Healthcare spending in the U.S. is out of control and part of the reason for the approaching train wreck is that decision makers place too much trust in people’s ability to think rationally. At least that’s the conclusion of a recent analysis in Health Affairs. Part of the solution, according to the report, rests in a deeper understanding of behavioral economics.
Dominic King and his associates from Imperial College London believe policy makers place too much emphasis on the conventional economic theory of rational choice. “The theory assumes that people weigh the probabilities and utilities of possible outcomes based on information in the marketplace about price, quality, function … and reliably pursue the option that provides the most benefit to themselves,” they write in Health Affairs.
But behavioral economists contend that human behavior is not guided by logic and that understanding of the illogic used by many decision makers can help cut costs when dealing with both clinicians and patients.
A review of the research literature and interviews with several leading behavioral scientists led the British team to develop a collection of insights on how to take advantage of these human tendencies.
A case in point: People tend to prefer that things stay the same and they often make major decisions based on that inertia. Using that mindset in setting medication prescription policy can have a dramatic effect on the bottom line. Simply making generics the default choice for all prescribers is one way to tap that inertia. In a study conducted at Vanderbilt University Medical Center, investigators discovered that using this default approach led to an increase in generic prescriptions from 32.1 percent to 54.2 percent over a two-year period.
King offered additional evidence to support the benefit of default thinking during a recent email exchange with Healthcare Finance News: “Typically when there is an opt-in system [for persons deciding to enter organ donor registries], consent rates are often less than 25 percent. When the default is reversed and is opt-out, the number of people on the register is much higher (often over 80 percent) …. Defaults have been successfully used to change behavior around health insurance and even ventilator settings in intensive care units where changes in defaults can actually save lives.”
Similarly, healthcare decision makers may want to take advantage of the human tendency to trust only those experts who are members of their own “tribe.” “People irrationally disregard advice from sources they do not like, while they are inclined to act on information from a source they respect or who is an expert in his or her field,” wrote King and his colleagues in their paper. That mindset can cause physicians and patients to ignore sound advice from the government or health insurers and give preferential treatment to advice from their peers.
One study, for instance, found that 82 percent of physicians put faith in guidelines from their own professional association, versus 6 percent of physicians who trusted the same recommendations when they came from an insurance company. Similarly only 23 percent of parents accepted vaccination advice that came from government experts, versus 76 percent when it came from their pediatrician.
Christopher Kerns, a managing director at The Advisory Board Company, brought a different perspective to the discussion of behavioral economics. He believes most clinicians, given the incentives that have been in place, have actually made very rational decisions. “In a system that rewards volume over value,” he said, and one in which there’s no downside to order a series of diagnostic tests, it’s very rational to take do just that.
Kerns was quick to point out, however, that patients are more likely to make irrational healthcare decisions. “I think behavioral economics applies much more forcefully to patient decisions,” he said. For example, he said, many patients make difficult, emotion-laden decisions during acute care and end-of-life situations, and often those decisions translate into large healthcare expenditures. Kerns said that if providers can get patients to make these decisions before they are in such emotional tumultuous situations, outcomes that are more agreeable to patients and their families will result and ultimately be less costly.