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we're here today with Wharton and ped med professor david ash to talk about his research on behavioral economics and
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how they can help us develop better health incentive programs for employees David thanks for being here today well
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thanks for inviting me so can you give us a brief overview of your research sure well i mean i think the background
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is this that for so many american companies and American employers even if they're not in the healthcare business
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health is central to what they do because it keeps their workforce healthy and because frankly health care costs
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have an incredible impact on their bottom line everybody knows that health is determined so much by individual
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human behavior and we now have much better ways of motivating that behavior from principles of behavioral economics
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principles that frankly employers I think have been a little slow to adopt and so what are some of the key
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takeaways from a research in terms of how employers could use these principles to design better health and center for
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sure well I mean I think 11 comment would be to back up a little bit and say well what are they doing and I think so
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much of our approach to health actually whether it's from a doctor approaching
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health care or an employer an HR group thinking about wellness for their employees is based on the principle of
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education we should just educate employees that smoking is bad for them and that fitness is good for them and
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they should be adherent to their medications it's a very rational model that assumes that if our employees only
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knew what to do they would do that and and as soon as you say those words you realize how limited that approach really
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is because of course people do know that smoking is bad for them but it's very
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hard to quit or they they start up smoking in the first place they know they should take their medications so
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giving them education rarely is going to be enough to move the needle and yet so
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many programs that employers use are fundamentally based on that the next level that employers use actually is
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thinking about economic incentives why don't we give a reduction in a health
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insurance premium or some kind of pay for performance approach to get employees to move forward and there is
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some evidence that that works but the work that we do has been largely focused on different kinds of arrangements to
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help motivate either employees on the employer side or patients in the clinical setting because I'm a physician
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to try to get people to take better care of their health recognizing the psychological foibles and pitfalls that
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we all fall into so if I'm an employer I'm trying to design an effective health
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incentive program what are some conclusions from your research that might be of a surprise to me as I'm
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sitting down trying to design this plan yeah so a lot of the research results are surprising and they're surprising
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because they're sort of irrational in fact they take advantage of the fact that many of us don't think in rational
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ways so here's an example of a recent study that we did was led by a colleague
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mitesh patel also a colleague kevin volp and i we did this with a group of employees to try to get them to walk
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more and we we're aunt with a randomized control trial real science thinking how
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can we get employees to walk at least seven thousand steps a day one group got was a control and group they just were
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given feedback about how far they walked some groups were paid in this case we paid them up to a dollar we paid them a
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dollar forty a day for every day in which they walk seven thousand steps a third group got actually what we would
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call a loss framed incentive exactly the same amount of money a dollar forty a day is 42 dollars a month what we did is
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we gave them 42 dollars a month in a virtual account before it started and we took a dollar forty back for every day
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they didn't walk seven thousand steps now mathematically those two incentive
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arms are the same right a dollar forty gain if you walk or the failure to lose a dollar forty if you walk the same
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thing it turns out those who got the gain incentive that were promised a dollar forty four walking didn't walk
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anymore than the control group the group that got the same dollar forty framed as
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a loss incentive walked fifty percent more than the control group it's irrational it doesn't make any sense
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it's the truth real data that shows that and it's consistent with theories of
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behavioral economics but inconsistent with how a lot of employers or doctors think about the best way to take care of
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their patients so what are some of the underlying forces here in terms of like that's work here like if we're thinking
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about this like if I'm not necessarily doing walking but I'm doing any sort of
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incentive program or any sort of employee health program and I think about this using behavioral
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economics to kind of design something that will make people that will actually get the result that I want which is
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healthier employees like what are some of these irrational ways of thinking maybe that would help me out like how
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would I do the back what is the best way that you find to do incentives what is the best way to sort of make people do
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the things that we all know we should do but that doesn't mean we're going to do
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them yeah I mean I think it just phrased it perfectly how do we do the things we
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all know we should do but don't do it anyway and as soon as you say that you
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realize what strategies you have to use because it's not going to be the rational one because you just gave a
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very rational argument of course I should do this and the rational view is well then I do it but of course that's
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not what really happened so you have to move beyond the typical education i i'm
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not against education i'm a professor write this I'm in the business of education but it can be a bit of a decoy
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when when something more effective might be in reach and so I think the answer to
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your question the more direct answer to your question is to think well what are the pitfalls we normally fall into so
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one of them is that I just mentioned we see losses as more potent than gains so let's see how we can frame things as
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losses another pitfall is that objects right in front of us or goals right in front of us are so much more salient so
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much more meaningful than things far in the distance right this is what we don't
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save for retirement enough it's why we eat that piece of chocolate cake right
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in front of us even though we're on a diet it's why we don't take our blood
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pressure medicine even though we desperately want to avoid a stroke that might happen years later all of these
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things reflect errors in which we focus too much on the present and not enough on a future how do we fix that book can
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we accelerate the benefits can we create incentives today for taking my antihypertensive incentives today for
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not eating the chocolate cake incentives today for going to the gym not the incentive we would normally get which is
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a you know thinner healthier person 10 years from now or several months from now and financial incentives our way to
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do that but there may be other incentives to social incentives right if I if I set up a system to go to the gym
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with a buddy right you don't we don't need research to tell us this people are
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more likely to go to the gym if they've made a little pact with a buddy to show
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up because you feel guilty if you don't show up those are sort of social incentives those are very powerful also
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at in healthcare we often think of healthcare so private that we don't want to engage two people together with it
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but we do that with so many other aspects of her life and going to the gym or taking your medicines it's really not
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that private so what a misperception I thought that with the research address that I thought was very interesting is
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this idea of you know like you said education is obviously important and it's obvious important to be transparent
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about what you're offering someone what you're doing but at the same time one of
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the things i think the research gets that that's very interesting a misperception it kind of corrects is
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this idea of sometimes it is possible to give people too much information if you
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maybe throw too much at them that they actually miss what you're actually trying to tell them or get them to do
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absolutely and and so there is like a fine line between enough information and too much information I think the best
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example for that are the very health insurance plans that employers you know give to their employees so it's April
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right now the University of Pennsylvania has open season few no benefits open season I've got like I've got to do that
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I think it's actually due tomorrow or something and I have to select a bunch
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of hell I have to select the best health care plan for me and my family well at Penn I spent 15 years as the director of
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the Leonard Davis institute of health economics I have to think of myself as someone pretty knowledgeable about
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health insurance and health benefits and I can't figure out what the best health
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insurance is for me and my family and the reason is is that there are these complicated tables of deductibles and
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co-payments and out-of-pocket maximum HSAs and all these other kinds of things each one of those is a financial
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incentive designed to try to help me move my health care in a particular direction but I would submit that a set
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of financial incentives you don't understand is a set of financial incentives that can't be effective it's
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just too complicated I think we need to greatly simplify our almost our approach
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design largely by economists and actuaries and turn it into an approach that's understandable by humans now I
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feel like sometimes maybe they companies don't do this because they feel like
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they're gonna insult people's intelligence like of course you can figure this out of course you want all
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this information but maybe really people don't they just want to know what's best
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for them really in the end is what they want to know I don't think it should be
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insulting I mean you know I think I know a lot about health insurance and yet it's just
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complicated and I'm busy and it's not about cognitive demand or you know
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cognitive ability it's just more about like we should be making it easy for people and not rely on their ability to
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handle hard things lots of our employees are smart and they can handle hard things but why should we rely on that we
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should be making it easy and I think so much of behavioral economics is about that also how do we make it so that it's
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easier to walk how do we make it so that it's easier to take your antihypertensive medications to lower
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your blood pressure why we have co-payments for antihypertensives they're not drugs of abuse no one's
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going to go and take lots of blood pressure medicines for the fun of it we want people to take their blood pressure
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medicines why do we make it so hard for them to get that medication and I think that there once we take a step back we
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can find lots of things that we're doing that don't have a good reason psychologically right we could we should
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be defaulting patients into automatic refill plans so they don't run out of their medications and fall off the wagon
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we should be you know lots of approaches once we recognize what are the steps required for certain goals and what are
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the psychological pitfalls that we all have as we approach those goals now I mean health incentive programs i mean
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have really been in I mean if not the news there's sort of in our cultural lexicon now it seems like every company
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has them and if they're not they're probably gonna have one next year or the
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year after that so as companies are adapting these things I mean do you think people our company's being
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thoughtful enough when they're adopting these things are they kind of being adopted in a vacuum without thinking
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about the particular particulars of that company of that company's employee population or about some of the things
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you're talking about about how do we design a program that doesn't just work
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for the short-term to get us what we want but actually makes for people who are healthier in the long term yeah so
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it is about more than eighty percent of us companies are using some form of financial incentive to promote the
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health of their employees and or their spouses and dependents and the leg so it is widespread is probably going to grow
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more than that now what I think is interesting and I hear it I don't want to be too insulting but I think that a
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lot of employers are not using these techniques as efficiently as they could and one of the reasons is you know as
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I've alluded to is they've got almost to ration own perspective they the assumption is
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well I'm using economics to improve behavior therefore i'm doing behavioral
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economics that's not behavioral economics that's economics right paying someone to do something is a highly
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transactional approach it becomes behavioral economics and much more potent when you use psychological tricks
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that that require these little clever design elements and actually that's not
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widely understood those those little tricks you know take take some experience and it turns out that subtle
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difference is as I mentioned the framing of a reward as a gain or a loss a very subtle difference can can have a huge
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impact so unless you know what you're doing it's actually hard to make use of
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behavioral economics in the workplace so what would you say sets this research apart from other research can bid that's
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being conducted on this topic so um you know there isn't a lot of work that is
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currently being done and behavioral economics and health that combines work in the Wellness space how do I get
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people to walk more or to lose weight with our insights from really clinical medicine how do I get someone who
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actually already has an illness let's say congestive heart failure and gets them to stay out of the hospital and so
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the that the acknowledgement that we can learn something from both of those settings and combine them now if you're
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an employer for example it's easy and comfortable to think about wellness but
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actually well this is not going to save you a lot of money in your employee roop
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it's not where the money is the money is in the very few employees that you have
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who have some serious illnesses and so the ability to improve the health and health care of those employees is going
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to have a much larger effect on your bottom line then the important but i would say highly diluted effects of the
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wellness activities for your employees and so what's next for your research what do you were you going to go from
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here so we've done a lot of work on the use of financial incentives to motivate
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people and again financial incentives that are designed with psychology and mind not just transactionally and
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there's been tremendous success in identifying ways to manipulate financial incentives to motivate employees I think
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we're increasingly interested in using social incentives people sometimes freaked out about it financial
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are you paying people to lose weight or to stop smoking can seem a little creepy
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or like a little bit of a nanny state but actually I think people are much more motivated by the social
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interactions that they have they want to feel good among their colleagues they don't want to be a dead weight they care
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what other people people think about them and to the extent that we can harness those very legitimate and very
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pro-social emotions and apply them to health settings I think we can advance individual and population health forward
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a lot one of the barriers to that has been as i mentioned that people have often thought of health and healthcare
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is very very private but if you were to watch what people say about themselves on twitter or on facebook you would
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realize in an instant that actually people are quite open about their health and I think that privacy is important
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but honestly it's probably not as important as many people think it is David thank you so much for being here
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today thank you you