments on this side are weak. For example, in response to the attack on health insurance companies, the health care reform opponents say that the we spend about $2.5 trillion ($2,500 billion) on health care in the U.S. each year and that the executive compensation ($10 million and up) is pennies. Also, the average profits for health insurance companies is only about 5%, which ends up being less than $20 billion per year (not even 1% total health care cost). Very compelling numbers! The Free Market wins! Or does it? (I think this is a fallacy of invalid contrast or misuse of statistics).

A closer look at the numbers (see table below) shows that the top 10 health insurance providers have total annual revenues of $253 Billion or 10% of all of our health care costs.

Company	Sym.	Mark.Capital. $Billion	P/E	Profits $Billion	Total Revenue $Billion	%profit
UnitedHealth Group	UNH	38.19	10.44	3.66	87.14	4.2%
WellPoint	WLP	27.47	6.26	4.39	61.24	7.2%
Aetna	AET	13	10.56	1.23	34.73	3.5%
Cigna	CI	9.37	7.25	1.29	18	7.0%
Health Net	HNT	2.4	5	0.48	15.71	3.1%
Coventry Health Care	CVH	3.38	14.1	0.24	13.9	1.7%
Humana	HUM	8.06	7.7	1.05	8.02	13.1%
Amerigroup	AGP	1.34	9.21	0.15	4.97	2.9%
Universal American	UAM	1.1	8.34	0.13	4.85	2.7%
Centene	CNC	0.77	9.47	0.08	4.1	2.0%
Total		105	88	13	253	5.0%

While these revenues represent exchanges for goods or services, none of these goods or services actually represent health care. For example, a policy that costs $8000 (rough estimate of annual cost of insurance), the amount breaks down as follows (If we assume that all U.S. health care is paid by claims against insurance - which it isn't).

$7200 Medical Claims paid out ($8000 minus 10% or $800 of insurance company revenues)
$760 Operating costs (buildings, utility bills, salaries, etc.)
$40 Profit of 5% on the $800

The opponents of government provided health care say that the $40 profit on a $8000 policy is nothing. The problem is that this is a flawed argument used to counter another flawed argument. Insurance profits are only the tip of the iceberg. The rest of the "insurance" iceberg is the $760 per person it costs to run the insurance company.

The flawed argument here is:
1. Insurance company profits and executive compensation are only 5% (True)
2. Insurance company profits are an even smaller percentage of total health care costs (True).
3. Therefore, insurance companies are not the problem with out of control health care costs.

This is either the fallacy of the excluded middle (total insurance costs) or of irrelevant contrast.

Why is Health Care so expensive?
My hypothesis is that government measures that attempt to improve health care has the unintended consequences of interfering with the free market feedback loop.

Here's where I expose my strong bias against publicly owned/traded companies.

Privately owned - focus on making customers happy by increasing quality of products and services while reducing prices/costs.

Publicly owned - focus is split between making customers happy and making stock holders happy. Increasing revenues is the only way to make stockholders happy.

Regulation on health care companies and another focus to both types of companies: how to satisfy government rules and regulations. For public companies, no amount of regulation is going to reduce the stockholders demand for growth. Limiting preexisting conditions, guarantees for uninsured, etc. all reduce revenue growth and therefore force premiums to go up.

Conclusion

Insurance companies are a larger contributor to rising health care costs than free market proponents will admit. The reason that insurance companies are a problem is due to government intervention and market growth demands that squeeze out the consumers needs.

The way to shrink the "iceberg" is to find ways to help private companies compete against the public companies. This will only work if many of the regulations that the government has imposed to "fix" health care are changed so that market forces can help melt the rest of the "iceberg".


Only the government thinks that cutting a foot of the bottom of a blanket and sewing to the top will make the blanket a foot longer.

Health Care Summit - The Onus is On Them

While trying to listen to the Health Care Summit today, I found myself cringing at the abuse of logic. (I just finish reading "Nonsense: Red Herrings, Straw Men and Sacred Cows: How We Abuse Logic in Our Everyday Language").

I only heard one person who actually seemed to attempt to address the issue while not pushing an agenda. That was Senator Tom Coburn who happens to be a medical doctor. I liked how tried focus on "why" health care cost so much and what we can do about it. His first proposal was to address Medicare fraud and abuse, which could save billions of dollars (The current cost of Medicare, etc. is about $440 billion with an estimated 10% of that being fraud, waste and abuse).

The response to Senator Coburn was:

Pres. Obama - "Every good idea that we've heard about reducing fraud and abuse in the Medicare and Medicaid system, we've adopted in our legislation... we want to eliminate fraud and abuse".

Rep. Steny Hoyer - "In our bill.. you'll be happy to see a very substantial investment in [cutting fraud, waste and abuse]".

So I say, Mr. President and distinguished members of Congress, if you are capable of "legislating" significant reduction of fraud, waste and abuse then you might gain my confidence that the rest of your legislation is more than "good ideas" and "investment [spending]". Until you gain my confidence, I am suspicious that any expansion of Government Health Care will be subject to the same fraud, waste and abuse of the old programs.

The onus is on you: reduce fraud in the programs you already manage before expanding them OR get out of the health care business altogether.

Best Healthcare Solution I've Heard of

Whole Foods market is using risk management and free market principles to cut health care costs. In risk management, you allocate resources based on the probability of something bad happening and the impact or severity of the consequences if it happens.

For example:

Cancer is low probability, high impact.
The common cold is high probability, low impact.

High deductibles basically cover the first (Cancer) and make you pay for the second (common cold).

Low deductibles basically cover both, but make you pay for it up front in higher premiums.

Therefore, every time someone gets health care and says to themselves, "Go ahead and do X, my insurance will pay for it", what they are really saying is "Go ahead and do X, all the people with low deductibles already paid for it". This increases demand and results in higher costs.

Additionally, when you use your insurance, health care costs more because the insurance company charges additional fees.

The best deal is high deductible insurance: you're not paying the insurance company for your low risk care AND you're not paying for all the frivolous low risk care that everyone else is getting.

Whole Foods' approach is to have a high deductible ($2500), which greatly reduces cost, and then put the savings in an individual employees account which they manage themselves.

The employees then decide how best to use the limited resources of their spending account using free market principles.

Health Care Rational or Rationale?

In the current debate on Health Care, there are still people who want to have rational discussions (like me), while others (Congress and the White House) appear interested in providing a "rationale" for why we must follow their plan (whatever it ends up being).

(See if you can make it through this paragraph without falling asleep) I've been involved several times with the design of complicated systems. We carefully analyzed the system requirements, documented the design, developed prototypes, reviewed designs with key stakeholders, redesigned, and implemented these systems. The design continued to evolve throughout the development cycle. The resulting system didn't look much like the original idea.

What does this have to do with Health Care Reform?

Health Care Reform is addressing a "system" more complicated than anything I have ever worked with and frankly this scares me. Especially based on a little research on my part.

My observations:

1. Watch C-Span - After watching a portion of the debate on health reform by Congress, I absolutely do NOT want these people reforming my Health Care. I've been in two types of meetings as part of system development. Meetings with people who know exactly what needs to be done, and meetings with people who have NO idea, but still feel inclined to spew hot air. The debate in Congress reminds me of the later.


2. Read the White House Health Reform Website. From the page "What People Are Saying", all of the articles referenced are pro-reform (and mostly from left-leaning publications), YET the comments are mostly negative and against health care reform.


3. I followed the link to How Health Insurance Reform will Benefit California.

I found empty promises like:



• "Health insurance reform will also ensure that you will always have guaranteed choices of quality"
  
• Improving our health care system.
  
• Health insurance ... will become more affordable
  
• Insurance Stability and Security: Health insurance reform will strengthen our system of employer-based health insurance
  

I did find details that all translated to "Increase Taxes"



• Ending the Hidden Tax
  
• Covering the uninsured
  
• Premium credits
  

Conclusions:

Our federal government was designed to prevent the President and Congress from getting too much power. They have found loopholes to this design by creating pork-laden bills to entice votes. Such bills are in no way capable of managing complex issues like financial recoveries or health care reform. My solution would be for Congress to define goals: reduced cost, improved access and quality, etc. Congress should then ask the states to design health care reform and should work with states to remove any obstacles. States should then pass the responsibility to Counties and also work with them to remove obstacles.

My question for Pres. Obama:
Under what conditions would you veto a health care bill? I'm guessing there are no conditions.

Links:
I liked this article a friend sent me:
Utopia versus Freedom
From a liberal viewpoint Obama's healthcare horror
From Sara Palin "Death Panels" (Did she really write this?)
Health Insurance Profits Ranks #86
Some good insights from C4L (Read the comments as well)
Caroline Baum at Bloomberg