>> GOOD MORNING. MY NAME IS DEBRA OLSTER FROM THE OFFICE OF BEHAVIORAL AND SOCIAL SIGNS RESEARCH. WELCOME TO OUR FIRST TALK OF THE SEASON AS IT WERE. I'M REALLY PLEASED TO BE ABLE TO INTRODUCE OUR SPEAKER TODAY, DR. GEORGE LOWENSTEIN, THE HERBERT A. SIMON PROFESSOR OF ECONOMICS AND PSYCHOLOGY AT CASH GIVE MELON UNIVERSITY. GOT HIS Ph.D. FROM YALE AND HELD ACADEMIC POSITIONS AT MANY PLACES, UNIVERSITY OF CHICAGO, CARNEGIE MELON. THE INSTITUTE FOR ADVANCED STUDY AT PRINCETON, THE RUSSELL SAGE FOUNDATION AND INSTITUTE FOR ADVANCED STUDY IN BERLIN. HE HAD MANY DISTINGUISHED HONORS BUT I DON'T WANT THE TAKE AWAY FROM HIS TIME BECAUSE WE REALLY WANT TO HEAR WHAT HE HAS TO SAY, NOT WHAT I HAVE TO SAY. SO WITH THAT, I WILL TURN OVER THE MICROPHONE. THE TITLE OF HIS TALK IS BEHAVIORAL ECONOMICS, CLASSICAL ECONOMIC, PUBLIC POLICY, POLITICS AND HEALTH. HELP ME WELCOME DR. LOWENSTEIN. [APPLAUSE] >> DR. OLSTER INVITED ME A LONG TIME AGO AND ASKED ME TO COME UP WITH A TITLE SO I TRIED TO COME UP WITH A TITLE THAT WAS SUFFICIENTLY EXPANSIVE SO I COULD GIVE ANY TALK THAT I WANTED TO GIVE WHEN THE TIME CAME. BUT HOPEFULLY THE TALK ITSELF IS A LOT SHORTER THAN THE TITLE BECAUSE I REALLY AM HOPING THAT WE'LL HAVE TIME FOR DISCUSSION. THIS IS RESEARCH I'M TALKING ABOUT RESEARCH WITH KEVIN VOLP AND A NUMBER OF OTHER COLLEAGUES, WHO I'LL ACKNOWLEDGE AS WE GO ALONG AT CARNEGIE MELON, PENN, HARVARD OTHER PLACES. A BETTER TITLE MIGHT BE REDESIGNING EMPLOYEE HEALTH INCENTIVES, LESSONS FOR BEHAVIORAL ECONOMICS, MY TALK IS LOOSELY BASED ON A FORTHCOMING PAPER THAT WE HAVE. SO THIS IS NOT GOING TO BE NEW TO ANYBODY BUT HEALTHCARE COSTS IN THIS COUNTRY ARE OUT OF CONTROL. MUCH HIGHER THAN IN ANY OTHER COUNTRY IN THE WORLD PER CAPITA. IF YOU DO A REGRESSION WHERE YOU LOOK AT THE WAY YOU LOOK AT HEALTH EXPENDITURES AS A FUNCTION OF INCOME, YOU SEE THERE'S A REALLY NICE LINE, THESE ARE DIFFERENT COUNTRIES WITH ONE OUTLIER. THAT IS THE UNITED STATES HIS OUTLIER ISN'T IN THE RIGHT PLACE, IT WOULD HAVE TO BE OFF THE GRAPH, THERE'S NO ROOM ON THE GRAPH FOR THE UNITED STATES. THERE'S A LOT OF POTENTIAL, POTENTIALLY EFFECTIVE REMEDY FOR DEALING WITH THE PROBLEM OF OUT OF CONTROL HEALTHCARE COSTS. WE COULD FOR EXAMPLE, CEASE REIMBURSEMENT OF HIGH COST TESTS AND PROCEDURES THAT ARE QUESTIONABLE VALUE AND THAT BRITAIN HAS OF COURSE BEEN A LEADER IN THIS AREA WITH THEIR NICE PANEL. WE CAN ELIMINATE EASILY AVOIDABLE CONFLICTS OF INTEREST WHICH IS ANOTHER RESEARCH OF INTEREST OF MINE. WE COULD THE COMPENSATION OF DOCTORS MINIMIZING FEE FOR SERVICE ARRANGEMENTS. PROBABLY ALL OF THESE WOULD BE POTENTIALLY IF THEY WERE IMPLEMENTED THE RIGHT WAY COULD BE EFFECTIVE REMEDIES FOR THE OUT OF CONTROL HEALTHCARE COSTS. NONE OF THESE ARE PART OF THE HEALTHCARE REFORMO:# BILL, UNFORTUNATELY. ONE OTHER POSSIBLE AVENUE OF COST CUTTING OTHER THAN THE ONES I MENTIONED, TO CHANGE INDIVIDUAL'S HEALTH BEHAVIORS. IF WE COULD ONLY MAKE PEOPLE HEALTHIER WE WON'T HAVE TO GIVE THEM HEALTHCARE. AND OF COURSE, THERE'S SOME LOGIC TO THAT, IT'S BETTER TO PREVENT A CASE OF LUNG CANCER THAN TO TREAT IT. THERE IS LOGIC TO TRYING TO CHANGE HEALTHCARE BEHAVIORS. HEALTHCARE BEHAVIORS ARE UNDENIABLY DISASTROUS. WE HAVE OBESITY EPIDEMIC IN THIS COUNTRY. THE OBESITY RATE WENT FROM 13% TO 31% FROM 1960 TO 2000, OVER HALF OF THE POPULATION IS OVERWEIGHT. IT'S BEEN ESTIMATED LIFESTYLE DISEASES, TOBACCO, ALCOHOL USE AND OBESITY ACCOUNT FOR A THIRD OF PREMATURE DEATHS IN THIS COUNTRY. WE DO HAVE A VARIETY OF POTENTIALLY BENEFICIAL TREATMENTS AND MEDICATIONS TO CONTROL THESE LIFESTYLE DISEASES AND ALSO NON--- OTHER TYPES OF DISEASES. HOW FAR, THE EFFECTIVENESS OF THESE MEDICATIONS AND TREATMENTS IS STYMIED BY POOR ADHERENCE. HERE IS ONE STUDY BY JACK AVITIS ET AL WHICH LOOKED AT THE RATE OF STATIN ADHERENCE OVER TIME FOR A DIFFERENT POPULATION. AND THE BOTTOM -- THE BOTTOM LINE IS PEOPLE WITH ACUTE CORONARY SYNDROME. YOU CAN SEE MOST PEOPLE ARE -- THEIR ADHERENCE IS DROPPING TO -- THE AVERAGE PERSON, SORRY, THAT WOULD BE THE TOP LINE, NOT THE BOTTOM LINE. FOR AVERAGE PERSON ADHERENCE IS DROPPING TO 50% AFTER LESS THAN A YEAR AND BUT EVEN FOR PEOPLE WITH ACUTE CORONARY SYNDROME, AFTER ABOUT TWO YEARS, ONLY HALF OF THEM ARE TAKING THEIR STATINS. YOU THINK THAT THEY WOULD BE HIGHLY MOTIVATED TO TAKE MEDICATIONS TO AVOID ANOTHER HEART ATTACK BUT THEY'RE NOT, STRANGELY ENOUGH. POOR MEDICATION ADHERENCE ASSOCIATED WITH HIGHER RATES DISEASE, INCREASED HEALTHCARE COSTS. IT'S ESTIMATED ONE ESTIMATE IS $100 BILLION PER YEAR, THE COST OF POOR MEDICATION ADHERENCE. AND IT'S GENERALLY THE CASE THAT EFFICACIOUS MEDICATIONS DON'T HAVE AN IMPACT IF PEOPLE DON'T TAKE THEM, OBVIOUSLY. THE HEALTHCARE REFORM BILL INCLUDES SEVERAL PROVISIONS AIMED AT CHANGING M&A HEALTH BEHAVIORS, ONE IS TALLRY POSTING AT -- CALORIE POSTING AT MANDATES. CALORIE POSTING AT CHAIN RESTAURANTS NATIONALLY. I HAVE ACTUALLY DONE A LOT OF RESEARCH ON THIS AND MANY OTHER PEOPLE HAVE AND WITH THE EXCEPTION OF ONE STUDY THAT LOOKED AT PEOPLE AT STARBUCKS WHICH IS NOT EXACTLY THE TARGET OF THE LEGISLATION, WITH THE EXCEPTION OF THAT ONE STUDY ALL STUDIES REACH SIMILAR CONCLUSIONS, THATCAL CALORIE POSTING DOESN'T HAVE AN IMPACT ON EATING BEHAVIOR. ANOTHER APPROACH OF THE HEALTHCARE REFORM BILL IS VALUE-BASED INSURANCE DESIGN SECTION 226, 13 OF THE AFFORDABLE CARE ACT MANDATES RECOMMENDED SERVICES BE COVERED WITHOUT COST SHARING. ONE AGAIN, THIS SOUNDS LIKE A GOOD IDEA, IT IS THE CASE WHEN YOU RAISE THE CO-PAYS ON SERVICES THAT FEWER PEOPLE GET THEM. HOWEVER ALL THE RESEARCH THAT I HAVE SEEN AND QUITE A BIT OF RESEARCH, HAS NOT FOUND GENERALLY WHEN YOU LOWER CO-PAYS ON MEDICATION THAT MORE PEOPLE TEND TO TAKE THEM. SO VBIT AS CALLED DID NOT SEEM TO BE A VERY EFFECTIVE WAY OF GETTING PEOPLE TO TAKE THEIR MEDICATION. THAT ACTUALLY RELATES TO THE GENERAL THEME OF MY TALK. FINALLY THE HEALTHCARE REFORM BILL INTRODUCES PROVISIONS TO CONDITION HEALTH PREEMS ON -- PREMIUMS ON HEALTH BEHAVIORS. THE SO-CALLED SAFE WAY AMENDMENT ALLOWS UP TO 50% PREMIUM ADJUSTMENTS BASED ON OUTCOME-BASED ASSESSMENTS, SMOKING, BMI, BLOOD PRESSURE, CHOLESTEROL. THIS IS CALLED THE SAFEWAY AMENDMENT BECAUSE IT'S BASED ON SAFEWAY'S CLAIMS OF FLAT COST THE PAST FIVE YEARS FROM TIME PREMIUMS TO BIOMETRIC MEASURES. HOWEVER, THERE'S BEEN A LOT OF CHALLENGES TO SAVEWAY'S CLAIMS AS THE WASHINGTON POST ARTICLE HEADLINE IS MISLEADING CLAIMS ABOUT SAFEWAY WELLNESS INCENTIVE SHAPE HEALTHCARE BILL. IF YOU LOOK CAREFULLY, THEIR FLAT COSTS PRECEDED THE INTERVENTION THAT THEY INTRODUCED. SO IT DOESN'T MAKE ANY SENSE TO CLAIM THEIR INTERVENTIONS CAUSED THE FLAT COST. BEYOND THIS EVIDENCE FROM SO CALLED EVIDENCE FROM SAFEWAY, THERE'S LITTLE EVIDENCE THIS APPROACH IS EFFECTIVE, THIS APPROACH BEING THE APPROACH OF CONDITIONING, PREMIUMS, ON THESE DIFFERENT HEALTH MEASURE, BEHAVIOR AND OTHER MEASURES. THE MAIN PURPOSE OF HEALTH INSURANCE IS TO REDISTRIBUTE BURDENS OF ILLNESS BETWEEN HEALTHY PEOPLE AND SICK PEOPLE. KIND OF TO SHARE THE COST OF POOR HEALTH. THE SAFEWAY AMENDMENT WILL UNDERMINE THIS PURPOSE AND WILL INCREASE PREMIUMS FOR LOW INCOME FAMILIES AN MINORITIES WHO HAVE WORSE HEALTH BEHAVIORS AND IT'S GOING TO LOWER PREMIUMS FOR HEALTHY PEOPLE. THAT IS REGRESSIVE. THE STATED PURPOSE OF THE SAMEWAY AMENDMENT IS TO PROMOTE HEALTHY BEHAVIORS AND REDUCE COST. THE WORST POSSIBLE OUTCOME WILL BE IF THE SAFEWAY AMENDMENT INTRODUCES GREATER REGRESSIVITY, CAUSES POOR UNHEALTHY PEOPLE, POOR PEOPLE ARE MORE LIKELY TO SMOKE, HAVE HIGHER BMIs, SO ON, CAUSES EXACT PEOPLE WHO CAN'T AFFORD THE PREMIUMS TO RAISE THEIR PREMIUMS. AT THE SAME TIME IT HAS LITTLE IMPACT ON BEHAVIOR. THAT'S THE WORST POSSIBLE OUTCOME. SO WHAT CAN BEHAVIORAL ECONOMICS CONTRIBUTE TO THIS? THE TRAIN HAS LEFT THE STATION ON THE SAFEWAY AMENDMENT AS PART OF HEALTHCARE REFORM. SO WE CAN'T DO ANYTHING ABOUT THAT. BUT A MAJOR IMPLICATION OF BEHAVIORAL ECONOMICS IS THAT A DOLLAR DOES NOT EQUAL A DOLLAR DOES NOT EQUAL A DOLLAR. WHAT I MEAN BY THAT IS YOU CAN -- THERE ARE WAYS OF DELIVERING INCENTIVES TO PEOPLE WHERE YOU MIGHT AS WELL BURN THE MONEY. IT'S GOING TO HAVE NO IMPACT ON PEOPLE. THERE ARE OTHER WAYS OF TAKING EXACTLY THE SAME INCENTIVES AND MAKING THEM MUCH MORE EFFECTIVE. HOW PREMIUM CONDITIONING IS IMPLEMENTED IS GOING TO DETERMINE WHETHER OR NOT IT CHANGES BEHAVIOR. THAT IS WHETHER OR NOT WE IN ADDITION TO THE REGRESSIVITY OF THE SAFEWAY AMENDMENT WE GET SOME BENEFITS FROM IT. LET ME CHANGE GEARS FOR A MOMENT TO LEAVE THE DOMAIN OF HEALTHCARE BEHAVIOR AND I WILL STRAIT MY POINT WITH TWO DIFFERENT PROGRAMS DESIGNED TO STIMULATE SAVINGS BEHAVIOR AMONG LOW INCOME PEOPLE. THESE ARE PROGRAMS NOT IN THE DOMAIN OF HEALTH BUT ILLUSTRATE THE THEME THAT I'M TRYING TO CONVEY. SO THE PROBLEM IS, WE HAVE ALSO TAX PROTECTED SAVINGS IN THIS COUNTRY LIKE IRAs, 401(K)s, SO ON. BUT IN THIS ONLY GIVE YOU BENEFITS. THEY GIVE YOU BENEFITS TO THE DEGREE YOU'RE IN A HIGH TAX BRACKET BECAUSE THEY GIVE YOU TAX DEDUCTIONS, THAT'S ONLY HELPFUL TO YOU IF YOU'RE IN A HIGH INCOME TAX BRACKET. SO POOR PEOPLE DON'T GET THE SAME BENEFITS FOR SAVING AS RICH PEOPLE SO THERE'S BEEN PROGRAMS TO TRY TO GIVE PEOPLE THE SAME BENEFITS THAT RICH PEOPLE ENJOY AND TWO DIFFERENT PROGRAMS WERE TESTED BY RESEARCHERS COLLABORATING WITH H&R BLOCK. THE FIRST ONE IS CALLED THE SAVER'S CREDIT EPIACTED IN 2001. IN THIS PROGRAM THERE WAS A FEDERAL INCOME TAX REDUCTION OF UP TO 50% OF FUNDS CONTRIBUTED TO AN IRA. SO IT'S A -- IF A LOW INCOME INDIVIDUAL CONTRIBUTED $100 TO THE IRA, THE TAXES WOULD BE CUT BY $50. IT'S EFFECTIVELY 100% MATCH. YOU PUT IN $50 EFFECTIVELY YOU GET $100. 100% MATCH ON YOUR SAVINGS. SOLUTION 2, WAS A SAVINGS MATCH, THIS WAS TESTED A FEW YEARS LATER. AND IN THIS SOLUTION, CLIENTS PREPARING TAX RETURNS AT H&R BLOCK OFFICES WERE ASSIGNED TO ONE OF THREE MATCH RATES FOR IRA CONTRIBUTION. A CONTROL GROUP THAT GOT NO MATCH A 20% MATCH GROUP SO EVERY $100 THEY PUT IN H&R BLOCK Z IT APPEARED TO THEM ANYWAY, PUT IN THE EXTRA $20. AND THERE WAS ALSO A 50% MATCH WHERE THERE WAS 100-DOLLAR SAVINGS, AN EXTRA $50. SO YOU CAN SEE SOLUTION 2 IS CONSIDERABLY LESS GENEROUS THAN SOLUTION 1. LET'S TAKE A LOOK AT WHAT THE RESULTS THAT SAVERS CREDIT, THE TAKEUP RATE WAS 3% AND AMONG THOSE 3%, THE AVERAGE CONTRIBUTION TO THE IRA WAS $150. IF YOU LOOK AT THE MATCH EXPERIENCE THE CONTROL, THE 3% TAKE UP RATE, THEY DIDN'T GIVE BUT 3% CONTRIBUTED TO THE IRA THERE AND THEY CONTRIBUTED AN AVERAGE OF 765. THESE ARE TWO DIFFERENT POPULATION GROUP, TWO DIFFERENT YEARS SO YOU CAN'T DO STRICTLY COMPARE THE TWO BUT IT DOESN'T LOOK LIKE THE SAVER'S CREDIT HAD MUCH IMPACT. HOWEVER, IF YOU LOOK AT THE 20% MATCH, THERE'S 8% TAKE UP RATE, $1,100 CONDITIONAL AVERAGE CONTRIBUTION AND WITH THE 50% MATCH IT WAS A 14% TAKE UP RATE. THE POINT IS THESE TWO PROGRAMS THE MORE GENEROUS PROGRAM HAD SEEMINGLY NO IMPACT ON BEHAVIOR, THE LESS GENEROUS PROGRAM HAD QUIT A BIG IMPACT ON BEHAVIOR. THE POINT IS THAT REALLY MATTERS HOW YOU IMPLEMENT INCENTIVES. WHY THE DIFFERENCE IN THE OPPOSITE DIRECTION FROM THE OBJECTIVE INCENTIVES PROBABLY HAS SOMETHING TO DO, CONJECTURE T SAVER'S CREDIT THE BENEFIT WAS INTEGRATED WITH THE INCOME TAX SO IT WAS NOT VERY SALIENT TO THEM. SECOND, THE REDUCTION NOT VERY LARGE COMPARED TO THE AMOUNT OF TAX THEY WERE PAYING SO THE REDUCTION WAS AMORPHOUS TO THEM. THE MATCH IN CONTRAST WAS SEPARATED AND MORE AS A RESULT MORE SALIENT. AND WITH A MATCH IT FEELS LIKE YOU'RE GETTING A GIFT YOU'RE GOING FOREGO IF YOU DON'T PUT THE MONEY ASIDE. LIKE SOMEONE IS READY TO GIVE YOU $20, AND YOU'RE GOING TO GIVE UP THE $20 IF YOU DON'T PUT IN YOUR OWN $100. SO THE SECOND ONE IS PSYCHOLOGICALLY VERY DIFFERENT THOUGH FROM AN ECONOMIC PERSPECTIVE IT'S LESS GENEROUS. MOST HEALTH PROGRAMS IGNORE THE MOST BASIC LESSON OF ECONOMICS. HERE IS A PROGRAM THAT OFFERED BY A INSURANCE COMPANY, A FITNESS PROGRAM GET THEM TO EXERCISE, THEY GET UP TO $150 BACK FOR JOINING AND USING THE GYM. PICTURE OF ATTRACTIVE PEOPLE. THAT PART IS PROBABLY GOOD. THAT PROBABLY DOES HELP PEOPLE TO EXERCISE. AMONG OTHER THINGS, REGULAR PHYSICAL ACTIVITY CAN HELP YOU REDUCE CHOLESTEROL, TELLS YOU WHY YOU SHOULD DO IT. COMPLETE 120 WORK OUTS IN 365 DAYS AND YOU'RE ELIGIBLE FOR A REIMBURSEMENT OF UP TO $150. WELL, IF YOU WANT TO BURN $150, YOU COULDN'T COME UP WITH A BETTER WAY OF DOING IT. THIS HAS DESIGN FLAW, REWARDS ARE ONCE A YEAR. THAT'S A SINGLE HIGH THRESHOLD, HOW MANY GO TO THE GYM 120 TIME? PROBABLY ONLY PEOPLE WHO ARE ALREADY GOING TO THE GYM 120 TIMES. SO THIS PROGRAM IS GOING TO SPEND $150 WHO ARE GOING TO EXERCISE ANYWAY. ISN'T GOING TO GET ANYBODY WHO WASN'T EXERCISING TO EXERCISE F. YOU LOOK AT TYPICAL HEALTHCARE PLAN, THIS IS JUST LIKE THE YOU HAVE TO MAKE A DECISION BETWEEN TWO PLANS, IF YOU LOOK AT THE TYPICAL HEALTHCARE PLAN, I WON'T GO THROUGH THE DETAILS BUT ALL OF YOU KNOW THE TYPICAL HEALTHCARE PLAN IS ABSOLUTELY BEWILLERRING. OBVIOUSLY A LOT OF THOUGHT WENT TO DESIGNING THAT PLAN. THERE'S A LOT OF DETAIL. THE DESIGNERS OF THE PLAN WANTED TO INCENTIVIZE THE SUBSCRIBERS TO BEHAVE IN REALLY SPECIFIC WAYS. BUT AFTER WAY MORE THAN AN HOUR OF SCRUTINY, BY ONE PERSON WITH A Ph.D. IN ECONOMICS, OBVIOUSLY MYSELF, I COULDN'T FIGURE OUT WHAT THESE PLANS ARE ALL ABOUT. IN FACT, I COULDN'T FIGURE OUT WHAT THE FUNDAMENTAL DIFFERENCE, BETWEEN THE TWO PLANS WAS OR WHICH PLAN I WOULD PERSONALLY CHOOSE. IF YOU CAN'T UNDERSTAND HOW THE PLANS WORK, HOW CAN THEY POSSIBLY INCENTIVIZE YOU TO BEHAVE IN ANYWAY? SO OUR APPROACH KEVIN AND RYAN AND OUR COLLABORATORS, OUR GENERAL APPROACH IS TO USE DECISION ERRORS TO HELP PEOPLE. SO BEHAVIORAL ECONOMICS IS %w VERY CONCERNED WITH A COMMON DECISION ERRORS THAT PEOPLE MAKE IN DAY TO DAY LIFE AND THE APPROACH THAT WE HAVE BEEN TAKING IS TO TRY TO USE THE SAME ERRORS THAT USUALLY HURT PEOPLE TO INSTEAD HELP THEM. FOR EXAMPLE, PEOPLE TEND TO BE VERY SHORT CITED. THEY'RE VERY ORIENTED TOWARDS IMMEDIATE COST AND BENEFITS. THAT'S USUALLY A BAD THING. THAT'S PART OF THE REASON WHY WE DON'T SAVE MONEY, IT'S PART OF THE REASON WE GAIN WEIGH BECAUSE THE IMMEDIATE FOOD IS VERY ATTRACTIVE TO US. IT'S POSSIBLE TO PLAN BIASES AND INCENTIVE PROGRAMS FOR MAKING REWARDS FOR BENEFICIAL BEHAVIOR FREAK AND IMMEDIATE. STEVE HIGGINS AND HIS COLLEAGUES WHO DO RESEARCH WITH DRUG ADDICT, THEY DO PROGRAMS WITH DRUG ADDICTS HAVE HAD REMARKABLE SUCCESS. YOU TAKE AN ADDICT, ADDICT IS LIVING ON THE STREET, LOST FAMILY, UNEMPLOYED SO ON, THEY HAVE EVERY MOTIVE TO KICK THEIR HABIT, THEY DON'T KICK THEIR HABIT. YOU GIVE THEM SMALL COUPONS GOOD FOR SMALL REWARDS LIKE AT STORES AND ALL OF A SUDDEN IT HAS A HUGE IMPACT ON BEHAVIOR. THE MUCH LARGER IMPACT MOTIVATION TO KICK THE HABIT AND GET YOUR LIFE TOGETHER DOESN'T SEEM TO WORK. FRAMING AND SEGREGATING REWARDS HAVE TALKED ABOUT THAT WITH THE TAIL OF THE TWO TAX PROTECTED SAVINGS PROGRAMS. BUT $100 REWARD IS MUCH MORE LIKELY TO BE EFFECTIVE THAN $100 DISCOUNT ON A HEALTH PREMIUM FOR MANY REASONS, FOR ONE THE $100 REWARD IS SEPARATED AND TWO, NOT BURIED IN A MUCH LARGER AMOUNT. PEOPLE TEND TO OVERWEIGH SMALL PROBABILITIES SO IN A LOT OF RESEARCH AS YOU SEE WE OFTEN GIVE PEOPLE LOTTERY REWARDS. PEOPLE LOVE LOTTERIES IN PART BECAUSE THEY EXAGGERATE THE LIKELIHOOD OF WINNING SO IF PEOPLE LOVE LOTTERIES LET'S GIVE THEM LOTTERY REWARDS. I WOAP GO THROUGH THE PSYCHOLOGY IN GREAT DETAIL BUT IN HEALTHCARE VERY MUCH LIKE IN SAVINGS FOR LOW INCOME FAMILIES AND HEALTHCARE HOW YOU IMPLEMENT A PROGRAM MAKES A BIG DIFFERENCE. THIS IS A STUDY WITH EMILY HAZILY A FORMER GRADUATE STUDENT, KEVIN AND TOM AND IN IT A HEALTHCARE COMPANY HEAD QUARTERED IN PITTSBURG TOLD US THEY WERE HAVING TROUBLE GETTING THEIR EMPLOYEES TO COMPLETE HEALTH RISK ASSESSMENTS AND B ASK FOR OUR HELP. THEY WERE PLAYING PLOAM EMPLOYEES TO COMPLETE A HRA AND WILLING TO GO UP TO $50. SO WE GAVE EVERYONE $25 CASH INCENTIVE FOR COMPLETING THE HRA AND THERE WAS A CONTROL GROUP THAT GOT NO EXTRA REWARD. THEN THERE WAS A DIRECT PAYMENT GROUP WE GAVE THEM ADS 25 GIFT CERTIFICATE, EVERYONE SHOPS FOR GROCERIES. EFFECTIVELY WE DOUBLED THEIR MONETARY REWARD. THEN WE INTRODUCED A LOTTERY CONDITION, WHICH IS ONE OF THESE BEHAVIORAL ECONOMICS INTERVENTIONS THAT PLAYS ON BIASES. WE DIVIDE EMPLOYEES EACH WEEK ONE SIDE WAS RANDOMLY SELECTED. IN THE SELECTED GROUP WHO COMPLETED AN HRA WON $100. INDIVIDUALS IN THE GROUP WHO HADN'T COMPLETED THE HRA KNEW THAT THE OTHER PEOPLE IN THE GROUP HAD HAD COMPLETED HRAs AND RECEIVED $100 AND THEY MISSED OUT ON $100. WE INCREASED THE PRIZE TO $125 IF80% OF THE WORK GROUP COMPLETED THE HRA. YOU CAN SEE WE'RE PLAYING ON GROUP PRESSURE, PLAYING ON REGRET. AND PEOPLE'S LOVE OF LOTTERIES, SO ON. AN IMPORTANT FEATURE IS THE LOTTERY INTERVENTION, THE EXPECTED VALUE WAS $25. SO WE CAN GIVE PEOPLE $25 OR WE CAN GET PEOPLE $25 IN A DIFFERENT WAY. HERE ARE THE RESULTS. THE CONTROL CONDITION GOT $25, THIS -- THE CONDITION WHERE THEY GOT $25 AND THE $25 GROCERY CERTIFICATE IF THEY COMPLETED THE HRA, AND THE LOTTERY CONDITION WAS MUCH HIGHERCH THIS IS A VERY CONSERVATIVE ESTIMATE OF THE IMPACTHQ OF LOTTERY CONDITION. A BUNCH OF PEOPLE COULDN'T SIGN UP FOR THE LOTTERY FOR COMPLEX REASONS, AND THIS IS BASED ON INTENTION TO TREAT. AND ANOTHER FEATURE OF THIS IS WE LOOKED AT INCOME, WE LOOKED AT IMPACT OF THESE INTERVENTIONS AS A FUNCTION OF INCOME, WE DID A MEDIAN SPLIT ON THE POPULATION AND LOOKED AT LOW INCOME PEOPLE WHO TENDED TO BE LIKE SUPPORT STAFF. AND HIGHER INCOME PEOPLE. IF YOU LOOK AT THE IMPACT AMONG HIGH INCOME PEOPLE, THE LOTTERY WAS MORE EFFECTIVE BUT NOT THAT MUCH MORE EFFECTIVE BUT THE THE LOTTERY WAS ESPECIALLY EFFECTIVE AMONG THE LOW INCOME GROUPS. VERY OFTEN AS WE DISCUSSED EARLIER, VERY OFTEN LOW INCOME PEOPLE ARE THE PEOPLE YOU WANT TO TARGET WITH THESE TYPES OF INTERVENTIONS BECAUSE THEY TEND TO HAVE POORER HEALTH AND POORER HEALTH BEHAVIORS. THIS IS APPLYING BEHAVIOR TO ECONOMICS AND WEIGHT LOSS, EXPLORE DECISION ERRORS TO HELP PEOPLE MANY THE FIRST STUDY WEIGHT LOSS, A THREE CONDITION RANDOMIZED CONTROL TRIAL, THERE WERE THREE CONDITIONS, CONTROL CONDITION WHERE THEY WENT TO A DITITION FOR AN HOUR -- DIETITIAN FOR AN HOUR LONG SESSION AND A LOTTERY CONTRACT POSITION. AT THE START SUBJECTS WERE OBESE, THEY'RE ALL VETERANS, ALMOST ALL WERE MALE. THEY WERE I TOLD YOU THEY ALL RECEIVE THE ONE HOUR CONSULTATION. EVERYONE WAS GIVEN THE GOAL OF LOSING FOUR POUNDS PER MONTH FOR FOUR MONTHS. AT THE END OF EACH MONTH THEY CAME INTO THE LAB AND THEY WERE WEIGHED ON OURLY IN THIS CASE SCALE. IN THE TWO INCENTIVE CONDITIONS THEY WERE GIVEN A SCALE TO TAKE HOME. IN THE INCENTIVE CONDITIONS THEY WERE ASKED TO PHONE IN THEIR DAILY WEIGHT AND WE SENT THEM A DAILY TEXT MESSAGE. SO WE'RE TRYING TO GIVE THEM A LOT OF -- WE'RE TRYING TO GIVE FREQUENT FEEDBACK CONSISTENT WITH PRESENT BIAS. THEY RECEIVE THEIR -- THEY -- THE TEXT MESSAGE IF THEY GET REWARDS IT TELLS HOW MUCH THEY RECEIVE. AT THE END OF THE MONTH WHEN THEY COME INTO THE CLINIC THEY GET THE MONEY. SO IN EFFECT IT'S ALMOST PAYING THEM TWICE. WE'RE TELLING THEM HOW MUCH THEY EARNED SO WE'RE GIVING A SYMBOLIC REWARD, AT THE END OF THE MONTH THEY'RE GETTING THE ACTUAL REWARD SO ALMOST LIKE THE MONEY IS DOING DOUBLE DUTY. SO HERE IS SOMEBODY, A VETERAN WHO STARTS AT 250 POUNDS, THEIR GOAL IS TO LOSE 16 POUNDS IN 16 WEEKS IN THIS PROGRAM. IF THEY STAY UNDER THIS LINE, THEY GET THE REWARDS. SUPPOSE THEY DON'T STAY UNDER THE LINE, WHAT TWO WE DO? ONE THING IS WE COULD HAVE SHIFTED THE LINE OUT HERE, PARALLEL LINE LIKE THIS, AND THEY CAN JUST START AGAIN. WE DIDN'T WANT TO DO THAT BECAUSE THAT WOULD PROVIDE THEM -- THAT WOULD GIVE THEM INCENTIVE TO PROCRASTINATE, THIS MONTH I WON'T LOSE WEIGHT AND NEXT MONTH I'M GOING TO START THE PROGRAM. ANOTHER THING WE COULD HAVE DONE WAS JUST KEPT THIS LINE WHERE IT IS BUT TAKE SOMEBODY WHO IS HERE AFTER A MONTH THEY HAVEN'T LOST ANY WEIGHT AND NOW HAIF TO LOSE FOUR POUNDS TO GET UNDER THE GREEN LINE, THEY PROBABLY GIVE UP AT A CERTAIN POINT. SO THIS IS KIND OF A COMPROMISE WHERE THERE'S A FRESH START TRAJECTORY BUT IT'S STEEPER, THEY HAVE TO LOSE MORE WEIGHT EACH -- THEY HAVE TO LOSE MORE WEIGHT EACH DAY TO STAY UNDER THE LINE. THIS IS LIKE TYPICAL DESIGN CONSIDERATION THAT GOES INTO THESE TYPES OF PROGRAMS. SOME IS SCIENCE, A LOT IS JUST LIKE BRAINSTORMING AND TRYING TO SOLVE PROBLEMS. THE LOTTERY INCENTIVE, THE SUBJECT CHOSE A 2 DIGIT NUMBER. 27. AND EVERY DAY WE DREW A TWO DIGIT NUMBER. IF THE FIRST TWO MATCHED LIKE WE DREW A 25 OR THE SECOND DIGIT MATCHED WE DREW A 57, THEY WON $10. IF BOTH DIGITS MATCH, THAT'S ALMOST A 1 IN 5 CHANCE OF WINNING $10, $2 EXPECTED VALUE. BOTH DIGITS MATCH THEY WIN $100 AND IT'S A 1 IN 100 CHANCE OF WINNING $100. SO THE TOTALED EXPECTED VALUE OF THE GAMBLE SUICIDE 3 A DAY. THEY ONLY GET THEIR MONEY, THEY ONLY GET THEIR WINNINGS IF THEY CALLED IN THAT DAY AND IF THEY CALLED IN THEIR WEIGHT AND REPORTED THEIR WEIGHT BEING BELOW THE GOAL. IF THEY CAME AT THE END OF THE MONTH AND THE WEIGHT WASN'T WHAT IT WAS REPORTED TO BE, THEY DIDN'T GET ANY WINNINGS OF COURSE. EVERY DAY WE TRANSMITTED A TEXT MESSAGE TO THE SUBJECT TELLING THEM WHETHER THEY WON OR WHETHER THEY WOULD HAVE WON IF THEY HAD MET THEIR GOAL. TODAY, YOU WON $10 TODAY BUT TOO BAD YOU DIDN'T CALL IN YOUR WEIGHT OR UNFORTUNATELY YOU WERE ABOVE YOUR TRAJECTORY, WEIGHT LOSS TRAJECTORY SO YOU DON'T GET THE $10. SO WE'RE PLAYING ON REGRET. SO I HAVE ALREADY SAID THE LOTTERY INCENTIVE CONDITION PLAYS ON REGRET AND ALSO PLAYS ON NON-LINEAR PROBABILITY WEIGHTING OF PEOPLE'S LAS VEGAS OF LOTTERIES. THEY LOVE LOTTERIES SO LET'S GIVE THEM LOTTERY REWARDS. SUBJECTS WERE ALLOWED AT THE BEGINNING OF EACH MONTH THEY COULD PUT DOWN THEIR OWN MONEY, FROM A PENNY TO $3 A DAY, TOWARD WEIGHT LOSS, WE MATCHED EACH DEPOSIT ONE TO ONE PLUS WE GAVE THEM ADS 3 DAILY PAYMENT, ALL OF THESE REWARDS ARE CONTINGENT ON THEM STAYING BELOW THEIR WEIGHT LOSS TRAJECTORY. IF THEY GO ABOVE THE WEIGHT LOSS TRAJECTORY, THEY LOSE, THEY DON'T GET OUR MONEY AND THEY LOSE THEIR OWN MONEY. THAT'S WHY IT'S CALLED A DEPOSIT CONTRACT. THE DEPOSIT CONTRACT CONDITION PLAYS ON OVEROPTIMISM, PEOPLE ARE NOTORIOUSLY OVEROPTIMISTIC ABOUT THEIR ABILITY TO EXERCISE, ALL TYPES OF SELF-CONTROL INCLUDING LOSING WEIGHT. SO PEOPLE SAY I'M GOING TO LOSE FOUR POUNDS THIS MONTH AND BASE THOOB THEY'RE READY TO PUT DOWN A BIG DEPOSIT. DUE THE A PHENOMENON THAT ECONOMISTS CALL LOSS AVERSION PEOPLE HATE LOSING MONEY, THEY DONE WANT THE LOSE THE MONEY THEY PUT DOWN, SO IT BECOMES A SELF-FULFILLING PROPHESY, A SELF-FULFILLING OVEROPTIMISM. HERE ARE THE RESULTS. THIS IS THE TOTAL WEIGHT LOSS, AGAIN, INTENTIONS TO TREAT BY CONDITION. YOU CAN SEE THAT THE LOTTERY AND THE DEPOSIT CONTRACT WERE BOTH VERY EFFECTIVE. WE ASKED THEM A BUNCH OF QUESTIONS INCLUDING DID THEY DIET, DID THEY CHANGE EXERCISE. WE DIDN'T SEE ANY RELATIONSHIP BETWEEN LOSING WEIGHT AND DIET. BUT WE SAW A BIG RELATIONSHIP BETWEEN LOSING WEIGHT AND EXERCISE. THIS IS -- I TOLD YOU THE GOOD NEWS ABOUT THE STUDY. THE BAD NEWS IS THAT WE FOLLOWED THEM UP SEVEN MONTHS LATER AND AFTER SEVEN MONTHS NOT ONLY HAD THEY NOT -- CONTINUED TO LOSE WEIGHT BUT THEY GAINED BACK MOST OF THE WEIGHT THAT THEY LOST. BASED ON THE FACT THEY REGAINED THEIR WEIGHT, CAN A SIMILAR BUT LESS EXPENSIVE APPROACH BE APPLIED TO EXTENDED WEIGHT LOSS, DEPOSIT CONTRACTS NO LONGER A FIX PAYMENT OF $3, JUST A MATCH, A PURE MATCH. ONCE AGAIN, WE FOUND THAT THE PROGRAM WAS SUCCESSFUL IN GETTING PEOPLE TO LOSE WEIGH AND KEEP THE WEIGHT OFF FOR EIGHT MONTHS INSTEAD OF FOUR MONTHS BUT ONCE AGAIN BAD NEWS WHEN WE FOLLOWED THEM UP AT 17 MONTHS THEY HAD REGAINED PRETTY MUCH ALL THE WEIGHT THEY HAD LOST. ANOTHER PROGRAM THAT WE DID, I'M GOING TO END IN SEVEN MINUTES BECAUSE I WANT TO HAVE AN EXTENDED DISCUSSION. ANOTHER PROGRAM THAT WE DID INVOLVED INCENTIVES FOR MEDICATION ADHERENCE USING DAILY LOTTERIES. THIS IS DONE WITH WARRAFARIN. WARFARAN, A LOT OF YOU ARE DOCTORS BUT IT'S A VERY DANGEROUS DRUG IF YOU TAKE TOO MUCH OF IT YOU CAN BLEED INTERNALLY, DIE FROM INTERNAL BLEEDING. AND SO A LOT OF DOCTORS ARE AFRAID OF PRESCRIBING WARFARIN TO THEIR PATIENTS BECAUSE THOUGH IT'S VERY BENEFICIAL, BECAUSE IT'S SO DANGEROUS. ADHERENCE IS SO POOR. WE DESIGNED AN INTERVENTION TO GET PEOPLE TO TAKE THEIR WARFARAN, THE RIGHT AMOUNT OF TIME, NOT TOO MUCH, NOT TOO LITTLE. AGAIN, IT'S EXACTLY THE SAME LOTTERY THAT I TOLD YOU ABOUT BEFORE AND AGAIN, WE PLAY ON REGRET. WE TELL THEM ABOUT THEIR WINNINGS AND WE TELL THEM IF THEY WON BUT DIDN'T TAKE THEIR WARFARIN WE SAY TOO BAD WE WON THE LOTTERY BUT BECAUSE YOU DIDN'T TAKE WERE WARFARIN YOU DIDN'T GET PAID. HOW DO WE KNOW THEY TOOK THEIR WARFARI ?RKS? THE ANSWER IS BY NOW AN OLD FASHIONED PIECE OF TECHNOLOGY, THE TECHNOLOGY IS DEVELOPING INCREDIBLY QUICKLY NOW BUT THIS IS AN OLD PEACE CALLED A MEDE MONITOR WHICH COMMUNICATES BY TELEPHONE, COMMUNICATES WITH THE PATIENTS AND ALSO GOT THESE LITTLE COMPARTMENTS AND WHEN THE PATIENT OPENS THE COMPARTMENT IT SENDS US A MESSAGE. SO WE KNOW AT LEAST -- WE DON'T KNOW WHETHER THEY TOOK WARFARIN BUT WHETHER THEY OPENED THE COMPARTMENT. MOST PEOPLE WHO ARE TAKING WARFARIN ARE MOTIVATED TO TAKE IT. IF YOU HAD A STROKE, ABOUT 15% CHANCE YOU'RE GOING TO HAVE ANOTHER STROKE IN THE NEXT YEAR IF YOU DON'T TRITE, YOU CAN REDUCE THAT TO 3% IF YOU TAKE YOUR WARFARIN, MOST PEOPLE DON'T WANT TO HAVE A STROKE. SO ON. SO RATES OF NON-ADHERENCE TO WARFARIN WERE REDUCED WITH THESE LOTTERY BASED INCENTIVES QUITE DRAMATICALLY. THESE ARE THE INR RATES, PEOPLE PROPERLY CO-ING ALATED. YOU CAN SEE THEY WERE NOT PROPERLY COAGULATED BEFORE TREATMENT, MUCH MUCH BETTER DURING THE TREATMENT, AND BUT ONCE AGAIN, SAME MESSAGE AS THE -- SAME MESSAGE AS FOR THE WEIGHT LOSS, SOON AS WE REMOVE THE INCENTIVE, THEY WENT BACK TO THEIR OLD POOR RATES OF ADHERENCE. IN MY OPINION, ALL OF THIS -- YES. (OFF MIC) >> THIS IS SORRY, THESE ARE THE BLOOD TESTS. I SHOULD HAVE CLARIFIED THIS. SO THESE ARE THE DATA FROM THE MEDE MONITOR, THESE ARE DATA FROM THE BLOOD TESTS. SO IN MY OPINION A BIG ISSUE FOR THESE TYPES OF INTERVENTIONS IS HABIT FORMATION. FOR SOMETHING LIKE THE HRA COMPLETION, A ONE SHOT THING OR FLU SHOT OR SOMETHING LIKE THIS, THESE INTERVENTIONS SEEM TO WORK REALLY WELL. THEY ALSO WORK PRETTY WELL FOR MORE DIFFICULT BEHAVIORS LIKE WEIGHT LOSS AND MEDICATION ADHERENCE BUT THERE'S A BIG PROBLEM THAT AS SOON AS THE INCENTIVE FOR ONGOING BEHAVIOR CHANGE AS SOON AS INCENTIVES ARE REMOVED. SO FAR WE HAVEN'T BEEN ABLE TO DEVELOP HABITS. WE'RE DOING RESEARCH TO TRY TO FIX THAT PROBLEM. SO IN SUM, PREMIUM ADJUSTMENTS FOR HEALTH BEHAVIOR ARE COMING, THEY'RE PART OF THE HEALTHCARE REFORM. THEIR PITFALLS ARE CLEAR, THAT IS, THEY'RE GOING TO INTRODUCE GREATER REGRESSIVITY, POOR PEOPLE WHO CAN LEAST AFFORD THE PAY MORE FOR HEALTHCARE ARE GOING TO BE PAYING MORE FOR HEALTHCARE. IT WOULD BE A TRAGEDY IF IT DOESN'T HAVE THEIR INTENDED EFFECT WHICH IS TO CHANGE BEHAVIOR. AND THESE IDEAS CAN BE USED TO ENSURE THAT INCENTIVES FOR HEALTHY BEHAVIOR INTRODUCED BY HEALTHCARE REFORM WILL ACTUALLY HAVE THEIR INTENDED IMPACT. [APPLAUSE] (OFF MIC) >> THERE ARE A VARIETY OF MODELS IN DIFFERENT COUNTRIES. (OFF MIC) >> YOUR QUESTION WORRIES ME BECAUSE YOU BEGAN WITH SOMETHING THAT'S EXACTLY THE OPPOSITE OF THE POINT THAT I WAS TRYING TO MAKE. IN MY OPINION ALL OF THE -- THE REALLY EFFECTIVE WAYS OF CUTTING COSTS ARE EXACTLY DEAL WITH THE BUSINESS MODEL. THEY DEAL WITH A WAY THAT WE ADMINISTER HEALTHCARE IN THIS COUNTRY. I DON'T THINK THAT THE ANSWER TO THE HEALTHCARE COST PROBLEM IS TO CHANGE BEHAVIOR. ALL I WAS SAYING WAS THAT OF COURSE CHANGING HEALTH BEHAVIOR IS A VALID GOAL, IT COULD REDUCE COSTS, ALL I'M SAYING IS THAT THE SAFE WAY AMENDMENT IS GOING TO HAVE NEGATIVE CONSEQUENCES THAT MANY PEOPLE WOULD BE LESS NEGATIVE, GOING TO INCREASE REGRESSIVITY AND IT'S QUITE LIKELY THE WAY -- VERY LIKELY INTRODUCED IT'S NOT GOING TO HAVE COMPENSATING BENEFITS. THAT WE NEED TO THINK CAREFULLY ABOUT HOW THE INCENTIVES ARE INTRODUCED SO IT DOES HAVE COMPENSATING BENEFITS. BUT I VERY MUCH THINK CHANGING HEALTHCARE BEHAVIORS IS NOT A WAY TO REDUCE HEALTHCARE COSTS IN THIS COUNTRY. THAT WAS THE POINT OF THIS SLIDE. I THINK IT WILL HELP. BUT THERE ARE OTHER -- THAT'S NOT WHERE THE ACTION IS REALLY. (OFF MIC) >> -- IS THE ACTUAL PROFIT MODEL (INAUDIBLE). (OFF MIC) >> RIGHT. I WOULD SAY I WAS INTENDING THESE TO COVER EXACTLY THE POINT THAT YOU'RE MAKING. I DO THINK A DIFFERENCE IN BUSINESS MODEL WOULD AFFECT ALL THESE THREE POINTS. MICHAEL. >> I'M CURIOUS WHAT YOUR PRACTICAL EXPERIENCE HAS BEEN (INAUDIBLE) IN ENVIRONMENTS THAT ARE (INAUDIBLE) I'M ALL OVER THIS (INAUDIBLE) INCLUDING ACADEMIC SETTINGS INCLUDING IN PITTSBURG AND PROPOSING TO CLINICIANS AND NON-ECONOMISTS (INAUDIBLE) LIKE THIS. THAT PEOPLE IN MY LIMITED EXPERIENCE OFTEN HAVE A REFLECTIVELY ETHICAL RESPONSE OF (INAUDIBLE) I'M CURIOUS DO YOU HAVE THAT EXPERIENCE AS WELL? >> WHEN I TOLD MY MOTHER, MY MOTHER ASKED ME ABOUT THE RESEARCH I DO. AND WHEN I TOLD HER, H HE ACTION WAS YOU'RE PAYING PEOPLE FOR DOING WHAT THEY SHOULD BE DOING ON THEIR OWN? SHE WAS HORRIFIED. AND I HAVE TO ADMIT THAT A PART OF ME SHARES THE RESERVATIONS. I DON'T THINK WE WANT TO WELD INTO SOCIETY WHERE WE'RE PAYING PEOPLE FOR DOING THE THINGS THAT ARE GOOD FOR THEM. SO I THINK FIRST THERE ARE A LOT OF INCENTIVES BUILT INTO -- NEVADA TA BRING THERE ARE INCENTIVES IN EVERY PLAN. IF THEY ARE BUILT IN WE MIGHT AS WELL IMPLEMENT THEM IN WAY THEY'RE GOING TO HEP. I DON'T THINK WE'RE GOING TO WAB TO MOVE TO A -- WANT TO MOVE THE A SOCIETY WE'RE INCENTIVIZING PEOPLE TO DO DIFFERENT THINGS. WE DON'T EPIKNOW FORGET THE ETHICS. WE DON'T EVEN KNOW WHR WHETHER IT WILL BE EFFECTIVE. ALL OF THESE EXPERIMENTS FOCUS ON ONE BEHAVIOR. WE HAVE NO IDEA WHAT WOULD HAPPEN IF WE INCENTIVIZE MULTIPLE BEHAVIORS. SO I SHARE THOSE PSYCHOLOGISTS OR CLINICIANS RESERVATIONS AND MY MOTHER'S RESERVATIONS. ON THE OTHER HAND, TAKE SOMETHING LIKE AGAIN HIGGINS, A PSYCHOLOGIST WHO DOES A LOT OF THIS WORK, HE'S DONE A BUNCH OF WORK TARGETING PREGNANT TEENAGERS WHO SMOKE. AND INCENTIVIZING THEM TO NOT SMOKE. THAT TO ME SEEMS NON-CONTROVERSIAL. IT'S VERY EFFECTIVE. OTHER TYPES OF APPROACHES HAVEN'T BEEN PROVEN TO BE EFFECTIVE. SO I THINK TARGETED INCENTIVES TO THE RIGHT PEOPLE IN THE RIGHT CIRCUMSTANCES CAN BE DESIRABLE AND BENEFICIAL. I SHARE THESE ETHICAL QUALMS YOU'RE MENTIONING. RICHARD. (OFF MIC) >> CERTAINLY THERE'S A LOT OF LOW HANGING FRUIT WHEN IT COMES TO DEFAULT AND NUDGES THAT DON'T COST ANYTHING M AND WE SHALL GO AS FAR AS WE CAN WITH THOSE IN MY OPINION. BUT TAKE SOMETHING LIKE WARFARIN ADHERENCE, HOW DO YOU DEFAULT SOMEBODY TO TAKE THEIR CORRECT AMOUNT OF WARFARIN. SO THOSE ARE SITUATIONIOUS MIGHT NEED OTHER INTERVENTIONS LIKE POSSIBLY UNSENTIVE BASED INTERVENTIONS. IN OUR RESEARCH WE ATTEMPTED TO LIKE TAKE THE WARFARIN CASE, HOW DO WE CHOOSE $3 EXPECTED VALUE A DAY, WE DID A CASUAL ESTIMATION HOW MUCH IT WOULD SAVE TO GET SOMEBODY NON-ADHERENT TO WARFARIN TO BECOME ADHERENT. SO THE $3 A DAY IS VERY CONSERVATIVE ESTIMATE. TAKE THE HEALTHCARE REFORM. THAT DOESN'T COST ANYTHING. THAT'S GETTING PEOPLE WITH POOR HEALTH BEHAVIORS TO PAY MORE AND PEOPLE WITH GOOD HEALTH BEHAVIORS TO PAY LESS SO WE DON'T HAVE TO WORRY ABOUT COST EFFECTIVENESS THERE, ALL WE HAVE TO WORRY ABOUT IS EFFECTIVENESS. (OFF MIC) >> THE WHOLE FIELD? (OFF MIC) I THINK THERE'S GOING TO CONTINUE TO BE RESEARCH ON DEFAULTS AND NUDGES. I THINK WE STILL HAVE FURTHER TO GO. WE DID A PROGRAM, COLLABORATION WITH CDS WHERE WE GOT PEOPLE TO USE DEFAULTS. WE ACTUALLY NOT USING DEFAULTS BUT USING FORCED CHOICE. FORCING PEOPLE TO MAKE A CHOICE. WE HAVE HUGE INCREASE IN PEOPLE DOING MALE ORDER OVER GOING TO THE PHARMACY. SO THERE'S A BIG SCOPE FOR THAT. BUT THE BIG SHORT TERM ISSUE IS THE ISSUE THAT I RAISED. HOW CAN WE INCULCATE HABITSCH BECAUSE WE DON'T WANT TO BE INTRODUCING LONG TERM INCENTIVES FOR TOO MANY BEHAVIORS. YES. (OFF MIC) >> THAT WAS A ONE SHOT COMPLETING THE HRA. I'M GLAD YOU RAISED THAT BECAUSE IT GIVES ME A BETTER ANSWER TO DR. SUZMAN'S QUESTION, THAT IS, SO FAR WE MAINLY HAVE BEEN DOING INDIVIDUALISTIC REWARDS. BUT I COMPLETELY AGREE WITH YOU THAT A REALLY IMPORTANT NEW AREA FOR RESEARCH BOTH WITH INCENTIVES AND WITHOUT INCENTIVES IS KIND OF GROUP REWARDS, GROUP PRESSURE AND SO ON. WE JUST DID A INTERVENTION, HOPEFULLY ABOUT TO GET ACCEPTED FOR PUBLICATION WITH DIABETES AISH PATIENTS COMPARING MONETARY REWARD PROGRAM TO THE PEER MENTOR PROGRAM. SO WE TOOK SOMEBODY WHO HAD OUT OF CONTROL DIABETES AND THEY HAD GOTTEN IT UNDER CONTROL, THEY WERE THE MENTOR AND THEY WORKED WITH SOMETHING WHO DIDN'T HAVE IT UNDER CONTROL. AND THE PEER MENTOR PROGRAM WAS EFFECT TREATMENTLY EFFECTIVE, MORE EFFECTIVE THAN THE INCENTIVE PROGRAM. SO I AGREE WITH YOU THAT GROUPS, DYADS AND SO ON IS A REALLY IMPORTANT NEW AREA WITH AND WITHOUT INCENTIVES. THAT'S ANOTHER AREA WE SHOULD BE GOING INTO IN THE FUTURE. YES. (OFF MIC) >> I MEAN, THE INSURANCE COMPANIES ARE ENORMOUSLY INTERESTED IN THIS. AND WE'RE WORKING WITH A RANGE OF INSURANCE COMPANIES TO TEST INTERVENTIONS LIKE THIS WITH THEIR POPULATIONS. ALSO WE'RE DOING THIS WORK WITH CVS PHARMACY BENEFITS MANAGER. SO THERE'S ENORMOUS COMMERCIAL INTEREST. MAYBE THERE'S NOT AS MUCH INTEREST AS THERE COULD BE, AND THE REASON FOR THAT WOULD BE THAT IN TODAY'S FRAGMENTED HEALTHCARE MARKET, THIS GOES BACK TO YOUR POINT, WHERE PEOPLE ARE CHANGING JOBS AND CHANGING INSURERS ALL THE TIME, AN INSURER WHO SPENDS MONEY TO CHANGE AN EMPLOYEE'S HEALTH BEHAVIOR IS LIKELY TO NOT ACTUALLY CAPTURE THE GAINS FROM THE IMPROVEMENT IN HEALTH. SO THAT'S ANOTHER BIG DISADVANTAGE OF THE WAY THAT WE DO THINGS NOW. THERE IS A HUGE INTEREST IN INSURERS DESPITE THAT FACT IN THESE INTERVENTIONS IN THE BACK. (OFF MIC) >> WE ARE. WE'RE DOING A LOT OF RESEARCH ON THAT. AND THAT IS MORE IN PROGRESS. SO THAT'S WHY I DIDN'T TALK ABOUT IT. BUT I AGREE, IT'S VERY IMPORTANT AREA AND THE -- A SPECIFIC -- ONE FOCUS IN THAT RESEARCH IS ON THE IMPACT OF LIMITING CONFLICT OF INTEREST, WHAT'S THE IMPACT OF REDUCING CONFLICT OF INTEREST ON PHYSICIAN BEHAVIOR BUT ALSO LOOKING AT THE IMPACT OF LIKE FOR EXAMPLE IN DIABETES MANAGEMENT WE'RE COMPARING THE IMPACT OF INCENTIVIZING PATIENT, INCENTIVIZING PHYSICIANS, INCENTIVIZING BOTH OR NEITHER. I COMPLETELY AGREE, THAT'S ANOTHER YOU'RE ALL GIVING ME GOOD RESPONSES TO DR. SUZMAN'S QUESTION, ANOTHER 'ALLY IMPORTANT AREA OF FUTURE RESEARCH. (OFF MIC)Csrp >> I'M TRYING TO BE DIRECT WITH YOU ABOUT THE GOOD AND BAD THINGS. BUT NEVERTHELESS, FIRST THERE'S A LOT OF THINGS IN HEALTHCARE THAT ARE ONE SHOT LIKE VACCINATIONS. AND COMPLETING HRAs AND SO ON. THESE APPROACHES ARE VERY EFFECTIVE FOR THOSE. SECOND ALL OF OUR INTERVENTIONS HAVE BEEN PERSISTENTLY EFFECTIVE AS LONG AS WE KEPT INCENTIVES GOING. SOME ARE QUITE COST EFFECTIVE. SO YOU COULD SAY FINE, LET'S -- WHERE IT'S REALLY IMPORTANT LET'S KEEP THE INCENTIVES GOING AS LONG AS WE WANT TO CHANGE THE BEHAVIOR. YOU'RE RIGHT. THE WEAK POINT IS THAT WE DON'T YET KNOW HOW TO DEVELOP PROGRAMS WHERE WHEN WE REMOVE THE INCENTIVES THE BEHAVIOR PERSISTS. >> (OFF MIC) >> WELL, WE HAVE FOUR MONTHS VERSUS EIGHT MONTH WEIGHT LOSS AND ALSO I THINK THESE INCENTIVES ARE DESIGNED TO HAVE A PERSISTENT EFFECT BUZZ THEY INVOLVE A LOT OF INTERACTION BETWEEN THE CLINICIAN AND THE PATIENT. THE PATIENT KEEPS PUTTING THE MONEY DOWN OR KEEPS GETTING THESE MESSAGES, YOU WON $100 TODAY BUT YOU DON'T GET IT, SO ON. THOSE ARE PRETTY COMPELLING MESSAGES. (OFF MIC) >> THAT'S RIGHT. WE DON'T HAVE EVIDENCE BEYOND 8 MONTHS BUT WE'RE OPTIMISTIC ON THAT POINT. YES. >> THERE IS RESEARCH GOING ON, I'M NOT AN EXPERT ON RESEARCH FUNDING AND THINGS LIKE THAT BUT THERE IS RESEARCH GOING ON IN MEDICARE, MEDICAID. TRYING TO DO FIELD STUDIES TO TEST THE IMPACT OF THESE TYPES OF INTERVENTIONS MOST STUDIES ARE REAL PEOPLE IN REAL SITUATIONS. THERE ARE SOME METHODS THAT WE CAN EMPLOY, LIKE INTERRUPTED -- CRUDE INTERRUPTED TIME SERIES TO SEE IF THESE MEASURES HAVE AN IMPACT. BUT SO MANY THINGS ARE CHANGING AT THE SAME TIME THAT YOU'RE RIGHT WE'RE NOT GOING TO REALLY KNOW EXACTLY WHAT -- IF WE GET CHANGES IN BEHAVIORS WE'RE NOT GOING TO KNOW EXACTLY WHAT DRIVES THEM. LET ME SAY THAT I DO THINK THAT THE -- A LOT OF THE PIECES OF THE HEALTHCARE REFORM ACT ARE NOT EVIDENCE-BASED. SO THE CALORIE POSTING, MAYBE PEOPLE -- PEOPLE PERHAPS YOU COULD ARGUE PEOPLE DESERVE TO HAVE INFORMATION WHEN THEY MAKE FOOD CHOICES, THEY DESERVE -- IT'S AN INHERENT GOOD TO HAVE THE INFORMATION UP THERE SO YOU KNOW HOW MANY CALORIES YOU'RE TAKING IN. BUT THERE'S NO EVIDENCE THAT THAT'S GOING TO HAVE ANY POSITIVE IMPACT ON BEHAVIOR. SAME THING WITH V BED, SAME THING MY WHOLE TALK WAS ABOUT, SAME THING WITH THE CONTINGENT INSURANCE PREMIUMS, WE HAVE NO -- WE HAVE NO EVIDENCE THAT THAT'S ACTUALLY GOING TO HAVE A BENEFICIAL EFFECT. SO PRETTY MUCH ALL OF THE PIECES OF THE HEALTHCARE REFORM ACT THAT ARE DESIGNED TO CHANGE HEALTH BEHAVIORS ARE NOT EVIDENCE BASED. YOU'RE RIGHT. WE'RE NOT GOING TO GET DATA WHEN THE ACT IS IMPLEMENTED. WE'RE GOING TO NOT GET USABLE INFORMATION ABOUT WHAT THE IMPACTS ARE. THAT'S WHY WE NEED TO DO MORE RESEARCH OF THIS TYPE. (OFF MIu!fÖ >> THAT'S RIGHT. SOMETHING I DIDN'T GO INTO DETAIL ABOUT ON THE WARFARIN. WE IMPLEMENTED THE INCENTIVES WRONG THE FIRST TIME WE DID IT. IT WAS $5. $5, RARE THAN $3 WHICH IS WHAT WE INTENDED. 5DZ WAS EFFECTIVE BUT WE STARTED OVER AGAIN, WE CONTINUED THOSE PEOPLE AND STARTED OVER AGAIN WITH A NEW GROUP, $3 A DAY. IF ANYTHING CERTAINLY THERE'S NO SIGNIFICANT DIFFERENCE BUT AT $3 A DAY WAS JUST AS EFFECTIVE AS $5. WHAT IF WE DID $3 IS WHAT WE THINK IS ALMOST CERTAINLY COST EFFECTIVE? BUT WHAT IF WE WENT -- (OFF MIC) >> IF YOU LOOK AT THE BLOOD -- YEAH, THAT'S RIGHT. THAT'S RIGHT. $3 -- THE $5 LOOKS PROPORTIONATELY MORE SUCCESSFUL. THIS IS A SMALL -- THIS IS A SMALL STUDY. I WOULD NOT -- BUT THE POINT IS WEP,„ DONE KNOW HOW LOW WE CAN GO. $3 IS ALREADY -- SO I COMPLETELY AGREE WITH YOUR QUESTION OF COURSE. BUT $3 IS PROBABLY ALREADY COST EFFECTIVE BUT IT MIGHT BE A PROGRAM INVOLVING $1 A DAY WOULD BE EFFECTIVE AND BE WAY MORE COST EFFECTIVE. (OFF MIC) >> I AGREE, THAT WOULD BE A GREAT DIRECTION TO GO. WE ARE DOING SOME INTERVENTIONS TO TRY TO DEVELOP HABITS THAT DO PLAY ON PSYCHOLOGY BUT NOT EXACTLY WHAT YOU ARE TALKING ABOUT. BACK TO YOU. (OFF MIC) >> WE HAVEN'T. THERE'S A WEBSITE CALLED STICK.COM AND THEY USE THAT. ON THE OTHER HAND -- (OFF MIC) >> THEY DON'T HAVE ANY DATA BECAUSE IT'S THEIR COMMERCIAL WEBSITE. BUT THEY -- I THINK THOSE TYPES OF IDEAS MIGHT BE VERY PROMISING BUT YOU WOULD CERTAINLY WANT TO COMBINE THEM WITH SOME OF THE IDEAS IN OUR WORK LIKE FOR EXAMPLE, THE DAILY DEPOSIT, THINGS LIKE THAT. I THINK THESE PROGRAMS WHERE YOU PUT MONEY DOWN AND YOU HAVE A LISTENING TERM GOAL ARE LESS EFFECTIVE THAN THE TYPES OF PROGRAMS WE DO WHERE YOU GET DAILY FEEDBACK. (OFF MIC) >> PERHAPS. (OFF MIC) >> THE ONLY STUDY THAT I KNOW OF ON THIS, WE DID. AND I HAVE OFTEN HEARD THAT CLAIM. BUT I THINK THAT WE DID THE ONLY STUDY -- WE DID THE ONLY STUDY THAT I KNOW OF EXACTLY ON THIS. WE WENT TO NEW YORK CITY BEFORE THEY INTRODUCED CALORIE POSTING AND FAST -- IN FAST FOOD RESTAURANTS. WE COLLECTED MEAL RECEIPTS. AND EVEN DURING THAT TIME WE RANDOMLY ASSIGN PEOPLE TO GET NO CONTEXTUAL INFORMATION TO GET THIS IS HOW MANY CALORIES YOU SHOULD EAT PER DAY, THIS IS HOW MANY CALORIES YOU SHOULD EAT FOR LUNCH. IT WAS LUNCH. VERY, VERY TARGET -- TARGETED CONTEXTUAL INFORMATION. WE WENT BACK AFTER CALORIE POSTING A MONTH LATER AND WE HAD SAME THREE GROUPS. GIVING THEM THE CALORIE CONTEXTUAL INFORMATION BENEFICIAL EFFECT. EVEN DAILY, WE EXPECTED THAT IT WOULD. THIS IS HOW MANY CALORIES YOU SHOULD EAT FOR LUNCH SO YOU CAN COMPARE THE TWO. DAILY IT'S MORE DIFFICULT. BUT WE HAD NO IMPACT. (OFF MIC)S! >> GREAT POINT. I'M PESSIMISTIC IF YOU TAKE A PERSON BEFORE YOU GO INTO MCDONALDS BEFORE AND AFTER CALORIE POSTING TO HIRE GOING TO ORDER A DIFFERENCE -- THAW EAR GOING TO EAT A DIFFERENT -- THEY'RE GOING TO EAT A DIFFERENT MEAL. MAYBE SOME WILL BUT PROBABLY NOT THE PEOPLE WE CARE ABOUT. I'M A LITTLE BIT MORE OPTIMISTIC ABOUT THE IDEA THAT MAYBE A FEW PEOPLE WILL NOT GO TO MCDONALD'S AND MAYBE GO TO SUBWAY OR SOMETHING LIKE THAT. (OFF MIC) THAT'S THE THIRD POINT. THE BIGGEST AREA WHERE THIS MIGHT HAVE A BENEFIT IS IF MCDONALDS, IT'S A TELL-TELL HEART EFFECT, MCDONALD'S AN SUBWAY GET -- THE INFORMATION IS OUT THERE NOW, WE HAVE TO CHANGE OUR MENU. GENERALLY, I HAVE DONE A LOT OF RESEARCH ON DISCLOSURE AND THE READING THAT I HAVE DONE, DISCLOSURE OF INFORMATION, FOR EXAMPLE, DISCLOSURE OF CONFLICTS OF INTEREST, MOST OF THE LITERATURE ON DISCLOSURE SHOWS THAT TO THE DEGREE DISCLOSURE HAS AN EFFECT, A BENEFIT, AND IT OFTEN DOES HAVE A BENEFIT, IT DOESN'T OPERATE THROUGH THE CONSUMER. IT OPERATES THROUGH THE RETAILER, THE PRODUCER AND SO ON. I THINK THAT'S TRUE HERE TOO. IF CALORIE POSTING HAS A BENEFIT, ALMOST FOR SURE THE BIGGEST BENEFIT WILL BE IF IT CHANGES THE -- WHAT THE OFFERINGS OF THE FAST FOOD RESTAURANTS. YES. (OFF MIC) >> I TOTALLY AGREE WITH YOU, IT'S NOT JUST ABOUT THE MONEY. IT'S NOT -- ALSO IT'S NOT ABOUT -- ONLY ABOUT THE TYPES OF ISSUES THAT I HAVE DISCUSSED BUT ALSO ABOUT THE SYMBOLIC VALUE. FOR EXAMPLE, WHO IS -- WHO IS GIVING YOU THE MONEY? IF IT'S A HEALTH INSURER YOU MIGHT FEEL LIKE THEY'RE DOING IT FOR THEIR BENEFIT, IT'S NOT FOR ME BUT MAYBE IF IT'S YOUR EMPLOYER IF YOUR EMPLOYER GIVING IT TO YOU IF YOU HAVE A GOOD RELATIONSHIP WITH YOUR EMPLOYER MAYBE YOU FEEL LIKE THEY'RE DOING IT FOR ME NOT DOING IT TO SAVE MONEY. THE ISSUE ONCE YOU START THINKING ABOUT THE SYMBOLIC SIGNIFICANCE, THEN THINGS LIKE WHO DOES THE MONEY COME FROM COULD POTENTIALLY MAKE A BIG DIFFERENCE. SO I AGREE, THAT'S SOMETHING WE REALLY NEED TO THINK CAREFULLY ABOUT. NOT ONLY INCENTIVE VALUE BUT WHAT'S THE MEANING OF THE MONEY. (OFF MIC) >> GIVING PEOPLE THOUSANDS OF POINTS, YEAH. (OFF MIC) >> CERTAINLY. THERE'S CERTAINLY A LOT OF RETAILERS SEEM TO BELIEVE THAT THAT IS AN EFFECTIVE STRATEGY. I WONDER WHETHER ITS EFFECTIVENESS MIGHT BE LOWER NOW THAN IT WAS WHEN THEY STARTED DOING IT. I THINK A LOT OF PEOPLE ARE CYNICAL ABOUT POINTS FROM THEIR OWN EXPERIENCE WITH TRYING TO REDEEM THEM. WE HAVE ACTUALLY IN A COMPLETELY DIFFERENT LINE OF RESEARCH, WE WORKED WITH A BANK ON LOYALTY PROGRAMS. THE BANK CUSTOMERS ARE FRUSTRATED BY A PROGRAM LIKE THAT. WE STARTED GIVING THEM SURPRISE GIFTS. THEIR LOYALTY TO THE BANK AND THEIR DEPOSITS WENT UP WHEREAS FOR THE THE CONTROL GROUP THEY WENT DOWN. SO I THINK THAT THESE KIND OF LOYALTY PROGRAMS AND POINTS AND THINGS LIKE THAT, PEOPLE ARE BURNT OUT ON THEM. SO THERE MIGHT HAVE BEEN A TIME WHEN THAT WOULD BE A GOOD IDEA BUT I THINK BASED ON INTUITION, IT MAY HAVE PASSED. YOU HAVE TO TELL ME WHEN -- >> PROBABLY SOON. >> OKAY. SURE. >> YOU ALLUDED TO I GUESS HIGGINS DATA USES YOUNGER PEOPLE, ADOLESCENTS. BUT IN GENERAL HOW DOES THIS WORK IN KIDS? WOULD IT BE MORE EFFECTIVE TO USE INCENTIVES, LESS, OR MIGHT HAVE HELPED THEM AND STILL HAVE IT OR ARE THEY NO DIFFERENT FROM ADULTS? >> PROBABLY -- WELL, FIRST OF COURSE INCENTIVES ARE USED A LOT WITH KIDS. THERE'S SOME VERY INTERESTING STUDIES INVOLVING PAYING KIDS FOR SCHOOL WORK. AND TURNS OUT THAT IT'S MUCH BETTER TO PAY -- IT MIGHT HAVE BEEN LISTENING TO NPR, WHAT'S THE ECONOMIST NAME? ROLAND FRIAR AT HARVARD. HE'S BEEN DOING THESE PROGRAMS. HE FINDS IF YOU PAY THE KIDS FOR READING A BOOK OR FOR CONCRETE BEHAVIOR SHOWING UP AT SCHOOL, THAT'S QUITE EFFECTIVE. IF YOU PAY THEM TO GET GOOD GRADES, THAT HAS NO IMPACT AT ALL. SO THERE ARE CERTAINLY INCENTIVES CAN BE VERY EFFECTIVE WITH KIDS. WITH CHILDREN YOU MIGHT WANT -- IF YOU DONE KNOW HOW TO GET GOOD GRADES IT'S BETTER TO INCENTIVIZE THE BEHAVIORS. ADULTS MIGHT HAVE A BETTER IDEA, WE INCENTIVIZE PEOPLE TO LOSE WEIGH. WE DIDN'T INCENTIVIZE PEOPLE TO EXERCISE OR CUT DOWN ON EATING BECAUSE WE FIGURED ADULTS KNOW HOW TO LOSE WEIGHT. THESE THINGS ARE DIFFICULT TO MEASURE. BUT MY READING OF THE LITERATURE ON INCENTIVES FOR KIDS IS IT HAS EXACTLY, IT'S CONFRONTING THE ISSUES THAT HAVE -- OF HABIT FORMATION. INCENTIVES CERTAINLY ARE VERY POWERFUL FOR KIDS. I DO THINK THAT THERE'S SOME WORK ON CROWDING OUT INTRINSIC MOTIVATION F YOU PAY CHILDREN TO DO ] THINGS THEY WON' T BE MOTIVATED TO DO THEM ON THEIR OWN. MY OWN VIEW IS THAT IS A BIT OVERBLOWN. AND THAT CHILDREN, ALL OF US, WE LOVE DOING THINGS WE'RE GOD AT AND WE HATE DOING THINGS THAT WE'RE BAD AT. SO IF YOU CAN GET SOMEBODY -- IF YOU CAN PAY SOMEBODY TO DO SOMETHING TO THE POINT WHERE THEY BECOME COMFORTABLE WITH IT, WHERE THEY GAIN MASTERY, THAT CAN BE A HUGE EFFECT. VERY LIKELY MUCH MORE POWERFUL EFFECT THAN CROWDING OUT OF INTRINSIC MOTIVATION THAT'S BEEN SHOWN IN STUDIES WHERE EVERYTHING ELSE IS HELD CONSTANT. OKAY. MAYBE WE SHOULD -- [LAUGHTER] >> I'LL ANSWER YOUR QUESTION PERSONALLY. >> OKAY. SO PLEASE JOIN ME IN THANKING GEORGE FOR A GREAT TALK.