Improving Health and Health Care Using Behavioral Economics¶
Chapter 494 | Part 20: Emerging Topics in Clinical Medicine · Parts 19-20 – Consultative & Emerging Topics · Chapter 494
Key Clinical Points¶
- Behavioral economics identifies that individuals are not perfectly rational utility maximizers but make predictable decision errors.
- Loss aversion implies that penalties are significantly more motivating than equivalent rewards (a multiplier of 1.5 to 2.5).
- Nudges and defaults can be leveraged to increase enrollment in beneficial programs, such as organ donation and generic prescribing.
- Present bias (hyperbolic discounting) leads individuals to over-weight immediate costs/benefits, negatively impacting long-term medication adherence.
- Deposit contracts leverage loss aversion and overoptimism to promote behavior change, such as weight loss.
- Regret aversion can be used to motivate preventive behaviors like vaccination by highlighting the 'fear of missing out' (FOMO).
- The 'peanuts effect' suggests that bundling rewards is more effective than offering many small, individual rewards.
- Narrow bracketing suggests framing rewards in terms of effort per day rather than per month or year to improve motivation.
- Rational-world bias is a common clinical trap where providers assume that providing information alone will lead to desired behaviors.
- Internalities (costs to one's future self) provide a justification for interventions even when no external harm is caused to others.
DEFINITION & OVERVIEW¶
• Core Concept: Behavioral economics builds on traditional economics by incorporating human decision-making flaws such as limited attention, overconfidence, and problems of self-control. • Traditional vs. Behavioral Economics: → Traditional: Assumes individuals are rational utility maximizers; assumes framing does not matter; focuses on externalities (harm to others). → Behavioral: Recognizes that people make decision errors; acknowledges that framing affects assessment even when utilities are the same; addresses internalities (harm to one's future self). • Nudges and Paternalism: → Nudge: Any aspect of the choice architecture that alters behavior in a predictable way without forbidding options or significantly changing economic incentives. Must be easy and cheap to avoid. → Libertarian Paternalism: Protecting people without limiting freedom of choice. → Asymmetric Paternalism: Helping individuals prone to irrational decisions without restricting the freedom of those making informed, deliberate decisions. • Internalities vs. Externalities: → Externalities: Costs or benefits individual behaviors impose on others. → Internalities: Costs individuals impose on themselves—typically their future selves (e.g., smoking, poor diet).
Table 494-1: Traditional Versus Behavioral Economics¶
| TRADITIONAL ECONOMICS | BEHAVIORAL ECONOMICS |
|---|---|
| Core theory: Expected utility maximization | Core theory: Prospect theory |
| Assumes perfect rationality | Recognizes that people make decision errors |
| Starting point independent | Assessment depends on your starting point |
| Framing doesn't matter | Framing affects assessment even when utilities are the same |
| Stable preferences | Time-inconsistent preferences |
| People discount the future at constant rates | People discount the near future to a greater degree and have time-inconsistent discounting |
| Intervene only when my actions adversely affect others (negative externalities) | Consider interventions when people will harm their future selves (internalities) |
EPIDEMIOLOGY¶
• Impact of Behavior: → 40% of premature mortality in the US is estimated to be linked to tobacco use, physical inactivity, unhealthy diet, and excessive alcohol. • Economic Burden: → 75% of the $4.3 trillion spent on healthcare in the US is attributable to cancer, heart disease, type 2 diabetes, and obesity—all conditions strongly influenced by behavior. • Adherence Gap: → Nearly one-half (50%) of patients prescribed medications for hypertension within 1 year following myocardial infarction stop taking these drugs, even when provided free of charge.
ETIOLOGY & PATHOPHYSIOLOGY¶
• Prospect Theory: A framework for describing behaviors not explained by expected utility theory. → Reference-dependence: How people feel about outcomes depends on their starting point. → Loss Aversion: People dislike losses much more than they like equivalent-sized gains. → Diminishing Marginal Utility: Decreased sensitivity to both gains and losses. • Present Bias & Hyperbolic Discounting: → Overweighting immediate costs/benefits relative to those occurring in the future. → Result: Individuals are more willing to begin dieting 'tomorrow' because the immediate cost of deprivation is avoided today. • Loss Aversion & Framing: → A potential penalty of $1000 for failing a target is roughly as potent a motivator as a reward of 1500 to 2500. (Ratio: 1.5 to 2.5). • Regret Aversion: → Individuals seek to make decisions today that reduce the risk of future regret ('If only I had...'). → Modern context: Often expressed as 'FOMO' (fear of missing out). • Rational-World Bias: → The assumption by policy designers that people's choices are deliberative and rational. → Leads to the false belief that information provision alone is sufficient for optimal decision-making.
Table 494-2: Key Decision Errors and Solutions¶
| Decision Error | Suggested Strategy |
|---|---|
| Present-biased preferences | Provide feedback and rewards quickly |
| Overoptimism and loss aversion | Get people to precommit and put money at risk (e.g., deposit contracts) |
| Peanuts effect | Deliver rewards in bundles, avoiding many small rewards |
| Narrow bracketing | Frame rewards in terms of effort per day rather than per month or year |
| Defaults/status quo bias | Change the architecture to shift the path of least resistance toward healthy decisions |
| Regret aversion | Help people anticipate the regret of poor choices |
| Loss Aversion and Framing Effects | Change the environment of choice to favor healthy decisions |
| Rational-world bias | Move beyond the assumption that information alone leads to behavior change |
CLINICAL FEATURES¶
• General Manifestations: → Smoking cessation failure despite free medication. → Obesity and weight gain despite knowledge of health hazards. → Medication non-adherence due to present bias (overweighting immediate costs). → Risk aversion leading to holding onto losing investments (e.g., complex insurance plans). • Hypertension Management: → Patients often fail to see the small daily cost of medication as a way to avoid a large, distant, and uncertain future stroke. • Loss Aversion in Practice: → Framing rewards as losses by 'fronting' a sum of money that is lost if goals are not met is more motivating than offering equivalent gains. • Regret Aversion in Prevention: → Significant increase in vaccination use among people who experienced illness after failing to get vaccinated. • Rational-World Bias in Insurance: → Most consumers lack an understanding of basic insurance concepts (deductibles, copayments, coinsurance) and cannot compute costs for basic services.
DIFFERENTIAL DIAGNOSIS¶
• Rational vs. Irrational Decisions: → Rational: Dispassionate assessment of net present value. → Irrational: Driven by timing, frequency, saliency, and framing. • Identifying Behavioral Biases: → Present Bias: Assess discounting of future harms (e.g., medication adherence). → Loss Aversion: Assess response to penalties vs. rewards (e.g., quality targets). → Regret Aversion: Assess motivation to avoid future regret (e.g., vaccination after illness).
INVESTIGATIONS & DIAGNOSIS¶
• Diagnostic Criteria for Behavioral Biases: → Loss aversion ratio in a range of 1.5 to 2.5. → Hyperbolic discounting patterns (overweighting immediate costs/benefits). → Status quo bias (tendency to take the path of least resistance). • Diagnostic Algorithm: 1. Assess patient's discounting of future harms (e.g., medication adherence for hypertension). 2. Assess patient's response to penalties vs. rewards (e.g., quality targets). 3. Assess patient's tendency to take the path of least resistance (e.g., default options).
MANAGEMENT & TREATMENT¶
- Nudges and Defaults: → Alter choice architecture without forbidding options or changing economic incentives. → Examples: Default enrollment in organ donation; default selection of generic medications.
- Deposit Contracts: → Use precommitment where participants put money at risk (e.g., weight loss programs). → Leverages both loss aversion and overoptimism to drive behavior change.
- Financial Incentives (Framed): → Frame rewards as losses rather than gains to leverage the 1.5–2.5 multiplier. → Note: Direct payments are often less effective than deposit contracts for long-term goals.
- Lottery-Based Incentives: → Use 'regret aversion' by informing non-adherent participants that they would have won a prize if they had complied (e.g., taken meds or checked BP).
- Environmental Changes: → Alter the environment to shift the path of least resistance. → Examples: Strategic placement of healthy food; removing high-calorie items from vending machines.
PROGNOSIS & COMPLICATIONS¶
• Weight Loss Outcomes: → Control group: ~4 lbs lost. → Lottery group: ~13 lbs lost. → Deposit group: >15 lbs lost. → Note: High-risk individuals may be deterred from deposit contracts by upfront costs. • Long-Term Adherence: → No significant difference found between continuous 8-month weight loss and 6-month weight loss with 2 months of maintenance (both achieved ~10 lbs mean loss). → Lottery incentives showed modest improvement over control but were not significantly better than environmental changes alone.
SPECIAL CONSIDERATIONS¶
• Addiction: → Deposit contracts and small incentives for tobacco cessation can triple success rates compared to large, delayed health benefits. → Effective for opiate and cocaine addiction where standard consequences (loss of job/family) are insufficient to motivate abstinence. • Vaccination: → Regret aversion is a key driver; lottery-based systems can leverage this by showing what was 'lost' due to non-compliance. • School Districts and Employers: → Use environmental changes (vending machines) and default changes in food selection to drive healthier choices.
KEY PEARLS & CLINICAL TRAPS¶
• Incentive eq Behavioral Economics: Providing a financial reward is 'Economics'; designing the structure of that reward (e.g., loss vs. gain, deposit vs. payment) is 'Behavioral Economics'. → Framing: The way an incentive is delivered can be more important than its absolute magnitude. • The Peanuts Effect: Avoid many small rewards; bundle them to maintain motivation. • Narrow Bracketing: Frame rewards in terms of effort per day rather than per month or year. • Rational-World Trap: Do not assume that providing information alone will change behavior in patients with high present-bias or loss-aversion profiles.
Reference Tables¶
TABLE 494-1 Traditional Versus Behavioral Economics¶
Harrison's 22e, p.3916
| TRADITIONAL ECONOMICS | BEHAVIORAL ECONOMICS |
|---|---|
| Core theory: Expected utility maximization |
Core theory: Prospect theory |
| Starting point independent | Assessment depends on your starting point |
| Stable preferences | Time-inconsistent preferences |
| Intervene only when my actions adversely affect others (negative externalities) |
Consider interventions when people will harm their future selves (internalities) |
TABLE 494-2 Key Decision Errors and Suggestions for Addressing Them Present-biased preferences Provide feedback and…¶
Harrison's 22e, p.3916
| Present-biased preferences | Provide feedback and rewards quickly |
|---|---|
| Overoptimism and loss aversion |
Get people to precommit and put money at risk as an effective motivational tool |
| Narrow bracketing | Frame rewards in terms of effort per day rather than per month or year |
| Defaults/status quo bias | Change the architecture or environment of choice to shift the path of least resistance to favor healthy decisions |