UPenn PRC Director Kevin Volpp, MD, PhD, appeared on Knowledge@Wharton with Dan Loney to discuss health care reform and how behavioral economics help explain the challenges of insuring the largest number of people possible. Dr. Volpp and Dartmouth professor Jonathan Skinner addressed these issues in a JAMA Viewpoint “Replacing the Affordable Care Act: Lessons from Behavioral Economics”
“I think a big part of the Affordable Care Act, in terms of increasing coverage, was to think about the underlying incentives of why people are not buying coverage,” said Volpp. “For many people, it frankly just comes down to weighing the expected costs and benefits in the short term, and concluding that the short-term benefits to people who weren’t buying coverage were less than what their coverage would have cost.”
“The way the Affordable Care Act tried to deal with that was by subsidizing the cost of coverage by providing people who are low income with fairly generous subsidies. That’s a carrot-type incentive. In addition, they included a stick-type incentive in the form of an individual mandate, whereby people were required to buy insurance. If they didn’t buy insurance, they’d have to pay a financial penalty. One thing we could critique is that this mandate probably wasn’t strong enough. It started out at about $200. Eventually it became about $700. That’s much less than the cost of the cheapest plan. An individual could quite rationally conclude, “I’m willing to pay a $700 penalty. I’m not willing to pay $4,000 or more for my coverage.”
Volpp added,”There’s generally an acknowledgement that subsidies alone may not be enough to get people to sign up. There’s a well-documented literature in behavioral economics that carrots are weaker than sticks. People tend to be very loss-averse. Subsidies alone probably will not work in terms of getting sufficient people to enroll in these marketplaces.”
Director Kevin Volpp, MD, PhD, and researchers Frances Barg, PhD, Carolyn Cannuscio, ScD, Amy Jordan, PhD, and Jason Karlawish, MD, discuss their approaches to health behavior change research in a video about research methods at the UPenn PRC.
In The New York Times The Upshot, Massachusetts General Hospital and Harvard Medical School resident physician, Dhruv Khullar, M.D., M.P.P., looks at how the field of behavioral economics contributes to improving provider performance and patient engagement in health care decisions and, in particular, the research of PRC Director Kevin Volpp, MD, PhD.
“A leader of this movement is Dr. Kevin Volpp, a physician at the University of Pennsylvania and founding director of the Center for Health Incentives and Behavioral Economics. He designs randomized trials around some of health care’s most important challenges: nudging doctors to provide evidence-based care; ensuring patients take their medications; and helping consumers choose better health plans.”
In the April 3 issue of JAMA, UPenn PRC Director Kevin Volpp, MD, PhD, and Jonathan S. Skinner, PhD, the Dartmouth Institute for Health Policy and Clinical Practice, discuss how research about behavioral economics in health care is useful when considering the challenges of replacing the Affordable Care Act.
Noting that “incentives to encourage healthy individuals to sign up for health insurance can be described as either carrots or sticks”, Volpp and Skinner observe that “the first principle from behavioral economics research is that carrots do not work nearly as well as sticks.” Research suggests that individuals tend to favor immediate gratification over long-term consequences, which is why young adults historically are less inclined to enroll in insurance plans and why many people are frustrated paying premiums for coverage they may never use. Volpp and Skinner note “health insurance is an 80-20 proposition; 20% of enrollees account for 80% of costs. If the least healthy patients can be moved off of the exchanges, this will allow for a substantial decline in premiums on the exchange for the 80% healthier people who remain” and that lowering health insurance premiums would make a difference.
A study by PRC Director Kevin Volpp, MD, PhD, and other health behavior researchers at the University of Pennsylvania shows that financial incentives for increasing physical activity are highly effective among the population of overweight and obese.
“Most workplace wellness programs typically offer the reward after the goal is achieved,” said senior author Kevin G. Volpp, MD, PhD. “Our findings demonstrate that the potential of losing a reward is a more powerful motivator and adds important knowledge to our understanding of how to use financial incentives to encourage employee participation in wellness programs.”
The study was reported on in the Knowridge Science Report and was published in the Annals of Internal Medicine.