Monday, February 7, 2011

Healthcare and Behavioral Economics

We all know that exercise is good for health, but how many of us actually do. All smokers know that they are doing a great disservice to their own health, but this awareness fails to prevent them from smoking. The big three – cancer, heart diseases and obesity are to a large extent the result of the poor health choices that we make. In fact, in a 2008 paper entitled Personal Decisions Are the Leading Cause of Death, Professor Ralph Keeney of Duke University estimates that every one million of the 2.4 million deaths in the U.S. in the year 2000 could be attributed to personal decisions. Furthermore, those deaths could have been avoided if alternative choices were made. Specifically, Professor Keeney found that 46% of deaths due to heart disease and 66% of cancer deaths could be attributed to personal decisions. These numbers are shocking and alone should serve as a wakeup call for changing behaviour. Poor compliance of treatment protocols by patient is a major cause of death and contributes to very high cost of healthcare. For example, research shows that missing an appointment with the doctor in the US has an average cost of 700$. Why then, is the healthcare industry not making more progress? Why are citizens still making irrational decisions that they intuitively know will lead to bad results? The science of behavioral economics can give us some insight into decision-making processes and, more importantly, help us to better understand how to influence those processes to encourage individuals to make better choices about their health.

Considering healthcare, imagine if BE principles could be applied to help stroke patients follow their treatment protocols more closely. In most cases after a stroke, doctors prescribe a blood thinner to help reduce the chance of recurrence from 24% to 4%. Despite the fact that taking this drug significantly reduces the chance of additional brain damage, many patients do not take their medicine! Researchers Kevin Volpp, George Loewenstein et al., created a small scale experiment to see if they could combine three incentive ideas drawn from BE to change this sad state of affairs. In a paper entitled “A Test of Financial Incentives to Improve Warfarin Adherence,” (warfarin is a blood thinner) the researchers used: (1) small, quick, frequent rewards, (2) a small chance at a big reward, and (3) the regret of missing a payoff in their clever design. In one test group, each day 20 patients were entered into two lotteries. All participants had a 1 in 5 chance at a $10 prize, and a 1 in 100 chance of a $100 prize. An electronic pillbox in their homes recorded their behavior. The daily lottery was conducted and patients were notified if they won. If they had not taken their pills correctly, they were told they would have won, but regretfully they had not complied with the drug regimen so they received nothing. Noncompliance dropped from 22% to under 2% for the entire three months of the study.

Think about how cost effective this type of incentive can be. For $3 a day, it is possible to significantly improve drug adherence and in all likelihood decrease strokes and improve wellness. What is remarkable to me is that a well-designed $3 payoff was a more powerful motivator than a 20% decrease in the likelihood of an additional stroke. Investments in such creative solutions that reflect how people really think, as opposed to how they are supposed to think, could create a huge, measureable, humane, and rapid return for patients and all of us.

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