Ir­ra­tional model

Health­care econ­o­mist re­veals con­nec­tion be­tween be­hav­ior, care

Modern Healthcare - - BOOKS - Ja­son Shafrin, who blogs at health­ca­reeconomist.com, is a re­search econ­o­mist at Pre­ci­sion Health Economics in Los An­ge­les.

It’s long been known that health­care does not fit the econ­o­mist’s stan­dard model for per­fect com­pe­ti­tion. But Dou­glas Hough, a pro­fes­sor of economics at Johns Hop­kins Univer­sity, goes fur­ther: He says pa­tients, providers and other stake­hold­ers are ir­ra­tional. His book, Ir­ra­tional­ity in Health Care: What Be­hav­ioral Economics Re­veals About What We Do and Why, claims peo­ple are ir­ra­tional in pre­dictable ways. Ja­son Shafrin, a health­care econ­o­mist, re­cently in­ter­viewed Hough for Mod­ern Health­care.

Ja­son Shafrin: Your book fo­cuses on be­hav­ioral economics and (how) its ap­pli­ca­ble to health­care pa­tients, care­givers and providers. How does be­hav­ioral economics dif­fer from neo­clas­si­cal economics?

Dou­glas Hough: Stan­dard economics as­sumes that peo­ple are ra­tio­nal. Be­hav­ioral economics says they act non-ra­tio­nally in pred­i­ca­ble ways so we can ac­tu­ally pre­dict what ways in which they are go­ing to make mis­takes. One of the themes of the book is that you have im­per­fect peo­ple mak­ing im­per­fect de­ci­sions. Be­hav­ioral economics is much bet­ter than stan­dard economics at ex­plain­ing and even pre­dict­ing that kind of be­hav­ior

Shafrin: One of the most in­ter­est­ing con­cepts you men­tion in your book is ac­tion bias. Can you de­scribe what ac­tion bias is?

Hough: Ac­tion bias is es­sen­tially, don’t just stand there, do some­thing. When pa­tients visit a physi­cian, they ex­pect a physi­cian to do some­thing (whether it is) mak­ing a di­ag­no­sis, cre­at­ing a treat­ment plan, writ­ing a pre­scrip­tion, or­der­ing an MRI (or) ad­mit­ting the pa­tient. There are a num­ber of times, how­ever, when the physi­cian knows that there isn’t re­ally a need for any of that. The clas­sic joke among physi­cians is that: “I can write a pre­scrip­tion and you’ll get bet­ter in seven days, or I can not write a pre­scrip­tion and you’ll get bet­ter in a week.” But what pa­tients want is ac­tion.

Shafrin: An­other in­ter­est­ing statistic you cite is that one quar­ter of new pre­scrip­tions are never filled. How can be­hav­ioral economics ex­plain this phe­nom­e­non?

Hough: This is cu­ri­ous. You have pa­tients who are ask­ing for some­thing to be done, yet 25% of them don’t even ful­fill their pre­scrip­tions. There are some stan­dard eco­nomic rea­sons for that: The price could be too high or it could take a while to go and get the pre­scrip­tion. Where be­hav­ioral economics comes in here, per­haps the pre­sent­ing prob­lem starts to sub­side and it doesn’t be­come as salient to the pa­tient, and the pa­tient de­cides, well, I re­ally don’t need the treat­ment af­ter all, when in fact, the pa­tient needs some ac­tion.

Shafrin: Do you think that physi­cians could do a bet­ter job of ex­plain­ing the need for pa­tients to ad­here to their treat­ment reg­i­men?

Hough: One cu­ri­ous ob­ser­va­tion is that ad­her­ence to treat­ment reg­i­mens go up a few days be­fore see­ing a physi­cian and a few days af­ter see­ing a physi­cian. So if a physi­cian is re­ally con­cerned about a pa­tient ad­her­ing to a treat­ment reg­i­men, he or she might strongly rec­om­mend that the pa­tient come back within a week.

Shafrin: Peo­ple of­ten per­form bet­ter, in terms of choos­ing bet­ter when they have fewer choices. Why is that the case? Most econ­o­mists think that more choice is bet­ter.

Hough: What be­hav­ioral psy­chol­o­gists and be­hav­ioral econ­o­mists have dis­cov­ered is that more choice is not nec­es­sar­ily bet­ter. The prob­lem is re­gret bias. If they are shown five things and are asked to choose among them, they can prob­a­bly choose well. But if they are of­fered 25 or 50, peo­ple end up not choos­ing at all. This is ac­tu­ally what hap­pened at the be­gin­ning of Medi­care Part D, when pa­tients were given an ex­tra­or­di­nary num­ber of pre­scrip­tion drug plans choices, and a good num­ber of the el­derly were par­a­lyzed by hav­ing to make that choice. My mother was an in­cred­i­bly suc­cess­ful busi­ness woman, but when at the age of 85 she was faced with the choice of among 45 plans in Vir­ginia for Part D, she just threw up her hands and said, “Well, I don’t know which one to pick. Doug, you pick one for me.”

Shafrin: But who chooses the choices? Hough: There are a cou­ple of ways which I think would be bad. For in­stance, some ex­pert sits down and de­cides, here are the 10 best choices. That ex­pert might not have the right set of pref­er­ences (for) an in­di­vid­ual. One of the ways of do­ing this is to of­fer an in­di­vid­ual five dif­fer­ent choices ran­domly cho­sen from the 45. If you don’t like one, we can give you five more. Or if you like this one, we can give you a cou­ple of oth­ers ones to com­pare it with. You can con­tinue un­til you as an in­di­vid­ual are sat­is­fied that you have the right plan.

Shafrin: In France, they have the con­sumers pay for physi­cian vis­its up front, and only later is the pa­tient re­im­bursed by in­sur­ance. Would a sim­i­lar sys­tem in the U.S. im­prove ef­fi­ciency and re­duce uti­liza­tion?

Hough: I think it would be a great idea. Here’s where you have a nice blend of stan­dard economics and be­hav­ioral economics. Stan­dard economics says that if you raise the price from ef­fec­tively zero, which an in­sured in­di­vid­ual is go­ing to be pay­ing, to an ac­tual phys­i­cal price, then they are go­ing to think twice if they ac­tu­ally need to go to that physi­cian. Here’s where the be­hav­ioral economics comes in: Rais­ing the price af­fects be­hav­ior even when they will be re­im­bursed for that pay­ment within a short pe­riod of time. I think it would be very ef­fec­tive for con­trol­ling un­nec­es­sary uti­liza­tion of health­care ser­vices.

Author Dou­glas Hough claims peo­ple are ir­ra­tional in pre­dictable ways.

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