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Progressions 2012

Nudging the invisible hand

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A key insight for medical device companies is: keep it simple!
  George Loewenstein, PhD
  Center for Health Incentives and Behavioral Economics at the Leonard Davis Institute,
Director, Behavioral Economics

EY: What does the Center for Health Incentives and Behavioral Economics (CHIBE) do?

Loewenstein: CHIBE is uniquely positioned to conduct field investigations applying behavioral economics to health. We bring together a rare combination of individuals from diverse fields — economics, psychology, medicine, statistics — to test new approaches for improving patient/physician behaviors and health policy.

EY: Could you share some findings from your current research?

Loewenstein: We recently published a study in the American Journal of Health Promotion on a program to increase health risk assessments (HRAs) by employees of a mid-size corporation. The company had been offering employees $25 for completing an HRA and was willing to increase the amount to $50. We tested the $25 and $50 incentives against a program that combined numerous behavioral economics incentives — lottery prizes, social pressure and regret.

Doubling the reward had no appreciable impact on HRA completion rates. But, while the lottery incentive was designed to cost approximately the same per compliant employee as the $50 payment, it was vastly more successful.

This is very timely, because the US health care reform legislation will have the effect of increasing the degree to which premiums are contingent on healthy behaviors such as HRA completion.

Since lower-income individuals tend to have less beneficial health behaviors, this could make health premiums regressive. Our study suggests that whether these incentives yield compensating improvements in health outcomes will depend critically on how they are implemented.

In another study (forthcoming in Annals of Internal Medicine), we compared monetary incentives and peer mentoring for improving glucose control. Peer mentors — patients with similar demographic characteristics who had successfully controlled their glucose — simply provided advice and talked with participants at least once a week. Peer mentorship had a larger and more significant impact than financial incentives. Peer mentoring is particularly appealing because it is virtually cost-free and raises no concerns about rewarding people for doing what they should be doing anyway.

EY: How can games and technologies improve patient behaviors?

Loewenstein: Research on incentives in education conducted by Roland Fryer, a Harvard University economist, shows that rewarding behaviors has a greater impact on students than rewarding outcomes. This is difficult to apply to health care, since outcomes (e.g., weight loss) are easier to measure than behaviors (whether patients exercise or stick to their diets).

However, new technologies — from wireless-connected electronic pill bottles and pedometers to smartphone apps — are making it easier to measure behaviors and could make incentive programs that reward behaviors more feasible. At CHIBE, we are doing exploratory research to harness the remarkable motivational power of electronic games to improve health behaviors. We hope that, like peer mentoring, the symbolic rewards, escalating challenges and immediate feedback of games can complement or even substitute for monetary rewards.

EY: What could life sciences companies learn from behavioral economics?

Loewenstein: A key insight for medical device companies is: keep it simple! Consumers spend an average of only 20 minutes trying to operate new electronics items before giving up. Companies can underestimate the difficulty that patients and/or physicians have mastering their devices due to something my colleagues and I dubbed the "curse of knowledge" — the tendency of experts (e.g., device companies) to underestimate the knowledge gap between themselves and others.

Life sciences companies should think more deeply about how their products interact with the foibles of human behavior. How could drug companies design drugs to increase adherence when only about 50% of patients continue blood pressure medications one year after a heart attack? I see my elderly parents and their peers fashioning crude, makeshift systems in vain attempts to follow complicated medication regimens despite their reduced cognitive capabilities. It is remarkable that a consortium of drug companies has not yet developed customized once-a-day poly-pills.

EY: Can incentives create lasting change?

Loewenstein: Much of our research shows that people almost instantly resume unhealthy behaviors when incentives are removed. Rather than viewing this as necessitating the long-term continuation of incentives, however, we are researching how to implement incentives in ways that inculcate persistent habits.

This article was featured in our report Progressions 2012 - the third place: health care everywhere.

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Progressions 2012: health care everywhere
Progressions 2012: health care everywhere
Disruptive innovations and unsustainable costs are propelling life sciences companies into the behavioral change business. Learn why in our annual life sciences report.

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