Tuesday, August 18, 2009

On Back of the Napkin Calculations

I was disappointed with the Back of the Napkin presentation on health care.

The value of back-of-the-napkin calculations is that they can help you find false assumptions and hidden errors in system design. Engineers often use the process to check the thermodynamics of a situation. Physic processes tend to preserve mass and energy, a quick calculation can let you check to see where all the mass/energy goes.

The process is helpful in accounting. Figures are supposed to balance out; so it is wise to simply check what goes into a process to what comes out.

The subtitle of Dan Roam's book is "Solving Problems and Selling Ideas with Pictures"

The book is about using images to sell people on ideas.

The Digital Room site completely misuses the traditional back-of-the-napkin methodology. Rather than real analysis, the site shows how you can use drawing on a napkin as a propaganda tool to repeat partisan themes. The web designer provides a nice example of how one can use image driven propaganda for partisan attacks.

The presentation started out correctly with the observation that our current problems are the result of injecting a third party between patients and their doctor.

Unfortunately, like the health care debate itself, the presentation quickly loses track of the patient and focuses entirely on the insurance side of the debate and jumps into convolutions about the merits of private v. public third party pools.

A true back-of-the-napkin would stop on that first napkin and realize that all third party payment systems are inherently flawed. As these systems consume resources, the systems will always return less money than shoveled in.

A third party must justify itself by either providing an efficiency which covers its cost, or by providing a benefit that justifies its existence. Insurance does neither.

A second napkin in the presentation shows that third party financing is a net negative in that third party pools create conflicts by pitting parts of the system against itself.

So, not only do third party pools fail to add efficiencies, they create inefficiency and conflict.

This is true of both government owned and privately owned insurance pools.

The rest of the presentation is partisan non-sense. The propagandist drivel is that conservatives don't want to see any improvements in health care. They forced the public option off the table leaving us no good choices.

I am used to partisan drivel.

The form of this drivel irks me.

First the statement that conservatives don't want better healthcare is way off base.

The opposition to the current round of healthcare reform is from people who see the reform headed in the wrong direction. The loudest opposition are people who read the back-of-the-napkin correctly and realize that the tiff over ownership of the third party pool is just a diversion.

Anyone familiar with insurance and who read the bill would realize that the bill was one great big grab bag for big insurance. Shove this into your back of the napkin calculating machine: Forcing everyone to buy insurance does what:

  • Decreases the amount of money made by insurance
  • Increases the amount of money made by insurance
  • Causes butterflies to issue forth from our belly buttons
  • Puts really big bribes (err, I mean campaign donations) into the pockets of politicians

Oops, there were two right answers in the diatribe. I am not a good test writer.

The idea that Conservatives are the ones most invested in the status quo is absurd as well. The status quo was the product of some 60 years of progressive-liberal thinking.

The status quo that we are led to despise gave Michelle Obama a $317,000/yr political job in a hospital.

The people who are writing healthcare reform are the primary beneficiaries of the complex centralized system that they wish to put in place.

The insurance companies have bought a large number of Republicans, but, from day one, it was the progressive liberal who led the charge in creating the top heavy status quo.

Anyway, I wish that people do real back of the napkin calculations on all the health care reform debate. Remember that simply because words appear on a napkin does not mean they are propaganda.

If you really want to engage in back of the envelop thinking, you might try some calculations on the Medical Savings and Loan. This system pulls the insurance agency out of the system by having people self-finance their care.

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