In 2009, mostly to fund the State Children’s Health Insurance Program, the U.S. government increased the tax on cigarettes from 39 cents to a $1.01. What followed was a demonstration of what we now commonly call behavioral economics.
When taxes drove the price of cigarettes up, teenage smoking rates fell 10 percent, according to the Campaign for Tobacco-Free Kids, and overall smoking dropped more than 8 percent, the most significant dip in smoking since 1932. The increase-taxes approach to cigarettes is now commonly used in all 50 states as a means of both generating revenue and reducing the number of smokers. Indeed, policy success has led to similar suggestions regarding soda as diabetes rates across the country skyrocket.
In this way, behavioral economics, for which Richard Thaler won the 2017 Nobel Prize in economics, has wormed its way into the fabric of our lives, creating more focus on incentives and disincentives as engines of behavioral change.
Here’s one more example: People usually choose bananas over oranges because the latter takes more effort to peel, illustrating the idea that making one path easier and another more difficult effectively directs personal behavior.
And here’s another: Savings rates are much higher when employees have to opt out of automatic deduction plans than when they are asked to opt in.
And yet, while the evidence of efficacy in behavioral economics seems strong generally, it’s relatively weak in healthcare.
New York Times reporter Aaron Carroll cites efforts to nudge recent heart attack sufferers to regularly take their medications, a non-activity that causes roughly 100,000 preventable deaths annually. (Yes, common sense might suggest that the heart attack alone should be sufficient motivation, but that would require a longer conversation about what qualifies as sense and how common it really is.)
“Getting patients to change their behavior is very hard,” Carroll writes. “In the past, we’ve tried making drugs free to patients to get them to adhere to their medications and improve outcomes. That failed. We’ve tried lotteries … to nudge people to achieve better compliance. That failed.
“Maybe financial incentives, and behavioral economics in general, work better in public health than in more direct health care.”
Indeed, we can be confident that behavioral economics works well in many settings, including public health. Besides the smoking cessation example, people donate organs more often when it’s the default.
But they don’t take their pills, even when a study includes the “kitchen-sink approach … direct financial incentives, social support nudges, health care system resources and significant clinical management.”
As some are now suggesting, the reason for this seemingly illogical behavior might come down to elegance, i.e., the beauty of behavioral economics is its simple elegance in so many situations, but many behavioral scenarios are anything but elegant, especially healthcare.
“Nudging in healthcare is rooted in the erroneous assumption that self-defeating health behaviors are necessarily irrational,” writes the Christensen Institute’s Rebecca Fogg. “This assumption ignores the inconvenient truth that people and their lives are complex, so their barriers to healthy behavior are, too.”
Given that complexity, Fogg and colleagues at the Christensen Institute have developed an alternative model called Job Theory that they feel takes human complexity into account.
As Clayton Christensen, Fogg and Andrew Waldeck write in a white paper:
“Jobs Theory explains that everything people consciously choose to do (including doing nothing), they do to make progress according to their own priorities, in a particular set of circumstances. We call this progress a ‘job,’ and it motivates individuals to search for solutions. Based on this insight, the theory asserts that the way to unleash patients’ potential to better manage their health is not to try to get them to prioritize health goals over the jobs they’re already striving to do. Instead, it’s to understand those jobs, and help patients accomplish them in ways that enhance their health, rather than detract from it.”
At the heart of Jobs Theory is healthcare delivery animated by five core characteristics:
- Takes into account patients’ full capacity to change
- Works with patients’ existing belief about health
- Illuminates the broader determinants of individual health status
- Clarifies the real competition to healthy behavior
- Shifts units of performance from outcomes to progress
So, is Jobs Theory somehow a replacement for behavioral economics, at least in the realm of healthcare? No, it isn’t. Indeed, Jobs Theory may never have been imagined without the insights created by behavioral economics. And, arguably, neither would be realizable without the healthcare IT tools now available for monitoring, reminders, etc.
“The application of behavioral economics to healthcare is indicative of an exciting movement to bring new science and technology to some of society’s most serious and persistent problems,” writes Fogg. “As such, innovators should continue to explore its capabilities—but also its limits. Because when it comes to adopting healthy behaviors, it’s not always a nudge that people need.”
No, sometimes it’s a kick in the pants. And sometimes it’s a regular alert on a cell phone. In the context of broader pushes for value-based payments and personalized care, the next step is to develop a methodology for determining who needs the nudge, who needs the kick and who needs a little of everything.