Thursday, August 19, 2010

Behaving Economically

The more I think about it, the more I suspect that behavioural economics (BE) will play a bigger part in business practices (especially marketing) than in public policy practices in the near future. Sure, BE will remain relevant to both areas of practice - and the balance of academic research may well be focused on the latter - but I suspect that the usual business imperatives to solve pressing problems quickly will speed up commercial BE adoption.

It isn't 'either/or', of course. One area (in Ireland at least) where the public and private sectors intersect is that of healthcare. Fortunately there is increasing evidence of the value of BE in the healthcare space. As the always insightful John J Sviokla has pointed out in a recent study, there are huge opportunities for BE to help not only reduce health care spend but also to make the reduced spend far more effective in terms of health outcomes. Here's his headline findings from a the study (pdf):
  1. Freedom from Choice! —Use defaults for prescriptions and explanations of benefits. The savings are enormous when participants in a healthcare plan default to electronic explanation of benefits and mail order prescriptions.
  2. Does The Emperor Have Clothes?—When patients are willing, provide transparency about their behavior to family members and loved ones. A grandmother is much more likely to take her medication if her grandchild is sent a text message when Grandma isn’t taking care of herself!
  3. I Could Have Been a Contender!—Use the power of regret. If you want people to participate in a health regimen, enter everyone in a lottery and if the person “wins” they will get a prize… unless they fail to participate! The power of the idea that they won something but couldn’t collect their reward is much more compelling than if they had a chance to win and did not.
Here's a summary of the other findings:

Much of this is about smarter communications, not smarter drugs. Nor does BE in a healthcare context stop at the patient. It also applies to staff. A recent paper looked at replacing pay-for-performance (P4P) in healthcare with incentives based on behavioural economics. Here is another handy summary of their findings:

The last one is interesting: instead of monetary incentives use in-kind incentives. Now there's an idea for the HSE next time it meets the IHCA: instead of offering 'mickey mouse' salaries why not offer them a gold star for every satisfied patient? Private or public.

We have five-star generals: so why not 'fifty star (and more) consultants'? It could save us all a fortune...

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