Behavioral health insurance choice

Behavioral hazard in health insurance
Can Consumers Make Affordable Care Affordable? The Value of Choice Architecture

Behavioral Economics is still a great promise for health economics. Anyway, in health insurance some materials are already available. Today I'll bring two articles on the choice of health insurance policy.
Some insights:

People do not misuse care only because the price is below the social marginal cost: they also misuse it because of behavioral biases—because they make mistakes. We call this kind of misutilization behavioral hazard . Many psychologies contribute to behavioral hazard. People may overweight salient symptoms such as back pain or underweight non-salient ones such as high blood pressure or high blood sugar. They may be present-biased (Newhouse 2006) and overweight the immediate costs of care, such as copays and hassle-costs of setting up appointments or filling prescriptions. They may simply forget to take their medications or refill their prescriptions. Or they may have false beliefs about the efficacy of care (Pauly and Blavin 2008).

The key message from the first article:

Incorporating behavioral hazard alongside moral hazard changes the fundamental tradeoff between insurance and incentives. With only moral hazard, lowering copays increases the insurance value of a plan but reduces its efficiency by generating overuse. With the addition of behavioral hazard, lowering copays may potentially both increase insurance value and increase efficiency by reducing underuse. This means that having an estimate of the demand response is no longer enough to set optimal copays; the health response needs to be considered as well. This provides a theoretical foundation for value-based insurance design, where copays should optimally be lower both when price changes have relatively small effects on demand and when they have relatively large effects on health. We show that ignoring behavioral hazard can lead to welfare estimates that are both wrong in sign and off by an order of magnitude.

"Avoidable copayments" , that's it. And about the second:

We examine how well people make these choices, how well they think they do, and what can be done to improve these choices. We conducted 6 experiments asking people to choose the most cost-effective policy using websites modeled on current exchanges. Our results suggest there is significant room for improvement. Without interventions, respondents perform at near chance levels and show a significant bias, overweighting out-of-pocket expenses and deductibles. Financial incentives do not improve performance, and decision-makers do not realize that they are performing poorly. However, performance can be improved quite markedly by providing calculation aids, and by choosing a ‘‘smart’’ default. Implementing these psychologically based principles could save  purchasers of policies and taxpayers approximately 10 billion dollars every year.

That's a lot. glups!

Efficient health insurance as a first best

 Sick Insurance: Adverse Selection and Regulation of Health Insurance Markets

When heterogeneity in consumer tastes and needs, and in cost and quality of products, are publically observable, markets can price, sort, and match these variations, and product choices made by consumers yield demand signals that foster efficient resource allocation. These conditions hold, roughly, for a broad swath of economic activity, allowing lightly regulated private markets to successfully approximate allocative efficiency. However, in health care systems around the globe today, participants do not necessarily see the big picture of lifetime health costs and quality of life, and in many systems the incentives that consumers and providers face do not promote efficient allocation of health care resources. Information asymmetries are the fundamental source of difficulties in health insurance markets and in efficient provision of health services. Additional factors contributing to poor performance of health markets include (1) government regulation that is intended to protect the disadvantaged and promote equity, but creates incentives antagonistic to allocative efficiency, (2) inefficient provider organizations and non-competitive conduct, sometimes sheltered by government policies, and (3) behavioral shortcomings of consumers in promoting their own self-interest, including inconsistent beliefs regarding low-probability future events, myopia, and inconsistent risk assessment.

The seminal contributions to economic analysis of Kenneth Arrow, George Akerlof, Joe Stiglitz, Mike Spence, Mike Rothschild, and John Riley establish that when there are information asymmetries between buyers and sellers, adverse selection, moral hazard, and counter-party risk can result, causing markets to operate inefficiently or unravel. Asymmetric information between buyers and sellers, or market regulations that restrict competitive underwriting and force common prices for disparate products, can induce adverse selection. Moral hazard occurs when effort to avoid risks cannot be observed by sellers and stipulated in insurance contracts, and buyers have less incentive for risk-reducing effort when some of their potential losses are covered. When the productivity and cost of medical interventions is not known to all parties, then buyers and third-party-payers may not make informed decisions on therapies. Counter-party risk occurs when sellers evade payment of benefits for losses, or fail as agents to respect the interests of the consumers who are their principals. Adverse selection of buyers with high latent risk or low risk-reducing effort, or sellers with high counter-party risk, make insurance less attractive to buyers, and may cause insurance markets to unravel. Administrative overhead will induce less than full insurance. By itself, this does not make insurance market outcomes inefficient, but increasing returns to scale in administrative costs may lead to an inefficient concentrated market.

In principle, the problems of asymmetric information can be overcome by government operation or regulation of health services; in practice, there remains a major mechanism design problem of designing incentives that handle the asymmetries; e.g., “single payer” systems permit additional levers of control, but information asymmetries cause principal-agent problems even in command organizations. Legal mandates and regulations can make adverse selection worse. Government policy on private health insurance markets often reflects a social ethic that individuals should not be denied health care because of inability to pay, expressed for example in requirements that hospitals admit uninsured patients with life-threatening conditions, and a social ethic that insurance contract underwriting should not be based on risk factors such as gender, race, and pre-existing conditions. When these requirements are not publically financed, they are implicit taxes on insurers and providers that are at least in part passed through to consumers as higher premiums that increase the effective load for low-risk consumers. Both the higher loads and the prospect of public assistance as a last resort reduce the incentive for consumers to buy insurance and to pay (or copay) for preventative care.

The United States has, more than any other developed country, relied on private markets for health insurance and health care delivery. These markets have performed poorly. Denials and cancellations, exclusion of pre-existing conditions, and actuarially unattractive premiums have left many Americans with no insurance or financially risky gaps in coverage. Administrative costs for health insurance in the United States are seven times the OECD average. These are symptoms of adverse selection. Delayed and inconsistent preventative and chronic care, arguably induced by incomplete coverage, have had substantial health consequences: the United States ranks 25th among nations in the survival rate from age 15 to age 60. This impacts the population of workers and young parents whose loss is a substantial cost to families and to the economy. If the U.S. could raise its survival rate for this group to that of Switzerland, a country that has mandatory standardized coverage offered by private insurers, this would prevent more than 190,000 deaths per year.

Given the damage that information asymmetries can inflict on private market allocation mechanisms, the obvious next question is what regulatory mechanisms can be used to blunt or eliminate these problems. This involves examining closely the action of adverse selection and moral hazard, and the tools from principal-agent theory and from regulatory theory that can blunt these actions. There is an extensive literature relevant to this analysis that can be focused on the regulatory design question. Less well investigated are the impacts of consumer behavior, particularly mistaken beliefs. This paper examines these issues, and studies the impacts of regulations intended to promote equity and efficiency. More practically, this paper investigates these issues with reference to the private market in the United States for prescription drug coverage for seniors, introduced in 2006 and subsidized and regulated as part of Medicare.

The efficient regulatory design is mandatory universal insurance, this is the answer. But it has to be eficient, otherwise appears duplicate insurance, paying twice for the same. This is the worst second best, a combined failure of mandatory and private coverage.

Our irrational behaviour

The Behavioral Economics of Health and Health Care
Irrationality in Health Care: What Behavioral Economics Reveals About What We Do and Why

Thomas Rice provides an overview of behavioral economics in health in a recent article in Annual review of public health. More or less the same things we already know with some concrete messages. A good starting point for those that want to take first steps in this discipline. The summary:

People often make decisions in health care that are not in their best interest, ranging from failing to enroll in health insurance to which they are entitled, to engaging in extremely harmful behaviors. Traditional economic theory provides a limited tool kit for improving behavior because it assumes that people make decisions in a rational way, have the mental capacity to deal with huge amounts of information and choice, and have tastes endemic to them and not open to manipulation. Melding economics with psychology, behavioral economics acknowledges that people often do not act rationally in the economic sense. It therefore offers a potentially richer set of tools than provided by traditional economic theory to understand and influence behaviors

Right now behavioral economics is still a promise, let's wait until we can really apply it widely.
Thomas Rice says in this respect:

 With the exception of Kahneman & Tversky’s prospect theory, which was developed more than 30 years ago, there has been little in the way of bringing the various tools and policies of behavioral economics under one umbrella. As a result, most of the applications seem to be ad hoc. More development of an overarching theory could aid those interested in designing new interventions when it is clear that traditional economics remedies are insufficient

Regarding the book on Irrationality in Health Care, I haven't had the opportunity to have a look at it. I leave here the reference and 23 anomalies . Maybe in the book there is the answer to solve them.

PS. For those interested in an introductory course, on March 11th starts at Coursera:  A Beginner's Guide to Irrational Behavior

In favour of consumer protection

Can Consumers Make Affordable Care Affordable? The Value of Choice Architecture

Healthcare.gov 3.0 — Behavioral Economics and Insurance Exchanges

Recently Google has entered in the insurance comparisons market. Right now is available for car insurance and health insurance could be the next step. This business model changes the search costs and has strong impact over current sales channels. Understanding the salient features of health coverage for any citizen, should require that government regulates the right conditions for consumer protection. If insurancee companies pay the comparison site, as google says, is there any change on how information is shown according to the amount paid?. Have a look at the Peter Ubel et al. article at NEJM or at the PLOS one, and you'll be convinced that the potential for manipulation is huge.
Therefore, if this is so, there is a role for protecting consumers against well designed biases in comparison sites.

Economics of prevention

 An Ounce of Prevention

I look at prevention through an economic lens and make three main points. First, those advocating preventive measures are often asked how much money a given measure saves. This question is misguided. Instead, preventive measures can be thought of as insurance, with a certain cost in the present that may or may not pay off in the future. Although most medical preventive measures improve expected health, they do not save money. Various lifestyle and early childhood interventions, however, may both save money and improve health. 

Second, preventive measures, including medical and lifestyle measures, are heterogeneous in their value, both across measures and within measure, across individuals. As a result, generalizations in everyday  discourse about the value of prevention can be overly broad. 

Third, health insurance coverage for medical preventive measures generally should be more extensive than coverage for the treatment of a medical condition, though full coverage of preventive services is not  necessarily optimal

Well, and Joseph Newhouse says:

At one time, it was common to hear arguments that clinical preventive services were not insurable because they were “not a random variable and hence not an ‘insurable risk’” (Zweifel and Breyer 1997). Zweifel and Breyer give the example that “it is hardly conceivable that a health insurer would ever cover  expenditure on items such as . . . atomizers that help to prevent respiratory disorders;” a similar point could be made about a flu shot or mammography. There are, however, both economic efficiency and behavioral arguments for many preventive measures.

It may be arguments, but not so much incentives in private insurance market. For example, why vaccines have been bought by governments?. That's all. A misguided article.

  

Beyond the hype: the controversy over wearables

Effect of Wearable Technology Combined With a Lifestyle Intervention on Long-term Weight Loss

If you want to know if some device is effective, there is a standard way to demonstrate it: a clinical trial. This is precisely what has been done on the impact of wearables on weight loss. And the result is:

Among young adults with a BMI between 25 and less than 40, the addition of a wearable technology device to a standard behavioral intervention resulted in less weight loss over 24 months. Devices that monitor and provide feedback on physical activity may not offer an advantage over standard behavioral weight loss approaches.

That's amazing! Why is there so many articles pushing wearables for weigth loss when there are very few clinical trials, and their results are clearly against their use?. This is a marketing bubble and somebody should tell clearly that they could use wearables but for other reasons.

PS. Let's imagine that somebody wants to relate wearables for weight loss reduction with insurance premiums! Nothing to add.

The Bahama Soul Club, Cuban Tapes

Què hem de fer davant el creixement desaforat de la medicalització?

The Perils of Medicalization for Population Health and Health Equity

Possiblement el que cal és començar pel principi. Per afrontar la medicalització hem de saber de què estem parlant. Aquest article ajuda en primer lloc a això, i diu:

medicalization—the process by which personal, behavioral, and social issues are increasingly viewed through a biomedical lens and “diagnosed and treated” as individual pathologies and problems

I després posa els exemples i les estratègies:

First, medicalization and its negative aspects need to be better recognized and resisted. There are many audiences in need of a deeper understanding and appreciation of the dangers of the current overly medicalized view of population and public health and the conflation of health with health care. This includes physicians and other types of clinicians, along with health care administrators, executives, and analysts.

 Second, because of the strong focus on individuals and personal responsibility in United States culture, it is critical to expand the capacity for the media to tell different types of stories. Journalists frequently draw from individual anecdotes and thus may require training or resources to effectively tell structural stories in compelling ways. A number of important efforts in this regard are underway 

Third, more health-related research funding is needed across a variety of domains to move beyond medicalized perspectives in research and policy recommendations. A host of behavioral and social science research at the micro, meso, and macro levels needs to be elevated in order to better understand and address the core issues that cut across health status outcomes

Fourth, public policy narratives and priorities for health need to be changed. The conflation of health policy and health care policy must be halted, along with a de-emphasis on health care policy as the main route to improved population health

i conclou:

 A medicalized view of health ignores the limited role that personal health care services and health insurance play in producing levels and distributions of health within communities and populations.Medicalization also has far-reaching negative effects on cultural and media representations of health and illness; on the allocations of funding for research, interventions, and public health infrastructure; and on agenda setting for the social policy reforms needed to address the fundamental drivers of social and health inequity

En qualsevol cas sorprèn que no faci referència al consumisme sanitari ni als determinants comercials de la salut. Hi ha més coses a fer, calen més estratègies que les que diu l'article. En parlarem un altre dia.

Parov Stelar

Desiguals entre desiguals

 The persistence of health inequalities in modern welfare states: The explanationof a paradox

Dels treballs d'en Mackenbach ja n'he parlat anteriorment i m'ha interessat un article de fa poc. A Social Science and Medicine revisa el perquè de les desigualtats en salut. Sense ànim de ser concloent, en primer lloc mostra les teories que expliquen les desigualtats en salut:

The theories reviewed are: mathematical artifact, fundamental causes, life course perspective, social selection, personal characteristics, neo-materialism, psychosocial factors, diffusion of innovations, and cultural capital.

I alhora es pregunta quins són els motius potencials pels quals als països desenvolupats esdevé tant dificil reduir-les. Diu:

Based on these theories it is hypothesized that three circumstances may help to explain the persistence of health inequalities despite attenuation of inequalities in material conditions by the welfare state: (1) inequalities in access to material and immaterial resources have not been eliminated by the welfare state, and are still substantial; (2) due to greater intergenerational mobility, the composition of lower socioeconomic groups has become more homogeneous with regard to personal characteristics associated with ill-health; and (3) due to a change in epidemiological regime, in which consumption behavior became the most important determinant of ill-health, the marginal benefits of the immaterial resources to which a higher social position gives access have increased.

Al final ho acaba resumint en dues opcions, mala gestió (dels polítics) o mala sort (els canvis han portat a que les desigualtats es basin molt més en factors immaterials). Penso que parlar de mala sort s'allunya del que seria esperable com un motiu. Recordeu el post de l'Angus Deaton i els dels macacos i les desigualtats de salut, més material per pensar...

PS. I sobretot consulteu el darrer GCS, l'article d'en Guillem López-Casasnovas, va del mateix tema. Precís i pragmàtic.

PS. Si us interessa l'impacte redistributiu de la despesa sanitària pública, consulteu:  Evaluating the redistributive impact of public health expenditure using an insurance value approach. Conclusió:

Public health care expenditure in Spain acts progressively on income distribution. By adding the health benefit to disposable income of Spanish households, and ignoring possible behavioral responses, it turns out that poverty is reduced by almost 50 %. The average amount of in-kind subsidies received by households is considerable and its adequacy is good. Health care subsidy accounts for 59 % of household disposable income for the families in the first decile. Provision of public health care substantially reduces poverty incidence and poverty severity in Spain, granting a more equal distribution of living standards, as shown by a reduction in the Gini index by 5.4 percentage points.

Se m'escapen algunes coses, metodologia, dades?. No sé...

PS. Encara més motius per la desconnexió. Des del NYT, dedicat a tots aquells que encara no s'han decidit i aquells que ho volen comprendre.

PS. I encara més motius per fer-ho quan més aviat millor. Un video on es mostra com l'incompliment dels compromisos d'inversió i les lleis porta a un augment de la mortalitat relativa. Motius per denunciar l'Estat davant la fiscalia.