Approaches to improving health outcomes
Health Economics Applications and Policy
EFN423
Health Economics Applications and Policy
EFN423
How to change Behaviour? Insights from Behavioural Economics
Many unhealthy behaviours do not result in negative outcomes in
every instance
• Each cigarette, drink, and bag of drugs is probabilistically related
to negative outcomes, not certain negative outcomes.
• Every unprotected sex, poor medicine compliance, delayed
cancer screenings are not going to kill with certainty
If a person is willing to accept the risk of negative outcomes for
greater reward, their “cost-benefit” ratio is acceptable.
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To effectively change behaviour, you need…
• Recognition that behaviour change is needed / desirable
• Motivation to make change
• Belief that change can occur and be maintained (perceived selfefficacy)
• Triggers/cues to initiate change
• Perceived benefits of that change
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Is health behaviour change hard to achieve…?
Yes.
For patients:
Treatment non-adherence ranges from 30-60%
Prophylactic treatment adherence only 30-35%
Protective health behaviour 10-30%
For healthcare professionals (HCPs):
Literature indicates HCPs do not follow clinical procedures they know
should be implemented: Physician performance ranges between 48-
72% of professional standard (Peterson et al., 1980)
Nurses deviate from infection control rules (Raven & Harley, 1982)
Dentists fail to adequately shield patients during x-rays (Green &
Neistat, 1983), 20% error rate in care procedures in old people’s
homes (Kayne & Cheung, 1973). etc…
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So what do we do to change health behaviour?
Behavioural Economics can offer some valuable insights.
There has been an enormous proliferation of interest in
behavioural economics in the last decade among policy
practitioners.
Both the UK and Australian Governments have developed
insights teams dedicated to finding new ways to ‘nudge’
citizens to be healthier, greener and more civic-minded.
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But…on average we would like people to make the ‘right’ health
decisions – from a societal point of view.
The Behavioural Economics approach to this problem is – NUDGE
Nudge – what is it?
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NUDGE: Principals and Procedures
PROCEDURES
evidence-based
testing of interventions in
reallife
context
randomised control trials
PRINCIPLES
Philosophy of libertarian
paternalism
• Simplification and
framing of information
• Changes to the
physical environment
• Changes to the default
option
• Use of (descriptive)
social norms
NUDGE could be appropriate for healthy behaviour
Nudges are
appropriate when:
• choices have
delayed effects,
• when they are
complex or
infrequent and
thus learning is
not possible,
• when feedback
is not available,
and
• when the
relation
between
YES ?
Perceived complexity LOW
Perceived complexity HIGH
LOW
involve
ment
decision
HIGH
involve
ment
decision
YES YES
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NUDGE in a nutshell
“… any aspect of the choice architecture* that alters people’s behaviour in a
predictable way without forbidding any options or significantly changing their
economic incentives…. Putting the fruit at eye level counts as a nudge. Banning
junk food does not”.
Thaler, RH & Sunstein CR (2008) Nudge: Improving decisions about health, wealth, and happiness, New Haven, CT., Yale
University Press.
*aspect of the social/physical environment that makes a particular option more attractive, preferred
or even the default choice
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Some individual NUDGES are quite effective
95-99% of customers stay with the “green electricity default”
Duplex printing default ~ 30%
Smaller plates -> 20% less food waste
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NUDGE (alone) may not change health behaviour
Because making it part of policy and
practice will take a long time and
require some heavy legislation.
One of the most effective nudges
(other than defaults) is 50% drop in
Pringles crisps consumption after
adding 10% red Pringles.
It is people and stricter policies that will resist the obesogenic
environment. Nudge can help by offering policy makers and
citizens better tools.
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Nudge in practice: Food and Drug Administration, 2014
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Nudge in practice: Food and Drug Administration – New
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Nudge in practice: Food and Drug Administration, 2014
• In 2014, the Food and Drug Administration (FDA) proposed to
revise its “nutrition facts” panel, which can be found on almost
all food packages. The FDA stated that the new label could
“assist consumers by making the long-term health
consequences of consumer food choices more salient and by
providing contextual cues of food consumption.”
• The FDA added that the “behavioural economics literature
suggests that distortions internal to consumers (or internalities)
due to time-inconsistent preferences, myopia or present-biased
preferences, visceral factors (e.g., hunger), or lack of selfcontrol,
can also create the potential for policy intervention to
improve consumer welfare.”
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Nudge in practice: Old Fuel Efficiency Information
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Nudge in practice: New Fuel Efficiency Information
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What is the
correct
thermostat
setting?
Karjalainen, S. (2009) Thermal comfort and use of thermostats in Finnish homes and offices
Building and Environment 44 (6), 1237-1245
It doesn’t need to be expensive
A low-cost NUDGE
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A NUDGE that went wrong…
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Insights from Behavioural Economics
• Strategies developed by behavioural economists include:
o Framing and nudging towards desired behaviours;
o Providing salient information on more immediate benefits
of healthy behaviour and immediate risks of obesity;
o Use of social-network to develop and promote inclusive
and positive group-based norms
• Such strategies hold promise for improving health behaviours
and disease control, but most have not been studied in medical
settings. The effectiveness of these approaches should be
evaluated for their potential as tools for medical professionals.
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Some commonly observed behavioural attributes
• Delay discounting: Individuals often overweigh costs and benefits
incurred today (i.e. the present) relative to the costs and benefits
incurred tomorrow (i.e. the future). This type of bias can lead
individuals to forgo healthy behaviours.
o For example, the decision to skip the gym overweighs the cost of
going to the gym today in terms of time and fatigue, while discounting
future health benefits heavily. As a result, individuals buy expensive
monthly gym memberships but go so infrequently that paying per
visit would cost less (DellaVigna & Malmendier 2006).
o Present bias can explain why individuals procrastinate about eating
healthy, quitting smoking, or getting a health check-up done.
o The results of a field experiment by Sarkar et al. (2020) show that
parents who discount the future more heavily tend to exhibit poor
engagement with health programs that benefit their child. Low
discounting parents tend to stick with the program longer.
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Some commonly observed behavioural attributes
• Salience: Although more information makes more informed choices,
people are often unable to process information when faced with a
large number of choices. As a result, they tend to pay attention to
information when it is highly visible or can be recognized easily at the
time a choice is made.
o For example, because the adverse complications of diabetes
(i.e., the health costs) are often not felt until late stages of the
disease, the risk of these complications is often not salient to a
decision maker at the time they are considering consumption
of a carbohydrate or sugar-rich food or deciding whether or
not to engage in physical activity. As such, people tend to
underestimate the real costs of diabetes and other chronic
diseases prior to experiencing them.
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Some commonly observed behavioural attributes
• Probability discounting: People tend to overestimate the probability
of unlikely events (such as winning the lottery) and underestimate the
probability of likely events, such as being diagnosed with diabetes if
they are obese (Kahneman & Tversky, 1979).
• Framing: The choices people make are influenced not only by the
underlying incentives or signals, but also by the way those incentives
or signals are presented or ‘framed’. For example, a message that is
framed as a loss has different impact on behaviors than a message
that is framed as a gain (Rothman & Salovey, 1997).
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Some commonly observed behavioural attributes
• Loss aversion: Many people display loss aversion by which they do
not value losses and gains of equal magnitude equally. Gains, such as
a reward, tend to be valued less than losses, such as a penalty, of
equal magnitude.
• Social preferences: People often display social preferences, whereby
their utility is defined not solely based on their own interests, but
motivated by other-regarding preferences such as, altruism,
reciprocity, cooperation, inequity aversion, or ethical commitments
that induce people to help others (Fehr & Falk, 2002, Goldfarb et al.,
2012).
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Examples of Behavioural Intervention Programs
- Regret Lottery
• This intervention is based on loss aversion; as well as the fact that
individuals do not like to regret (called regret aversion).
• Lotteries can take advantage of the fact that individuals overweight
small probability events. For example, providing a 1% chance of
winning $100 might motivate people more substantially than offering
them $1 directly, even though the two have the same expected value.
Regret lotteries have successfully influenced behaviour in a variety of
health domains.
o For instance, subjects lost significantly more weight when provided
with a regret lottery that paid out an expected $3 per day (in the form
of a 20% chance of winning $10 plus a 1% chance of winning $100) if
the subject is on track to his or her weight loss goal (Volpp et al.
2008b).
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Examples of Behavioural Intervention Programs - Commitment Devices
• Another way to leverage loss aversion with monetary incentives is to
provide individuals the opportunity to make commitment contracts
(also called deposit contracts) in which they put up their own money.
This money is then forfeited if they fail to achieve a certain goal, such
as reaching a weight loss target or attending the gym a specified
number of times in a week or month.
• This strategy allows individuals to create monetary incentives for
themselves and leverage loss aversion simultaneously. A commitment
contract in which the committed funds were matched 1-to-1 by
researchers was effective at achieving weight loss by study
participants (Volpp et al. 2008a).
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Examples of Behavioural Intervention Programs - Peer Mentoring
• There is growing evidence that social forces have a powerful effect on
individuals’ health behaviour.
• In a randomised controlled trial on teen smoking across 59 schools
and 10,730 students aged 12-13 in Wales (Campbell et al. 2008),
control schools received the standard smoking education while a
special program was implemented in treated schools that included
peer mentors: students who were trained to have informal
conversations with their peers to discourage smoking.
• Treated schools showed lower likelihood that students would smoke
one to two years later.
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Physician Behaviour
It is often notoriously difficult to change physician behaviour, even when their
behaviour is deemed inappropriate (e.g., over-prescribing antibiotics, underprescribing
cholesterol pills). Physicians are strong-willed people, with lots of
things competing for their attention and with many well ingrained habits.
• Many physicians prescribe antibiotics, even for common cold. Often
these prescriptions do more harm than good. They expose patients to
unnecessary expense and potentially hazardous side effects. And they
expose the general public to the dangers of antibiotic-resistant
bacteria.
• How do we get doctors to reduce prescription of unnecessary
antibiotics?
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Physician behaviour change – approach 1
• This JAMA (2016) study showed that
we can reduce inappropriate antibiotic
prescriptions using two approaches. - Accountable justification: At the time of
antibiotic prescriptions, a pop-up screen
asked the doctors to type in a reason for
the prescription. The idea behind this
approach is simple, but powerful. A
physician might know deep down that an
antibiotic is unnecessary, but may
prescribe one anyway to avoid
confrontation with a demanding patient,
or just to feel like she did something. If
physicians like this are forced to slow down
and think, and provide reasons for their
actions, they might overcome unjustifiable
influences that promote inappropriate
prescribing.
The Figure shows that this slowing
down/justification intervention
worked. It led to a significantly
steeper decline in the use of
antibiotics, compared to the control
group.
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Physician behaviour change – approach 2 - Peer Comparison: The researchers gave
physicians monthly feedback on whether
they were a “Top Performer,” one of the
10% of physicians giving out the smallest
proportion of inappropriate antibiotic
prescriptions. The other 90% of physicians
received a reminder that they were “Not a
Top Performer.” This intervention appeals
not only to physician competitiveness
(who are often very competitive), but also
to the power of social norms. When
reminded that some people are able to,
say, overcome the temptation to prescribe
antibiotics, physicians may feel more
empowered to follow suit.
Again, the intervention worked. Although
the intervention only took place once a
month (rather than with each antibiotic
prescription), the feedback was enough to
change behaviour. Finding out they were
not doing as well as their peers was
effective in reducing inappropriate
antibiotic prescription.
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Physician behaviour change – approach 3
• This study published in JAMA (2015) showed that financial incentives informed by
insights from behavioral economics increased the likelihood of getting patients’
cholesterol under control.
• Here is a picture showing that giving financial rewards to both patients and physicians
increases the odds that patients will take their cholesterol pills as prescribed–will
“adhere” to their medications.
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Summary: Behavioural Intervention Programs
• Many interventions rely on other behavioural tools, such as
Information and Salience (e.g., nutrition labelling leading to
decreased calorie intake), Context and Framing (changing the default
of health coverage in insurance plan, changing from opt-in to opt-out
rules in consent for organ donation), etc.
• Overall, while the behavioural economics approaches have often
proven to be cost-effective, so far scientific evidence mostly point to
short-term effectiveness of behavioural interventions.
• More research is needed to understand its effects on long-term
behaviour change, which may help design public health strategies
that reach segments of the population hitherto impervious to existing
public health strategies.
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Conclusion
• The rapid rise of obesity and associated chronic diseases
worldwide has inspired policy responses in many countries.
o New York City voted to ban the trans-fat in restaurants in 2006.
o Japan started charging higher premiums for citizens with
waistlines above a maximum threshold in 2008.
o Denmark instituted a tax on all products with saturated fat in
2011.
• If there is no moral hazard, then these laws do not affect
total social welfare, but they do introduce a regressive tax,
since obese people tend to be poorer than thinner people.
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• Thus, any government intervention should be scrutinized for
unintended and harmful side-effects.
o Example: taxing fast food may rein in obesity, but would
likely hurt the poor who rely on these sources of cheap
food for important nutrients.
• Behavioural economics provides some useful tools to manage
obesity. Some behavioural ‘nudges’ have proven to be successful
in managing obesity and other chronic diseases.
Conclusion
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References cited in the slides
Campbell R, Starkey F, Holliday J, et al. An informal school-based peer-led intervention for smoking prevention in
adolescence (ASSIST): A cluster randomised trial. Lancet. 2008 May; 371(9624):1595-1602.
DellaVigna S, Malmendier U. Paying not to go to the gym. Am Econ Rev. 2006 Jun; 96(3):694-719.
Fehr E, Falk A. 2002. Psychological foundations of incentives. Eur. Econ. Rev. 46:687–724.
Giné X, Karlan D, Zinman J. Put your money where your butt is: A commitment contract for smoking cessation. Am
Econ J Appl Econ. 2010 Oct; 2(4):213-35.
Goldfarb, A., Ho, TH., Amaldoss, W. et al. Behavioral models of managerial decision-making. Mark Lett (2012) 23: - doi:10.1007/s11002-012-9183-4
Kahneman D, Tversky A. Prospect theory: An analysis of decision under risk. Econometrica. 1979 Mar; 47(2):263-92.
Rothman, A. J., & Salovey, P. Shaping perceptions to motivate healthy behavior: the role of message framing.
Psychological bulletin, 1997; 121(1), 3.
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