The American Healthcare System as an Exercise in Game Theory
The US healthcare system, especially when compared to other countries, is extremely complex, expensive, and, quite honestly, confusing. The ways in which Americans receive and pay for healthcare vary, including employer-based private insurance, Medicare, Medicaid, Veterans Affairs, and supplemental out-of-pocket costs, not to mention the millions of people who cannot even afford healthcare. Despite the US topping the global charts in terms of healthcare spending as a percent of GDP (18% last year!), it is not as effective as other countries in health outcomes, cost for citizens, and universal coverage.
There are so many moving parts in this system, and we can use ideas from game theory to examine the costs and benefits for the parties involved. First, consumers who receive healthcare through their employer still must make decisions about which plan to choose based on factors such as deductibles, co-pays, and what types of care are included. Middle-class Americans facing enormous medical bills will sometimes have to bankrupt themselves or give away assets in order to qualify for Medicaid. Many hospitals and other healthcare providers operate as for-profits, as do pharmaceutical companies and insurance companies. All of these entities want to keep the cost of providing services low, while making the most profit for themselves. Add to that that the American government has little regulation of healthcare costs as compared to other nations, and we have a perfect situation in which different parties are working to maximize their payoff and minimize their costs, at the expense of consumers.
A 2013 article by Mark D. Agee and Zane Gates looked at how game theory could be applied to the healthcare system, and found that if providers, insurers, and employers could come to agreements about service costs and health incentives, everyone would benefit. In looking at a specific group of medical facilities and an insurance company, they found that the Nash equilibrium in these decisions would, in fact, lead to greater profits for all groups involved, decrease inflation, and lower patient costs. They also add to that mix guaranteed workplace health programs in exchange for lower insurance rates, which would mean lower costs for employers and employees.
Implementing new healthcare policies in the US is always a huge challenge, and it seems unlikely that solutions from game theory would ever be used to improve the healthcare system nationally. Of course, a universal healthcare system would not have nearly as many complexities and tradeoffs involved. And, at the end of the day, why should our ability to afford quality healthcare even have to be examined as a game in the first place?
Sources:
Agee, M.D., Gates, Z. Lessons from Game Theory about Healthcare System Price Inflation. Appl Health Econ Health Policy 11, 45–51 (2013). https://doi.org/10.1007/s40258-012-0003-z
Campbell, Andrea Louise. Trapped in America’s Safety Net: One Family’s Struggle. University of Chicago Press, 2014.