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Unformatted text preview: insight The healthcare industry appears on the brink of a major break- through in altering the healthcare cost curve and improving the quality of care and medical outcomes. But not because of legislation, technological inno- vation, new therapies, or care delivery models. Behavioral economics is already showing tremendous potential as a force of good in the healthcare system. Based on the evidence that when confronted with limited ability, time, information, and other resources, human beings make irrational decisions, behavioral economics is a relatively new discipline, and not always fully understood. But with promising early results and the potential impact so huge, healthcare industry leaders are compelled to examine the possibilities of applying behavioral economics principles. Can Behavioral Economics Alter the Healthcare Cost Curve? By Bret Schroeder, John Sviokla, and Tom Weakland Executive Summary Unhealthy behavior and noncompliance with medical advice are the twin causes of a significant portion of costs in our healthcare system. Of the $2.5 trillion spent annually on healthcare, simply missing appointments and not following medical advice represent nearly $450 billion or 18% of the annual healthcare cost in this country. Unfortunately, these issues have received only cursory attention in the national healthcare debate. There have been many attempts by constituents in the healthcare system to fundamentally change peoples behavior. Perhaps the most notable is smoking cessation. From 1965 to 2006, the smoking rate in the United States has declined to 20.8% from 42%, largely due to increased public awareness about health risks and various organizations cessation initiatives. Today, the science of behavioral economics (BE) offers a wealth of tools to promote healthy behavior. We think there is a tremendous opportunity to use behavioral economics and relatively simple information technology to create new tools to aid companies in managing consumer behavior, and to help citizens improve their quality of life. If healthcare providers, insurers, pharmaceutical manufacturers, and employers were to utilize the science of behavioral economics (BE), they could experience significantly better outcomes while reducing costsfar more than previous behavioral change efforts. In order to take advantage of this opportunity, healthcare stakeholders will need to analyze their healthcare services from a behavioral economics point of view. Then, they will need to design new, innovative interventions, test them quickly in real world settings, and then scale successful programs to capture value and bend the healthcare cost curve. 2 The central premise of behavioral economics is that when confronted with limited resources (e.g., ability, time, information), human beings are not rational and do not make the same economic decisions as if complete and certain information were available. In many ways, this is good news for constituents in the healthcare system. Five key principles of behavioral economics in the healthcare system....
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This note was uploaded on 07/08/2011 for the course BM 501 taught by Professor Kop during the Spring '11 term at Bloomsburg.
- Spring '11