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behavioral economics

Through a series of small grants, we’re is exploring the utility of applying behavioral economic principles to perplexing health and health care problems—everything from getting seniors to walk more to forgoing low-value health care.

At a recent meeting in Philadelphia we challenged grantees to compete in an Innovation Tournament. The goal was to identify testable ideas that leverage behavioral economic principles to help make people healthier by working with commercial entities. Participants were assigned to groups and made their best pitches to their colleagues. And of course we used a behavioral economics principle (financial incentives) to increase participation: Each member of the first, second and third place teams received Amazon gift cards.

Eight teams made the finals:

1.     Love Lock: This team addressed the issue of driving and texting by proposing an app that could be installed on your cell phone that would send reminders not to text while driving. This team would work with car insurance and mobile phone carrier companies and provide discounts to those who get it installed. The behavioral economics principles being tested are default choice and opt-out.

2.     McQuick & Fit: Too many people eat unhealthy food. This team’s idea was to have a rewards card that can only be used to purchase healthy food. With each purchase, the customer would earn points toward free, healthy foods. Online orders would be placed through a website that would feature salient labeling and allow for defaults to order healthy meals. The behavioral economics principles at play include pre-commitment, default choice, labeling, and incentives.

3.     Just Bring Me Water: The problem tackled by this team is “regrettable” calories—mindlessly consuming whatever is put in front of you, such as free bread at a restaurant, or soda on a plane. The innovation: when booking a table online or calling for a reservation, you could ask to “opt-out” of the complimentary bread or chips that are offered. This would reduce the consumption of regrettable calories.

4.     Lunch Club: This group looked at addressing gluttony through a partnership with a chain restaurant. When going out for a meal, portions are typically bigger and diners consume more. But what if you had the option of doggy-bagging one third of the meal for another meal—framed as “buy dinner and get lunch free”? And, if you took this option, you would get a scratch off as an enhanced incentive and immediate reward. The behavioral economic principles being tested here include loss aversion, active choice, and incentives.

5.     Snooze, But Don’t Lose: People don’t get enough good sleep, which leads to poor executive functioning and safety issues. To increase safety, productivity, and efficiency, this group proposed using a Fitbit to build in reminders to go to bed earlier and provide feedback on good sleep. The behavioral economic principles at play are pre-commitment and loss aversion.

Continue reading “Eight Bright New Ideas From Behavioral Economists That Could Help You Get Healthy.”

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One of the chief aims of the Affordable Care Act (ACA) is the expansion of insurance coverage to individuals who at present either cannot afford it or choose not to purchase it. Unfortunately, many Americans lack the financial literacy needed to navigate the numerous and complex options thrust upon them by the ACA.

The ACA contains a number of mechanisms through which coverage will be expanded, including the individual mandate, the state insurance exchanges, and the expansion of Medicaid.

Yet, while many more Americans will be able to obtain health insurance under the law, the new policies present a complex new choice environment for consumers, one that contains new penalties, new subsidies, and a potentially vast number of plans to choose from.  Successfully navigating these choices requires consumers to be financially literate.

As recognized in research on related areas of financial decision-making – such as retirement planning, investing, and debt – consumers often lack the understanding, ability and confidence to make financial choices that are in their best interest.

To shed light on consumers’ ability to navigate the ACA, we recently examined the distribution of financial literacy by household income.  Our findings were recently posted on the Health Affairs Blog and in a working paper by RAND’s Bing Center for Health Economics.

Continue reading “Why Explaining the Affordable Care Act Turns Out To Be A Lot Harder Than We Thought It Would Be.”

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My wife Mary and I recently got a series of early morning calls alerting us to the declining health of Mary’s mom, who was in her 90s. She died later that week. We were stricken and so sad, but took comfort that she died with dignity and good care on her own terms, and at her home in San Francisco.

Ten years ago, we received a very different early morning call, about my father.  An otherwise healthy and vigorous 72-year-old, Dad had fallen at home. Presuming he’d had a stroke, paramedics took him to a hospital with a neurosurgery speciality rather than to the university trauma center. That decision proved fatal.

A physician in Seattle at the time, I arrived the next day to find Dad in the intensive care unit on a ventilator. Dad’s head CT revealed a massive intracranial hemorrhage. Dad also had a large, obvious contusion on his forehead.

The following day, the physicians asked to remove Dad from the ventilator.  He died that night. We were profoundly devastated by his death and upset with the care he’d received.

Our family wasn’t interested in blame or lawsuits. We did, however, want answers:  Why hadn’t Dad been treated for a traumatic injury from a fall? Shouldn’t he have had timely surgery to relieve pressure from bleeding? What went wrong?

I’ve spent the last decade searching for answers, for myself and countless others, to questions about how to improve health care.  I’ve had the honor of working with many people pushing health care toward high value, at the Robert Wood Johnson Foundation(RWJF) and elsewhere.

We’ve worked hard to find solutions.  We all get it:  The health care problem is a big, complex one without silver bullet answers. Still, we’ve made incredible progress with efforts like RWJF’s Aligning Forces for Quality Initiative in which community alliances work to improve the value of their health care.

We’re searching for ways to help us all make smarter health care decisions.  We’re helping health care professionals improve and patients and families be more proactive.  We’re exploring the price and cost of care, and ways to automate health care information with technology.

And importantly, we’re working to align the incentives that health care professionals need to support and deliver great care.  We strongly believe that unless we reward great results, we won’t get them.  That means payment reform, with a focus on financial incentives for those who hunt for waste, resolve safety problems, sustain improvement, and, most of all, innovate to save more lives.

But do financial incentives to promote and reward behavior work?

Continue reading “Aligning Physician Incentives Doesn’t Do It”

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We have announced our second Call for Proposals in the field of behavioral economics. We’re actively seeking ideas that will help us to better understand how to discourage the consumption of low-value health services — those that provide more harm than benefit or which provide only marginal health benefits. In addition to improving health outcomes, this knowledge could contribute to lowering health care costs for us all.

Behavioral economics is an area of study by which I’ve personally grown increasingly intrigued and in which the Foundation has recently begun to invest. We all know, for example, that we need to exercise, eat right and be actively engaged in our own health care. But we don’t always do what we know we should do; knowing the “right” decision to make does not guarantee that we make that decision. The goal of behavioral economics is to uncover insights that could enable people to make better — more “rational” — choices for their health.

It’s not a given that the behavioral economic-driven solutions that have been shown to, for example, increase 401k savings will prove to be true when applied to the challenges of health and health care. But it’s a risk we want to take because we sincerely believe — if it does — that it could lead to the profound social impact that the Pioneer Portfolio, and the Robert Wood Johnson Foundation as a whole, is seeking.

Continue reading “RWJF Call for Proposals: Pioneering Use of Behavioral Economics”

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On occasion, your correspondent fights the northeast’s dreary weekend winter evenings with a dram of spirituous liquor like Macallan 12. Unlocked with a small splash of water and a single ice cube, a generous ounce of that pungent cinnamon leathery elixir turns the cold into cozy.

So naturally, your correspondent relies on spouse to help keep a therapeutic stock available.  Both yours truly and spouse run errands and it shouldn’t be too hard for either to be proactive by periodically checking supplies, buying some Macallan when necessary and avoiding the unhappiness of a dispirited and cold author.

Unfortunately,  spouse doesn’t always see it that way.

Welcome to the complicated world of behavioral economics. It tells us that it’s difficult for persons to expend effort today to reduce the tomorrow’s risk of an unlikely event. It’s why many persons chose to not take or pay for medications today to reduce the distant likelihood of disability or early death.  There’s more on the topic here.

This also explains why persons don’t do a good job getting a flu shot for themselves or their loved ones. Check out this interesting information from athenahealth. According to their pooled electronic health record (EHR) data, 2.5% of children without a flu shot came down with the flu, versus only 0.9% of those who got the shot.  While getting a shot reduced the relative risk of coming down with the disease by approximately two thirds, the vast majority of kids who went without immunization (97.5%) did OK.  Data from the CDC in adults reflects the same kind of numbers: 80% of persons in the U.S. do not come down with the flu in the course of the year.

How can the population health and care management community leverage behavioral economics to increase immunization rates?

Continue reading “Behavioral Economics and Influenza Immunization”

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Researchers at USC recently published a study designed to find out how much people are willing to pay for better drug coverage from their health insurance plan.  The question they posed to the general public was straightforward: How much extra money would you pay per month for a health insurance plan that would pay for “specialty drugs” if you need them?

Specialty drugs are expensive new treatments for diseases like leukemia, multiple sclerosis and rheumatoid arthritis.  These drugs often cost tens of thousands of dollars, and in some cases even run into six figures per patient.  But these high costs can be accompanied by significant benefit.  Gleevec for example can dramatically increase life expectancy for people with otherwise fatal leukemia.

Keep in mind that not only are specialty drugs expensive but they are being used with increasing frequency.  According to the USC team, 3 out of 100 people in the United States will use at least one specialty drug in the following year.

How much would you pay to make sure you aren’t responsible to pay for these drugs out of pocket?  Would you be willing to give your insurance company an extra $5 per month? $10?  Maybe even $20?

The USC team found that, on average, people were willing to spend around $13 extra per month to make sure their health insurance plans cover such specialty drugs. (The study was published in the April issue of Health Affairs, and was led by John Romney.)  To put that into perspective, the actuarial cost of such coverage—how much insurance companies would expect to spend per person if everyone obtained such coverage—is around $5 per month.

Continue reading “Is Health Insurance Too Cheap?”

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