More em­ploy­ers, in­sur­ers are get­ting on the be­hav­ioral eco­nom­ics band­wagon to in­flu­ence—not force—peo­ple to make healthy choices to cut costs

Modern Healthcare - - Front Page -

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.

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