Insight into people’s irrational choices can improve healthcare.
Behavioral economics is the study of how individuals analyze economic choices and make decisions. It recognizes that they are not the rational, reasoned people described in classic supply-and-demand economic theory. Instead, because they are emotional and full of cognitive quirks, they do not weigh risk-and-reward issues very well.
“The goal of behavioral economics is to identify the various triggers that shift behavior and then use those triggers to create an environment that makes it easier for individuals to make healthy decisions,” says Rick Leander, CEO of LFB Holdings, a behavioral insights consulting company in Winston-
Salem, North Carolina.
Within behavioral economics, techniques and programs exist to help people make decisions that are presumably better, or at least more rational. The health insurance industry has used these tools to influence behavior in various ways.
One tool is the nudge, a slight tweak of the environment to guide decision-making. Health insurers can use nudges to get members to choose in-network care over out-of-network care by decreasing coverage of the latter. “While the insured party can still choose an out-of-network provider, the higher price orients them toward an in-
network provider,” says Preet Anand, co-founder and president of Snug, an app-based daily check-in service for seniors living alone.
Another tool, hyperbolic discounting, offers something for a limited time after which the offer is gone, says Lisa Freeman Foote, M.A., director of health engagement design at HMS, a healthcare technology company based in Irving, Texas. Freeman Foote says an insurer might, for example, tell members with diabetes, “ ‘We have a limited number of free kits to send to members today to help them manage their blood sugar. Would you like one, before they are no longer available?’ The key is to create a sense of urgency.”
Another tool in behavioral economics plays on people’s perceptions of time. Often that means strategically timed emails and text messages to help jog the memory. “For many people, time passes quickly without them realizing it,” Freeman Foote says. “This causes them to sometimes forget that they need to do something because they feel like they just did it.” For example, a woman might forget that it has been two years since her last mammogram.
One of the most noted success stories in behavioral economics concerns organ donations. There is a dearth of critical organs for transplant, both domestically and internationally, says Thomas Rice, Ph.D., a professor at the UCLA Fielding School of Public Health in Los Angeles. States and countries have set “organ donor” as the default on driver’s licenses as a way of increasing donors.
Researchers have found that people rarely choose the cheapest health insurance plan, even when the benefits of alternative plans are identical. When plan benefits are not identical, people often do not comprehend the differences because of cognitive overload. “There are ways to cut down on information overload, including reducing the number of choices available to a manageable number by removing uncompetitive or unpopular plans, removing extraneous information from comparison tables … and using star ratings rather than exact dollar figures to catch the eye,”
But researchers have discovered that the success of interventions predicated on behavioral economics is sensitive to context — meaning what worked in one environment may not work in another, even if the new environment appears identical. “Every intervention should be viewed as a way to learn, to get smarter and to test assumptions that earlier interventions may have supported,” says Leander. “Most behavioral economists consider every one of their interventions an experiment.”
“I am a huge fan of Paul Saffo’s concept of strong opinions weakly held,” Leander continued. “We know that every opinion is based on incomplete information, and that a smart way to think about that reality is to be willing to formulate an opinion based on early and incomplete information and then systematically look for insights that would tear that opinion apart.”
A study published in 2019 in the Journal of General Internal Medicine hints at the limitations of behavioral economics. Neither reminders from electronic pill bottles nor bidirectional text messaging about medication adherence improved blood pressure control. But Anand does not see the study as evidence that behavioral economic interventions don’t work, because there was already a high level of adherence. “There was very little to improve upon, especially because there were only 150 people in the study,” he says. “In general, medication adherence is thought to be around 50%. (Those are) the conditions and control I would test this against.”
Freeman Foote notes that the goals of the two different messages being sent to the pill bottle group were to provide encouraging nudges to either celebrate the “victory” of taking the pill yesterday or to urge people to take it today, she says. “There is room to improve the messaging by providing stronger language,” says Freeman Foote. “If they tested different messaging, they may have seen that by addressing the severity of not taking the medication exactly as it should be taken. There may have been shifts in adherence or blood pressure levels.”
The COVID-19 pandemic has led to an unexpected increase in the use of telehealth. Freeman Foote says behavioral economics could provide some useful insights into telehealth usage and those who are reluctant to use it: “If we could ascertain more about people’s motivations or lack thereof by addressing barriers, then smart communications and content could be developed using behavioral techniques to continue growing adoption.”
When reflecting upon the successes and failures of behavioral economics used in healthcare, Freeman Foote says she has learned the pitfalls of generalizations. “It’s important to develop tailored and specific communications to meet individuals where they are in their current healthcare journey and plan for that unpredictability,” she says. “There will never be a one-size-fits-all solution, because all people act differently. When taking a more personalized approach, the odds of driving positive behavioral change are greatly increased.”
Leander has learned that shifting behaviors is difficult. “People are wired for instant gratification, yet in healthcare we often ask people to shift behaviors now for benefits that will not show up for years or decades, such as ‘don’t drink sugary sodas to avoid getting diabetes in 20 years.’ We need to find ways to provide shorter-term benefits for these kinds of behavioral shifts.”
Rice has realized that it is difficult to predict how effective a new behavioral economic strategy will be because there is no underlying theoretical model that helps gauge the impact of specific interventions. “One thing that’s great about behavioral economics is that interventions are often very cheap compared to traditional economic incentives,” he says. A study in Africa, for example, found that if a person with HIV has a good chance of winning a very small prize in a lottery, they are more likely to take antiretroviral medications.
The bottom line is that many principles of behavioral economics can be applied to healthcare. “Some work better than others, but all of them have their place and purpose and should be applied and tested appropriately in the industry,” Freeman Foote says.
Karen Appold is a medical writer in the Lehigh Valley region of Pennsylvania.