Health is Wealth: Behavioral Economic "Nudges" Applied to Healthcare

by Cameron Watts

Georgia College & State University

“Health is wealth,” is a common catchphrase adopted by non-profits and clinics to describe the inherent value of investing in one’s physical and mental wellbeing. However, most people do not recognize the truth behind the phrase – the financial return on health investments. The Center for Disease Control and Prevention (CDC) reported in 2010, that over 2.3 trillion dollars were spent to treat chronic and mental health diseases, many of which were preventable (Gerteis et al., 2016); Furthermore, the Congressional Budget Office expects 966 billion dollars to be spent on Medicare and Medicaid alone in 2018 (Projections for Major Health Care Programs for FY 2018 2018). That is money straight from the taxpayer’s pocket and health care costs continue to rise.

There is no silver bullet solution to this health care crisis; it must be tackled just like eating a whale —one bite at a time. One of these bites extends from the emerging field of behavioral economics. A divergent subset of classical economics, this new perspective compiles psychological, cognitive, emotional, cultural and social factors to analyze and offer non-restrictive solutions to the irrational economic decisions made by individuals and institutions. Decisions like refusing to take one’s medication or binging on sugary foods after being diagnosed with diabetes. People need and ask for help to escape the habits and logical fallacies that do not have their best interests at heart.

As previously mentioned, behavioral economics does not offer a large-scale solution to the numerous problems with America’s healthcare system, but it does provide effective insights to supplement current efforts in both preventative and administrative health care. How can doctors help their patients stay on a diet or increase their exercise? They can prescribe mobile phone applications. How can hospitals save money when prescription drug prices have skyrocketed? They can make generic drugs the default medication instead of the more expensive name-brand drugs. These are simple, scalable, cost-effective solutions backed by scientific evidence to save money and improve wellbeing. With the costs of chronic illness on the rise, behavioral economics offers these unique solutions to adjust stubborn human behavior towards healthy and cost-effective habits without constraining one’s freedom to choose.

The bittersweet truth is that many of the chronic diseases plaguing the country could be avoided if citizens made small adjustments in their lifestyle choices in three fundamental and interrelated areas: exercise, diet, and mindset. In 2013, 80% of Americans did not complete the recommended amount of weekly physical activity (Jaslow, 2013). Something as trivial as taking the stairs instead of the elevator can help strengthen the heart and increase blood flow; however, exercise without the proper diet is not effective. The CDC reports that in 2015, more than 37% of adolescents and 40% of adults said they ate fruit less than once a day, while 39% of adolescents and 22% of adults said they ate vegetables less than once a day (Nutrition, Physical Activity, and Obesity: Data, Trends and Maps, 2018). Substituting fruit for dessert or carrot sticks for potato chips are easy changes to consume the essential nutrients contained in fruits and vegetables. The American Psychological Association reported in 2013 that 42% of people felt more stressed than they did 5 years ago (A Stress Snapshot: High Stress Doesn't Appear to be Going Anywhere, 2013). Stress has been directly linked with cardiovascular disease and cravings for unhealthy foods (Steptoe & Kivimäki, 2012). The regular practice of meditation can significantly reduce stress levels and the risk for heart disease (Harvard Health Publishing, 2012). All these factors are within people’s control, but continuously managing the above-mentioned areas over a lifetime is incredibly difficult. Sometimes people just need a little extra support.

To help change behavior, one must first understand the nature of when and why people make these irrational health decisions. Behavioral economics has uncovered a variety of concepts that do just that. The first stems from a centuries-old observation first verbalized by the father of economics, Adam Smith, when he said, “The pleasure which we are to enjoy ten years hence, interests us so little in comparison with that which we may enjoy to-day” (Raphael, 1976).  He is describing present bias, which is a human tendency to “overvalue immediate benefits at the expense of future ones,” explaining why people prefer to eat a chocolate bar instead of going to the gym (Mullainathan & Shafir, 2014). To fix this bias, one must bring the benefits of going to the gym or eating healthy into the present. The mobile app, SideKickHealth, does just that by gamifying healthy behavior. Users earn points for healthy activities like eating a serving of fruit, completing an exercise routine, or taking time to meditate. Furthermore, people can receive immediate feedback on their behaviors and develop the habit of self-monitoring their lifestyle, a concept that research has linked to a consistent increase in weight loss (Thorgeirsson & Kawachi, 2013). Using these behavioral economic insights, SideKickHealth “users are up to 3x more likely to reach their 5% weight-loss goals,” and “they have up to 30% lower dropout rates than control groups” that do not use the app (Thorgeirsson, 2018). These everyday people just needed a free app to lead them towards a healthier life.

Another free app generating a lot of buzz is called, Wellth. This app’s primary focus has been entirely on medication adherence to prevent hospital readmission rates and their associated costs. Wellth pulls from another behavioral economic concept called loss aversion, which simply means, “losses hurt about twice as much as gains make you feel good” (Thaler, 2016). The app offers anyone who enrolls $150 for 90 days of medical adherence—taking their pills on time. The catch is, they lose $2 every time they miss a dose, capitalizing on the heightened impact of losses as opposed to gains. A 2014 study discovered that similar financial incentives of just $1.40 per day could increase medication adherence rates by 17% on day one and 35% 6 months after the initial prescription (Sen et al., 2014). Additionally, the app sends daily notifications, reminding the user to take their medication, something small that has been found to hold significant effect on people’s ability to consistently take their medications on time (Kannisto, Koivunen, & Välimäki, 2014). Both factors combined have contributed to a 40% or higher decrease in hospital readmission rates saving on average. This is equivalent to $7,515 in readmission fees per patient using the app (Krumholz et al., 2002).

Once the tools have been created, it becomes the responsibility of healthcare providers to connect the tools with those in need. Thus, an innovative practice would be to prescribe these apps like medications. While this is still a largely untested and unknown area within healthcare, there is a precedent for the prescription of apps and it has thus become a hotly contested concept in the medical world (Brustein, 2012). Many point to concerns about the risk of apps staked in faulty information or whether personal data can be protected through these new platforms, but with 64% of Americans owning a smartphone, app prescription can become an innovative, cost-effective, and accessible solution to many of the behavior issues traditional medication cannot address (Smith, 2015). As both SideKickHealth and Wellth demonstrate, the potential benefits of smartphone apps designed using behavioral economics are extensive enough to justify the work required to make them safe.

These solutions are great for prevention, but a larger issue for the millions of Americans already afflicted by chronic illness is the inflated cost of health care. Prescription drugs are largely to blame especially when one examines the difference between name-brand and generic drug prices. When expensive name-brand medications are prescribed, some patients are unable to take them because they cannot afford to fill their prescriptions. The issue is that doctors are not faced with the same financial constraints as their patients, prompting some to prescribe name-brand drugs instead of their generic alternatives, often simply because they show up first on a computer. This may seem ludicrous, but it is just a natural human tendency.

Fortunately, just as behavioral economics can help nudge behavior in patients, it can help nudge behavior in doctors. This introduces the idea of choice architecture or how choices are presented to decision makers. Default options are a powerful component of choice architecture. It is the choice made, “if the chooser does nothing,” and due to “inertia, status quo bias, and the ‘yeah, whatever’ heuristic” it is relatively safe to assume that many people will settle for these pre-made decisions (Thaler & Sunstein, 2008). Take organ donors for example, when one goes to register for a driver’s license, the form asks if the driver would like to become an organ donor. The current default in this situation is to not donate because if someone does not notice the question on the form, they would automatically be considered a non-donor. European countries were the first to experiment with a new default, altering their organ donor registration to a “presumed consent” or “opt-out” system. After this policy nudge, the European governments sat back and monitored the physical donation rates for a decade before declaring a statistically significant, 16.3% increase in cadaveric donations (Johnson & Goldstein, 2009). Obviously, this is an extreme case, and many find the practice of “presumed consent” controversial; however, one thing is certain: defaults matter.

It is easy to apply this new concept to the issue of name-brand drug prescriptions. One simply creates an “opt-out” default for generic drugs in medical electronic systems. A 2016 experiment conducted by the University of Pennsylvania Health System did just that. Doctors prescribing medication had to click an “opt-out box” entitled “dispense as written” if they consciously preferred to choose the brand name drug over the generic. They confirmed the impact of default options by increasing generic prescriptions by 23.1% over 10 months (Patel et al., 2016). Not only does this help with patient’s out of pocket costs, but it assists in their ability to follow prescriptions, having a profound effect on the amount of money paid in medical costs by Medicare and Medicaid. Therefore, these insights suggest a low-cost opportunity to both improve health outcomes and save taxpayer money.

This is a lesson many hospitals could use as well. Grady Memorial Hospital, located in the heart of Atlanta, is an integral medical institution to Georgia due to its commitment to affordable, lifesaving treatment for the city’s indigent population. A decade ago, this crucial healthcare provider almost shut its doors because it could not cover the cost of expenses (Kass, 2017). Similarly, rural hospitals in Georgia face the same problems: serving the uninsured, the aging of the baby boomer generation, and growing healthcare costs. This raises even larger concerns about how people can receive treatment without a hospital to go to. The behavioral economic solutions offered above, and many others like them, can encourage behavior changes at these institutions to save the money needed to keep their doors open.

While the prescription of apps and changing of defaults have strong scientific evidence to support their effectiveness, these practices have not been implemented on a large enough scale to say with certainty how many lives they will save or how much money they will allow taxpayers to keep in their wallets. Critics of behavioral economics will also point to evidence implying the impact these interventions have will wear off over time. This is not even mentioning the moral debate over people’s autonomy to make their own choices. Nevertheless, much more information must be collected to settle on any concrete conclusions.

The proposed interventions fall largely on the shoulders of hospital administrators to implement and monitor; however, this is just the tip of the iceberg when considering the broad repertoire of nudges behavioral economics has to offer. For example, other studies have found that students will eat more vegetables using choice architecture in school lunches, that health insurance plans can incorporate “fault tolerance”, and that the opioid epidemic can be slowed with default options. “Nudge Units” have already begun popping up around the world, focused solely on spreading and experimenting with these innovative behavioral interventions. Health care is not getting any cheaper and people are not getting less stubborn. It is time to generate solutions designed for how humans really behave instead of how they should behave. There is no illusion that behavioral economics could save the entire system of healthcare, the whale is simply too big, but bite by bite, nudges like those suggested in this paper can help keep hospitals open, encourage preventative care, and save lives.

 

References

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