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Health Care costs commentary
March 2, 2010 at 8:34 pm #93856
INTERESTING thoughts/commentary from From HBR John Sviokla’s blog Too bad the fine people in Washington are not terribly interested in solutions
How Behavioral Economics Can Help Cure the Health Care Crisis
8:58 AM Monday March 1, 2010
This post was co-authored with Bret Schroeder and Tom Weakland
Noncompliance with medical advice is one reason the U.S. health care is so costly. Yet it has received only cursory attention in the national health care debate — undoubtedly because politicians don’t want to risk offending their constituents.
How bad is this problem? According to a study by the National Community Pharmacists Association, three of every four Americans don’t take their drugs as directed. Forty-nine percent forget to take them; 31% don’t fill their prescriptions and 29% stop taking their pills before the drugs run out! According to the New England Healthcare Institute, this costs the U.S. $290 billion per year (over 11% of our $2.5 trillion health care bill).
More waste comes from missed appointments. According to a cross-study analysis, no-show rates for doctor’s visits run as high as 20% to 30%. Although there is no system-wide estimate of the effect, one study pegs the overall cost of each missed appointment to be over $700 to the health care system. Given the fact that in 2006 there were about 900 million appointments, the annual cost to the system is over $150 billion.
We think there is a tremendous opportunity to use behavioral economics (which recognizes that people aren’t always rational) and relatively simple technology to create new tools that aid health organizations in managing consumers’ behavior and that help patients improve their own actions. Even very small changes in patient population behaviors would have a dramatic impact on costs.
For example, our firm worked on a project to help the state of Gauteng, South Africa, create an information infrastructure to help manage diabetes care. Our approach used a combination of education, clinics, web services, and cell-phone reminders to get patients to heed their doctors’ advice. Gauteng was able to reduce missed appointments from about 70% to 30% almost immediately.
We are now in the midst of designing a new system that employs a number of behavioral economics concepts (reminders, pre-commitment, social pressure, default options, etc.) to reduce waste even further.
Sure, it would be nice if we all rationally acted in our own best interest and followed the doctor’s orders — but we don’t. By recognizing that and using insights from behavioral economics to design innovative approaches, we can improve health and drive down costs.
For example, after a stroke doctors usually prescribe a blood thinner to help reduce the chance of recurrence from 24% to 4%. Despite the fact that taking this drug significantly reduces the chance of an additional brain damage, many patients don’t take their medicine.
Researchers Kevin Volpp, George Loewenstein et al, conducted a small-scale experiment to see if they could combine three incentive ideas drawn from behavioral economics to change this sad state of affairs. They used (1) small, frequent rewards, (2) a small chance at a big reward, and (3) the regret of missing a payoff.
In one test group, 20 patients were entered into two daily lotteries. All participants had a one in five chance of winning a $10 prize, and a one in 100 chance of winning a $100 prize. (For those of you who remember your probability class, this means they had an expected value each day of $3.) Patients had an electronic pillbox in their homes that recorded whether or not they took their medicine. If they had not taken their pills correctly, they were disqualified from the lotteries. Winners who had not taken their medication were informed that because they had not complied with the drug regimen, they would receive nothing.
Noncompliance dropped from 22% to under 2% for the entire three months of the study. A well-designed $3 payoff was a more powerful motivation than a 20% decrease in the likelihood of an additional stroke!
Clearly, investments in such creative solutions that reflect how people really think could rapidly generate a huge, measurable human and financial return. It is time to make such investments a priority.
March 2, 2010 at 9:48 pm #93860
In my case, Henry, the prescription drug program that Bush jammed down our throats is making a fortune for Insurance Companies.
Since I am Disabled, and low income, the state of SD pays the thirty dollars a month for the drug care plan. Then last year, the Insurance company buried some information about raising the rates in a bunch of advertising for every concievable thing.
Had I known, I would have switched plans. So now the State pays a little over thirty dollars a month and I am paying $3 per month plus the co-payment which was 0 on generics and 6 bucks on the regular stuff. Now, after I had just about accepted that, in november and december when you have to cange plans or automatically renew they sent me another wheelbarrow full of advertisements and info.
I didn’t change plans and now I find that all my “Generics” have been named by name and are in a higher tier, and I am paying 6 bucks for the Albuterol and even more for the others.
Problem is I can walk into Wall-mart with no prescription drug plan and pay less than I pay for the drugs I get on the plan.
The State of SD is paying for nothing but Blue Sky because of Bushes prescription drug plan.
March 2, 2010 at 9:56 pm #93858
I guess I should also say, I usually use the Albuterol, because it works and is cheap, but I should be taking the other two and I just cant afford it. I take vitamins too – they have helped a lot and they cost me money right out of my pocket. If I buy all three inhalers and the vitamins it costs me about 40 bucks. Lots of times I just buy the Albeuterol and vitamins because being short on cash is a chronic condition of mine. A twenty dollar bill that I can save for something later is of immediate importance. Yeah, I should be taking all three.
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