LEARNING A NEW WAY
More employers, insurers are getting on the behavioral economics bandwagon to influence—not force—people to make healthy choices to cut costs
The new reform law relies on financial incentives to change the behavior of everyone from patients to providers
Would you become an organ donor if it were the default option on your driver’s license? How about contribute to a retirement plan if your employer automatically enrolled you in one? Or consume less energy if a light in your home glowed red when you cranked up the heat? Research indicates that you would. All of these are examples of behavioral economics—in which social behaviors and human emotions influence economic choices. Popularized by recent bestselling books Nudge, Freakonomics and Predictably Irrational, behavioral economics is a hot area of study. And it’s captivating retailers, employers, insurance companies and even high-ranking officials in the Obama administration.
Now, the obesity crisis, skyrocketing costs and errors, waste and inefficiencies in the healthcare system are promoting experimentation with behavioral incentives on a nationwide scale. How successful the disparate efforts will be remains to be seen.
The biggest test of how well behavioral economics can be applied to healthcare is the new federal health reform law, which contains in its more than 1,000 pages many opportunities to nudge people toward better health choices.
“There’s definitely a general fascination about this area,” said Alan Garber, an internal medicine physician and professor of medicine and economics at Stanford University. “In healthcare, for years and years and years there’s been an interest in changing provider and consumer behavior.”
What’s new is that money is flowing into research on behavioral economics, and the government is getting involved, Garber and others said. Over the next five years, the government will put behavioral economics into practice on a large scale through the Patient Protection and Affordable Care Act.
Several high-ranking officials in the Obama administration are strong proponents of behavioral economics. Cass Sunstein, coauthor of Nudge, is now the administrator of the White House Office of Information and Regulatory Affairs. Peter Orszag, director of the White House Office of Management and Budget, has spoken about the promise of behavioral economics to control costs.
But some worry that behavioral economics could exacerbate health disparities, or inadvertently punish the elderly or people who suffer from chronic diseases.
Meanwhile, some employers are moving fullforce to apply behavioral economics to benefitpackage design in order to cut healthcare costs.
The most obvious example of behavioral economics in the new healthcare law—and one that drew fire from chronic-disease groups—is a change in employer wellness program incentives. Starting in 2014, employers can offer workers rewards worth up to 30% to 50% of their cost of health coverage for participating in a wellness program and meeting health benchmarks. The law also sets up a 10state pilot program for similar wellness initiatives on the individual insurance market.
The idea is to create more incentives for workers than is allowed by law today to improve their health, and thus lower medical costs for everyone. The large incentives were
Michelle Obama’s Let’s Move initiative tackles childhood obesity. The program is designed to be a behavior-changer.