Irrationality in Health Care Irrationality in Health Care What Behavioral Economics Reveals About What We Do and Why Douglas E Hough Stanford Economics and Finance An Imprint of Stanford University Press Stanford, California Stanford University Press Stanford, California Song lyrics at the beginning of Chapter 8:   The Song That Goes Like   From MONTY PYTHON’S SPAMALOT   Lyrics by Eric Idle   Music by John Du Prez and Eric Idle   Copyright © 2005 Rutsongs Music and Ocean Music   All Rights Reserved Used by Permission   Reprinted by Permission of Hal Leonard Corporation ©2013 by the Board of Trustees of the Leland Stanford Junior University All rights reserved No part of this book may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying and recording, or in any information storage or retrieval system without the prior written permission of Stanford University Press Special discounts for bulk quantities of Stanford Economics and Finance are available to corporations, professional associations, and other organizations For details and discount information, contact the special sales department of Stanford University Press Tel: (650) 736-1782, Fax: (650) 736-1784 Printed in the United States of America on acid-free, archival-quality paper Library of Congress Cataloging-in-Publication Data Hough, Douglas E., author   Irrationality in health care : what behavioral economics reveals about what we and why / Douglas E Hough    pages cm   Includes bibliographical references and index   ISBN 978-0-8047-7797-1 (cloth : alk paper)   1.  Medical economics—United States.  2.  Medical care—United States.  3.  Health behavior—United States.  4.  Economics—Psychological aspects.  I. Title  RA410.53.H669 2013  338.4'73621—dc23 2012039953 Typeset by Thompson Type in 10/15 Sabon DEDICATION To Edie with gratitude, and to Katerina and Kai, who I hope will have a better health system when they need it CONTENTS List of Anomalies Preface and Acknowledgments ix xiii What Is Behavioral Economics— and Why Should We Care? 1 Keeping What We Have, Even If We Don’t Like It 25 Managing Expectations and Behavior 69 Understanding the Stubbornly Inconsistent Patient 100 Understanding the Stubbornly Inconsistent Consumer 136 Understanding the Medical Decision-Making Process, or Why a Physician Can Make the Same Mistakes as a Patient 173 Explaining the Cumulative Impact of Physicians’ Decisions 201 viii Con t en ts Can We Use the Concepts of Behavioral Economics to Transform Health Care? 229 References 249 Index 279 A nomalies anomaly 1: Why does the public support the specific aspects of health care reform but not the bill that was passed that contained these provisions? 39 anomaly 2: Why did a person in a congressman’s town hall meeting shout, “Keep your government hands off my Medicare!”? 44 anomaly 3: Why was there such an uproar in November 2009 when the U.S Preventive Services Task Force released its recommendations for screening mammography? 44 anomaly 4: Why opponents—and proponents—of the Patient Protection and Affordable Care Act believe that the law will have a larger impact on the health care sector than it probably will? 78 anomaly 5: Why would requiring everyone to buy health insurance make everyone—including those who don’t want to buy health insurance—better off? 83 anomaly 6: Why would giving consumers lots of choices in their health plans be a bad idea? 89 references 277 World Health Organization 2009 WHO guidelines on hand hygiene in health care Geneva: World Health Organization Young, Neal S., John P A Ioannidis, and Omar Al-Ubaydli 2008 Why current publication practices may distort science PLOS Medicine (10) (October): 1418–1422 INDEX Abaluck, Jason, 93, 96 ABC Research Group, 178 action bias, 174, 176, 234; among patients, 110–15, 117, 118, 121, 131; among physicians, 112–15; among soccer goalkeepers, 100–101, 110, 114, 129, 131 action paralysis, 176 adaptation, 70, 71–72, 74 addiction, 123–28, 168, 169 adverse selection, 143 adversarial collaboration, 68, 241–42 affect, 116, 178, 230, 236, 243; defined, 104, 137; experimental evidence regarding, 36–37, 108–10, 117, 191; vs rationality, 103, 104–5, 109, 121–22, 128, 137, 141–42; risk and emotions, 36–37, 109–10; role in action bias, 110; role in decision making, 108–9; role in framing, 109–10; and zero prices, 150, 153 Affordable Care Act See Patient Protection and Affordable Care Act Agassi, Andre: on losing vs winning, 30 Agency for Healthcare Research and Quality (AHRQ), 45, 63 agency theory, 66–67 Ainsle, George, 74 Alhakami, Ali, 108 Ali, Mukthar M., 29 Al-Ubaydli, Omar, 233 Alzheimer’s patients, 164, 165 American Cancer Society, 45, 49, 56, 61, 67 American College of Physicians, 49, 56 American College of Radiology (ACR), 45, 49, 61, 62, 64 American Economic Review, 21 American Red Cross, 159, 160 Ammirati, Rachel, 95 Amsterlaw, Jennifer, 120 anchoring, 26, 65, 67–68, 70, 176, 242, 245; experimental evidence regarding, 37–38, 67, 233 Angott, Andrea M., 198 Annals of Internal Medicine, 46 Ariely, Dan, 17–18, 33, 38, 141, 149–50, 153, 156, 158, 160, 162 Arkes, Hal R., 174, 197, 199 Asch, David A., 112 Ashraf, Nava, 155 Asian disease paradox, 35–38, 65, 66, 109, 120 asymmetric information problem, 66, 111 Ayanian, John Z., 174 Ayres, Ian, 132–33 Bachmann, Michele, 80 Bagwell, Kyle, 150 Bakwin, Harry, 182 280 i n d e x Baldwin, Tammy, 52 Balschke, Terrence, 116, 117, 118 Bar-Eli, Michael, 100–101 Baron, Jonathan: Thinking and Deciding, 247 Barsky, Robert B., 106 Bateman, Ian, 68 Becker, Gary S., 161; “De gustibus non est disputandum,” 122–23; on rational addiction, 123, 126 Berry, James, 155 Berwick, Donald M., 174, 196–97 Bessman, Edward: on heuristics, 181–82, 195, 218–19 bias See action bias, confirmation bias, hindsight bias, input bias, outcome bias, overconfidence bias, projection bias, regret bias, status quo bias Bishop, R C., 33 Blank, Harmut: on hindsight bias, 12–13 blood donation, 159–60, 165 Blumberg, Linda J., 240 Borgida, Eugene, 138 Bornstein, Brian H., 199 Botti, Simona, 88 bounded rationality, 175–76, 182, 189, 232 Breast Cancer Surveillance Consortium (BCSC), 46 Brennan, Troyen A., 190 Brickman, Philip, 70–71, 233 Brook, Robert H., 152 Brown, Gardner Mallard, 32–33 Buettgens, Matthew, 240 Burgess, Michael, 52 business failures, 11–12 buyer’s regret, 89 Cabana, Michael, 212 Calonge, Ned, 52, 54–55, 68; on framing, 241–42; interview with, 59–64, 241 calorie labeling, 134, 172 Cameron, David, 171–72 Camp, David, 51 Cancer Intervention and Surveillance Modeling Network (CISNET), 46 capitalism, 3, 94 See also markets Caplan, Robert A., 174, 198 Carman, Kristin L., 111 Carmon, Ziv, 33 Carrier, Emily R., 190 Carter, Barbara R., 185 Carter, K Codell, 185 Cash for Clunkers program, 25 Cassar, Gavin, 11–12 Centers for Disease Control and Prevention (CDC), 186, 210, 211 central-line associated bloodstream infections (CLABSIs): deaths from, 2, 202; prevention of, 2, 209–15; Pronovost on CLABSI prevention checklist, 209, 210–13, 215 chagrin factor, 30, 192 Chapman, Gretchen B., 174, 199 Chaudhry, Basit, 226 Chen, Keith, 65 Cheney, Frederick W., 174, 198 Chernew, Michael E., 163 Chick-fil-A, 18–19 childhood obesity, 168 Chinander, Karen R., 184 choices: choice architecture, 97–98, 246; regarding health plans, 89–98; Iyengar on choice overload, 86–87, 88, 176, 189; more vs fewer, 69–70, 86–94, 96–97, 99, 140, 176, 189, 235, 242; paradox of choice, 87–88, 174 cholesterol test, 114 Christensen, Caryn, 174 Christmas Clubs, 132 CLABSIs See central-line associated bloodstream infections Claxton, Mark, 144, 145, 148 Coates, Dan, 70–71, 233 Cochrane Collaboration, 68, 131 Cohen, Jessica, 155–56 coherent arbitrariness, 38 coinsurance, 143, 144, 145, 146, 147, 151–54 Colbert, Stephen, 67 cold vs hot decision making See hot vs cold decision making college students as experimental subjects, 21, 233 commitment devices, 76, 85, 131, 237, 243; and hot vs cold decision making, 132–33; for weight loss, 22–23, 134, 236 commodities, 19, 160–62 complete blood count, 114 inde x confirmation bias, 234 Congressional Budget Office, 68 consumer-driven health plans, 148–49, 163 Cooper, Anderson, 49–50, 111 copayments, 143, 144, 145, 146, 147, 148, 164 Cope’s Early Diagnosis of the Acute Abdomen, 181 Corrigan, Janet, 216 Coval, Joshua, 30 Craig, Justin, 11–12 Creamer, Robert, 79 Credit CARD Act, 25 Cromwell, Jerry, 207 Croskerry, Pat, 195, 238; on cognitive forcing strategies, 226, 228 crowding out effect, 23, 193–94 Cummings, Janet, 91–92 Damasio, Antonio R., 102 Dartmouth Atlas of Health Care, The, 203–5 Dartmouth Institute for Health Policy and Clinical Practice, 203 Darwin, Charles: The Descent of Man, 9; on ignorance and confidence, “death panels,” 44, 79, 81, 83, 94 debiasing, 95, 226, 229, 234–35 Deci, Edward, 86, 193–94 decision aids, 130, 196–97, 226–27 decision efficiency, 140–42, 146, 148–49, 149, 153 decoupling of payment and consumption See payment decoupling deductibles, 143, 144, 145, 147, 148, 149, 163–64 default (initial) position, 8, 20, 171, 245; experimental evidence regarding, 13–17; in health care policy, 234–35, 241; Sunstein and Thaler on, 13, 97–98, 246 DeKay, Michael L., 112 DellaVigna, Stefano, 75–76, 125 demand and supply, 1–2 DeNavas-Walt, Carmen, 143 diabetes, 168, 193; Type II diabetes, 164, 183 DiMatteo, M Robin, 115, 117–18 Djulbegovic, Benjamin, 192 Donaldson, Molla S., 216 281 Do Not Resuscitate (DNR) orders, 235–36 Dranove, David, 207 Druckman, James, 36–37, 66, 109–10 Dunning, David, 9–10, 33–34 Dupas, Pascaline, 155–56 Econometrica, 6, 20 education regarding biases, 95 egocentric empathy gap, 33–34 Eisenberg, John M., 174 Elías, Julio Jorge, 161 Elstein, Arthur S., 173 Elster, Jon, 157 emergency department treatment, 85–86, 154, 181, 182 Emergency Medical Treatment and Active Labor Act (EMTALA), 85–86 Emler, Christine, 199 end-of-life care, 235–36 endowment effect, 65, 163; defined, 16–17, 26, 31; experimental evidence regarding, 31–34, 37–38, 67, 189; Kahneman, Knetsch and Thaler on, 33, 189; and mammography screening, 57–59; and Patient Protection and Affordable Care Act (PPACA), 42–44; among physicians, 186, 189, 213, 214 Epstein, Arnold: on heuristics, 207–8 Epstein, Ronald M., 173 Esserman, Laura, 56 Evans, Jonathan St B T., 102 Evans, Robert: on supplier-induced demand, 206–7 Evidence-based Practice Centers (EPCs), 45, 46, 47, 48, 54, 60 evolutionary economics, 5–6 expectations, 69–71, 77–83, 94, 166; regarding major events, 69–70, 71, 73 See also hot vs cold decision making experience goods, 150 experiential vs analytic thinking, 127, 128, 132–33; Slovic on, 102–5, 126 See also System (intuitive) vs System (reflective) thinking expert systems, 226–27 exponential discounting, 74–75, 95 externalities, 168, 243–44 282 inde x extrinsic and intrinsic motivation, 23, 193–94, 243 Federation for American Immigration Reform, 78–79 Feder, Judy, 240 Fehr, Ernst, 157 Feinstein, Alvan, 192 Fendrick, A M., 163 financial incentives, 22–23, 128, 133, 192–94, 237, 243 Finder, Benjamin D., 164 Finkelstein, Amy: “E-Z Tax: Tax Salience and Tax Rates,” 146 Fischbacher, Urs, 157 Fischer, Michael A., 115, 117 Fischhoff, Baruch, 10–11, 108 Fisher, Elliot S., 204 flight insurance, 106–7 401(k) retirement programs, 15–17 Fowler, Floyd J., 205–6 framing, 65, 66–68, 70, 235; defined, 26, 34–35; experimental evidence regarding, 35–37, 67, 109, 233; Kahneman and Tversky on, 35–36, 109; relationship to patient behavior, 56–57, 109–10, 118–21, 122, 129, 131–32, 136, 238, 242, 243, 245; relationship to physician behavior, 120, 121, 131–32, 174, 183–84, 188–90, 196, 213, 238, 242, 245; role of affect in, 109–10; by U.S Preventive Services Task Force, 54–56, 241–42 France, 164 Francke, Anneke, 228 Franklin, Nancy, 217–18, 220, 226 Frank, Richard, 21 Frederick, Shane: on System vs System thinking, 102–3 Fredrickson, Barbara, 178 Freeman, Joseph D., 82 Friedman, Milton: on assumptions vs predictions, 4–5; billiards player analogy, Frølich, Anne, 174 Fuchs, Victor, 207 Gaissmaier, Wolfgang, 103; on heuristics, 178 Galbraith, John Kenneth, Gallop Organization, 126 gambling, 27–30, 36, 177 Garg, Amit X., 226 Gawande, Atul, 209, 239; on checklists, 215, 227; “The Cost Conundrum,” 203, 206, 207 Gell-Mann, Murray, 233 generic medications, 154 germ theory of disease, 185, 186 Gigerenzer, Gerd, 103; on heuristics, 178–79, 184, 218 Gilbert, Daniel: Stumbling on Happiness, 247 Gilovich, Thomas, 95, 177; on heuristics, 175 Ginsburg, Paul B., 163 Gittelsohn, Alan, 203 glucose test, 114 Gneezy, Uri, 19, 157–58, 164 Goldstein, Daniel, 13–14, 16 Goodman-Delahunty, Jane, 8–9 Gordon, Ruthanna, 217–18, 220, 226 Graber, Mark L., 217–18, 220, 226 Grant, Adam M., 196 Grayson, Alan, 79 Great Britain, 171–72 Gregg, Judd, 78 Gregory, Kimberly, 49–50, 111 Greifeneder, Rainer, 88 Griffin, Dale W., 175 Griffith, R M., 28–29 Grimshaw, Jeremy, 197 Grol, Richard, 197 Groopman, Jerome E., 173 Gruber, Jonathan, 93, 96, 123, 207 habits: bad habits, 125–28, 129–30, 134–35, 136, 243; good habits, 128–29, 130, 136, 243 HAIs See hospital-acquired infections Halpern, Scott D., 164 Hammack, Judd, 32–33 hand washing, 185–87, 196, 217 Handwashing Liaison Group, 187 Hanoch, Yaniv, 91–93, 96 happiness/satisfaction: Brickman, Coates and Janoff-Bulman on, 70–71, 233; Gilbert on, 247; maximization of, 3–4, 6, 27–28, 70, 86, 123, 140, 150, 165, 168, 176; relationship to available choices, 69, 87–88, 96–97, 176; as sense of well-being, 69–72; utility function, 6, 27–28, 166; and inde x willingness to pay vs willingness to accept, 32–34, 59 Haslam, Nick, 74 Haynes, R Bryan, 131 health care consumers: attitudes regarding price of health care, 136–37, 142–49, 219, 231; as producers, 156–62 See also health insurance; patient behavior; payment decoupling health care expenses, 96, 164–65; high vs low-expenditure areas, 203–6, 208–9; related to medical errors, 216–17; patient attitudes regarding, 142–47, 219; related to patient nonadherence, 118; relationship to health insurance, 136–37, 142–49, 163; relationship to physician’s pen, 201; relationship to quality of care, 1, 205–6; in U.S vs other countries, 1, 164 See also health insurance health care reform law See Patient Protection and Affordable Care Act health insurance: coinsurance, 143, 144, 145, 146, 147, 151–54; as compulsory, 2, 40, 42–43, 81–82, 83–86, 94, 164; copayments, 143, 144, 145, 146, 147, 148, 164; coverage of small expenses by, 147–49, 163; decoupling of payment and consumption in, 144–45, 148, 149, 153–54, 162, 163, 164; deductibles, 143, 144, 145, 147, 148, 149, 163–64; effects on consumer behavior, 144–49, 151–54, 231; fee-for-service plans vs HMO plans, 151–54; high-deductible health plans, 148–49, 163–64; increase in premiums, 148–49, 163; and loss aversion, 147–48; as prepayment system, 144–45, 148, 237; Rand Health Insurance Experiment, 151–54, 156; relationship to health outcomes, 152; relationship to price of health care, 136–37, 142–49, 163; relationship to utilization of health services, 151–54; value-based health plans, 163–64 See also Patient Protection and Affordable Care Act (PPACA) health policy, defaults in, 234–35, 241 Health Resources and Services Administration, 160 283 Heberlein, T A., 33 hedonic efficiency, 140–42, 144, 146, 148–49, 153 Heine, Steven J., 21, 233 Hell, Wolfgang, 13 Helping Families Save Their Homes Act, 25 Henrich, Joseph, 21, 233 heuristics: anchoring heuristic, 176; availability heuristic, 176–77, 191–92; Bessman on, 181–82, 195, 218–19; and biases, 176–78, 218; defined, 175; Arnold Epstein on, 207–8; as fast and frugal, 176, 178, 184, 190, 195, 218; Gaissmaier on, 178; Gigerenzer on, 178–79, 184, 218; Gilovich on, 175; heuristic decisions vs deliberative decisions, 179–80; Kahneman on, 175, 176–78, 218, 246; Daniel Oppenheimer on, 179–80; peak-end rule, 178; Pronovost on, 222, 223; representativeness heuristic, 177, 219; role in medical errors, 216–20, 222; role in physician behavior, 180–84, 185–86, 187, 189–90, 191–92, 194, 195, 196, 197, 201–9, 213–14, 215, 216–20, 222, 223, 224, 226, 227, 232, 238–39, 243; Shah on, 179–80; Simon on, 175–76; Sisson on, 180–81, 182, 183; Slovic on, 175; as System thinking, 180, 184, 194, 195, 208, 214–15; Tversky on, 175, 176–78 Heyman, James, 158, 160, 162 hindsight bias, 10–13, 174 HIV/AIDS, 115, 117 Hofmann, David A., 196 hospital-acquired infections (HAIs), 185–86, 209–20 hot hand fallacy, 177 hot vs cold decision making, 99, 237, 242; and commitment devices, 132–33; and DNR orders, 235–36; experimental evidence regarding, 77–78, 82, 85, 124, 146–47; regarding health insurance, 78–86, 94; Loewenstein on hot-cold empathy gap, 76–78, 83, 146–47, 214 Hozo, Iztok, 192 Hsee, Christopher K., 108, 191 Hunt, Derek L., 226 284 inde x hyperbolic discounting, 166, 168, 236, 243; experimental evidence regarding, 75–76; vs exponential discounting, 74–75, 95; regarding health insurance, 83–85, 99; naïve vs sophisticated decision makers regarding, 75–76, 128–29; among physicians, 215; regarding smoking, 127 hypertension, 193 ICUs See intensive care units idiot patient theory, 231–32 illusion of explanatory depth, 234 illusion of regulatory competence, 234 incentives: financial incentives, 22–23, 128, 133, 192–94, 237, 243; for smoking cessation, 22, 128, 133, 237 See also commitment devices information: asymmetry of, 66, 111–12, 206–7; context of, 65–67; informational interventions, 170; information overload, 88, 178–79; neoclassical economics on market participants’ information, 4, 6–7, 10 Inglis, Bob, 25–26 innate vs learned tendencies, 65, 66–68 input bias, 184, 197 Institute of Medicine (IOM): To Err is Human, 216, 217, 220 institutional economics, insurance companies, 1, 7, 53, 79, 83, 96, 98, 143–44 See also health insurance intensive care units (ICUs), 210, 211, 214–15, 221, 222 internalities, 73, 168, 236, 243–44 intrinsic and extrinsic motivation, 23, 193–94, 243 investor behavior, 30 Ioannidis, John P A., 233 Isakson, Johnny, 81 Iyengar, Sheena, 96; The Art of Choosing, 247; on choice overload, 86–87, 88, 176, 189; on negative emotions, 88, 89; on preference uncertainty, 88–89 James, William: on empirical thinking vs associative thought, 102 Janoff-Bulman, Ronnie, 70–71, 233 Jason, Hilliard, 194–95 Johanneson, Magnus, 159 Johnson, Eric, 13–14, 16, 37, 43, 106–7 Joint Commission, 186, 211 Jones, Jeffrey M., 126, 127 Journal of Consumer Research, 244 Journal of Political Economy, 21 Kahneman, Daniel, 71, 73, 107, 235; and adversarial collaboration, 68; on belief in the law of small numbers, 56–57, 177–78; on biases, 176–78, 218, 246; on choice, 246; on endowment effect, 33, 189; on framing, 35–36, 109; on heuristics, 175, 176–78, 218, 246; on loss aversion, 26–28, 30, 147–48, 189; on norm theory, 101; on overweighting small probabilities, 26–28, 150; on power of zero, 150; “Prospect Theory: An Analysis of Decision Under Risk,” 6, 20, 26–28, 30, 147–48, 150; on System vs System thinking, 102–3, 221, 246; Thinking, Fast and Slow, 246; on willingness to pay vs willingness to accept, 33 Kaiser Family Foundation, 84, 91, 144, 148–49 Kaiser Health Tracking Polls, 39–41, 42–43 Kaiser Permanente, 193 Karlan, Dean, 132–33 Kassirer, Jerome P., 112, 173, 174, 195 Kearns, Janine M., 53–54 Keil, Frank, 234 Keren, Gideon, 102 kidney disease, 71, 73; and kidney donation, 160–62 Kim, E H., King, Josie, 210 Klevens, R., 210 Knetsch, Jack, 31–32; on endowment effect, 33, 189; on willingness to pay vs willingness to accept, 33 Koestner, Richard, 193 Kohn, Linda T., 216 Kolstad, Jonathan T., 82 Kopans, Daniel, 50 Kopelman, Richard I., 173, 195 Köszegi, Botond, 123 Kowalski, Amanda E., 82 Kruger, Justin, 9–10 Kuhn, Thomas: on paradigms, 20 Kunreuther, Howard, 107 inde x Lacetera, Nicola, 159–60 Laine, Christine, 51 Lakshminarayanan, Venkat, 65 Lancaster, Kelvin, 86 Landfeld, Kristin, 95 Lawthers, Ann G., 191 Lee, Carol, 49 Lehrer, Jonah, 244 Lepper, Mark: on choice overload, 86–87, 88 Lester, Helen, 193 libertarian paternalism, 95–96, 131–32, 246 Lilienfeld, Scott, 95 Lilly Ledbetter Fair Pay Act, 25 List, John, 33 Loewenstein, George, 22–23, 33–34; on addiction, 168, 169; on behavioral economics, 166–72, 236; on cognitive evaluation, 105–6; on coherent arbitrariness, 38; on decision efficiency, 140–41, 153; on fearreduction strategies, 130; on habit formation, 73; on hedonic efficiency, 140–42, 144, 153; on hot-cold empathy gap, 76–78, 83, 146–47, 214; on internalities vs externalities, 168, 236; interview with, 165–72, 240; on loss aversion, 167, 170; on negative internality, 73; on neoclassical economics, 166, 167; on payment decoupling, 139–42, 153; on policy interventions to change behavior, 168–72; on projection bias, 72–74, 84, 169; on risk as feelings, 105–7; on risk vs benefits, 130; on visceral factors, 123–24, 126 loss aversion, 42–44, 66, 67, 150, 166, 233, 241, 243; defined, 26; experimental evidence regarding, 22–23, 28–29, 30–34, 35–37, 57; and health insurance, 147–48; Kahneman on, 26–28, 30, 147–48, 189; Loewenstein on, 167, 170; and mammography screening, 57–59; in patients, 57–59; in physicians, 58–59, 213; Tversky on, 26–28, 30, 147–48, 189 Lundy, Janet, 164 Macis, Mario, 159–60 macroeconomics, 167 285 Madrian, Bridget, 15–16 Malmendier, Ulrike, 75–76, 125 malpractice lawsuits, 112, 190–92 mammography screening: and behavioral economics, 54–59, 64–68, 110–11; false positives in, 50, 57, 60–61, 111; U.S Preventive Services Task Force recommendation regarding, 26, 44–64, 110–11, 176, 196 Mandelblatt, Jeanne S., 46 Manning, Willard G., 151 markets: allocation of scarce resources by, 3, 164; competition in, 3, 4, 66; economic norms vs social norms, 156–62; entrepreneurs, 11–12, 94; government intervention in, 3, 236, 243; information possessed by participants, 4, 6–7, 10; invisible hand in, 3; monopolies, 3; neoclassical assumptions about, 2–6, 94; preferences of participants, 3–4, 6, 38, 70, 72–73, 75–76, 88, 105, 120, 123; rationality of participants, 3, 4, 6, 10, 11–12, 35, 36, 73, 88, 105, 123, 125–26, 130, 157, 166, 191, 217 Marxism, Massachusetts health care law, 82, 240 maximization of utility, 3–4, 6, 27–28, 70, 86, 123, 165, 168, 176 Mazar, Nina, 17–18, 149–50, 153, 156 McAllen, Texas, 203–204, 206, 208, 224–25 McCain, John, 13 McDermott, Rose, 36–37, 109–10 McGlothlin, William H., 29, 30 McNeil, Barbara, 119, 188 Medicaid, 1, 137–38, 143, 148 medical checklists, 209–15, 220, 221–23, 227–28, 239 medical education, 225, 226, 238–39 medical errors: cost of, 216–17; deaths from, 2, 202, 215, 217; role of heuristics in, 216–20, 222 Medicare, 1, 26, 39, 41, 42, 44, 81, 83, 143, 148; high vs low-expenditure areas, 203–6, 208–9; Part A, 144; Part B, 144; Part D, 90–94, 96, 97–98, 246; premiums, 144 Medow, Mitchell A., 197 Mello, Michelle M., 190 Mellstrom, Carl, 159 Mick, David G., 244 286 inde x micromotives and macrobehavior, 201–2, 209, 215, 217, 228 Mikulski, Barbara, 51–52, 55 Milgrom, Paul, 150 Miller, Dale: on norm theory, 101 Milliman, 216–17 Mitchell, Janet, 207 Mogilner, Cassie, 96 Moonesinghe, Ramal, 233 moral hazard, 143, 147, 153 Morse, Adair, Moylan, Nancy, 53 Murphy, Kevin, 168; on rational addiction, 123, 126 naïve vs sophisticated decision makers, 75–76, 125, 128–29, 133 Nalebuff, Barry, 132–33 National Breast Cancer Coalition, 49, 56 National Cancer Institute, 48 National Organ and Transplant Act, 160 negative emotions, 88, 89 Nelson, Heidi D., 46, 48, 60 Nelson, Richard, neoclassical economics: on addiction, 123, 125–26; assumptions of, 2–6, 94, 122–23; vs behavioral economics, 6–19, 20–21, 22, 23, 27–29, 31, 32–33, 35, 38, 39, 41–42, 70, 72–73, 74, 90, 98, 102, 105, 107, 108–9, 114–15, 119, 122–24, 128–29, 130, 140, 144, 149, 153–54, 160–63, 166–68, 169, 172, 189, 191, 194, 217, 229, 230–33, 235, 236, 243, 244; on business failures, 11–12; on competition, 3, 4, 66; on consumer preferences and decisions as path independent, 4, 7; on decision efficiency, 140–41, 149; on decisions based on marginal benefits and marginal costs, 22, 217; on default position, 14–15; on entrepreneurs, 11–12; on externalities, 168; fundamental theorem of welfare economics, 3; on the future, 74; on kidney donation, 160–61; on market participants’ information, 4, 6–7, 10; on market participants’ knowledge of their preferences, 3–4, 6, 38, 70, 72–73, 88, 105, 120, 123; on market participants’ rationality, 3, 4, 6, 10, 11–12, 35, 36, 73, 88, 105, 123, 125–26, 130, 157, 166, 191, 217; on maximization of utility, 3–4, 6, 86, 123, 140, 166, 168; on prices, 31, 41–42, 114–15, 143, 149, 150–51, 160–61, 162; on principalagent relationship, 111–12, 231; on risk seeking vs risk aversion, 27; on supplier-induced demand, 206–7, 231; on utility function, 6, 27–28, 166; on willingness to pay vs willingness to accept, 32, 33; on zero prices, 17, 19 New England Healthcare Institute, 118 Newport, Frank, 127 Nisbett, Richard: on vividness, 137, 138 nonadherence to treatment regimens, 115–18, 129, 131, 132, 133, 136, 243; for acute vs chronic conditions, 116, 117; costs of, 118; defined, 2; for short-term vs long-term treatments, 116, 117 Nordgren, Loran F., 124 Norenzayan, Ara, 21, 233 Norm theory, 101 Novemsky, Nathan, 107 Obama, Barack, 21, 25–26; election of 2008, 12–13; on health care reform, 44, 203 O’Donoghue, Ted: on addiction, 125; on projection bias, 72–74, 84; on selfcontrol, 124–25, 128–29 Ontario physicians study, 188–90 Oppenheimer, Daniel M.: on heuristics, 179–80 Oppenheimer, Judy, 54 opportunity costs, 140, 141 opting out vs opting in, 222 organ donors, 14–15, 160–62 Organ Procurement and Transplantation Network, 160 Orszag, Peter, 21 Osterberg, Lars, 116, 117, 118 Oswald, Andrew J., 72 Ottawa Ankle Rules, 181 outcome bias, 174 overconfidence bias, 229, 236, 241, 244; experimental evidence regarding, 8–10; in physicians, 187, 196, 213, 221 inde x overweighting of small probabilities, 170, 191–92, 229–30; Kahneman and Tversky on, 26–28, 150 Owings, Maria, 207 Palin, Sarah: on “death panels,” 44, 79; on health care reform, 44, 79 paradox of choice, 87–88, 174 Pareto-optimality, Parker, Tom, 174 patient behavior, 23–24; action bias, 110–15, 117, 118, 121, 131; adaptation, 71; attitudes regarding amount of care provided, 202; bad vs good habits, 125–30; and idiot patient theory, 231; idiot patient theory, 231–32; insistence on treatment/tests, 2, 110–15, 129, 136, 201; intervention strategies for positive changes in, 129–33, 134–35, 168, 169–72, 235–37, 243, 245; lack of compliance with treatment regimens, 2, 115–18; loss aversion, 57–58, 59; in naïve vs sophisticated decision makers, 125, 128–29, 133, 230; patient-physician interaction, 2, 111–15, 117, 118, 120, 122, 129, 130, 131–32, 180–84, 196–97, 201, 202, 205–7, 231, 235–36, 237, 242; relationship to framing, 56–57, 109–10, 118–21, 122, 129, 131–32, 136, 238, 242, 243; relationship to loss aversion, 57–59; as selfdestructive, 168; regarding side effects, 116–17, 120–21; whitecoat adherence, 117 See also health care consumers; nonadherence to treatment regimens Patient Protection and Affordable Care Act (PPACA): accountable care organizations (ACOs), 82–83; attitudes regarding impact of, 78–83; and “death panels,” 44, 79, 81, 83, 94; and endowment effect, 42–44; implementation of, 240–41; Independent Payment Advisory Board, 81; individual mandate, 40, 42–43, 81–82, 83–86, 94, 240–41; insurance exchanges, 82–83; and malpractice reform, 190; and neoclassical economics, 287 41–42; opponents vs proponents of, 78–83, 94; and risk pooling, 85; Section 2705, 241; Section 4205, 240; support for law vs support for individual provisions, 26, 39–44; and the uninsured, 39, 40, 79, 82–83, 84–85, 94 Pauker, Stephen P., 119, 174, 195 pay-for-performance compensation, 192–93, 223 payment decoupling: in health insurance, 144–45, 148, 149, 153–54, 162, 163, 164; Loewenstein on, 139–42, 153; Prelec on, 139–41, 153; and prices, 139–40, 144, 148; and salience, 139–40, 144–46; Thaler on, 139–40 Pelosi, Nancy, 80 Peters, Ellen: on affect, 109 Petitti, Diana, 52, 53, 55 physician behavior, 23–24; action bias, 112–15; adoption of new procedures, 185–87, 196–97, 209–15, 220–28; regarding clinical practice guidelines, 212, 228, 239; community practice differences, 202–9, 243; computer use, 197, 226–27; defensive medicine, 112, 190–92; diagnostic decisions, 47–48, 66, 173–74, 180–84, 189–92, 195, 196, 197, 199, 201, 212, 217–18, 221, 222, 237, 238; regarding endof-life care, 235–36; endowment effect, 186, 189, 213, 214; excessive diagnostic testing, 112–15; regarding financial incentives, 1, 192–94; hand washing, 185–87, 196, 217; hyperbolic discounting, 215; intervention strategies for positive changes in, 194–200, 220–28, 230, 238–39, 245; loss aversion, 58–59, 213; micromotives and macrobehavior, 201–2, 209, 215, 217, 228; as motivated by intrinsic vs extrinsic factors, 193–94; overconfidence bias, 187, 196, 213, 221; overdiagnosis, 47–48, 66; overtreatment, 66, 112–15; patient– physician interaction, 2, 111–15, 117, 118, 120, 122, 129, 130, 131–32, 180–84, 196–97, 201, 202, 205–7, 231, 235–36, 237, 242; physician conspiracy theory, 231–32; 288 inde x physician behavior (continued) premature closure, 218; relationship to framing, 120, 121, 131–32, 174, 183–84, 188–90, 196, 213, 238, 242; relationship to professional standards, 58–59, 132, 174, 209, 223–25; role of science in, 56, 174, 207–8; treatment decisions, 173–74, 188–90, 193, 196, 197, 198–99, 201–9, 212, 222, 235, 237, 238, 242; utilization of heuristics, 180–84, 185–86, 187, 189–90, 191–92, 194, 195, 196, 197, 201–9, 213–14, 215, 216–20, 222, 223, 224, 226, 227, 232, 238–39, 243; utilization of medical checklists, 209–15, 220, 221–23, 227–28, 239; watchful waiting, 111, 112, 129, 237 Pinker, Steven: How the Mind Works, 247 Pittet, Didier, 186, 187 placebo effect, 154–55, 164 Plous, Scott, 138 Pohl, Rüdiger, 13 Posner, Karen L., 174, 198 Powdthavee, Nattavudh, 72 preferences: of market participants, 3–4, 6, 38, 70, 72–73, 75–76, 88, 105, 120, 123; as path dependent, 7; as path independent, 4, 7; preference uncertainty, 88; as time consistent, 123; as time-inconsistent, 74–76, 127; utility function, 6, 27–28, 166 See also hyperbolic discounting Prelec, Drazen: on coherent arbitrariness, 38; on decision efficiency, 140–42, 153; on hedonic efficiency, 140–42, 144, 153; on payment decoupling, 139–41, 153 premature closure, 218 Preventive Services Task Force See U.S Preventive Services Task Force prices: behavioral economics on, 8, 17–19, 20, 22, 42, 43, 115, 134, 142, 147–62, 150–54, 163–64, 171–72, 219, 244; changes in, 31, 41–42, 43, 134, 142–47, 148–49, 152, 157–59, 162, 163, 235; of electricity, 171–72; inflation, 142–47; of medical procedures, 83–84, 114–15; neoclassical economics on, 31, 41–42, 114–15, 143, 149, 150–51, 160–61, 162; and payment decoupling, 139–40, 144, 148; relationship to economic norms, 156–62; relationship to quality, 150–51; relationship to usage, 151–54, 155; salience of, 138–39, 142, 144–47, 153, 162, 163, 164; teaser rates, 76; vividness of, 137–39, 142, 162, 163; zero price, 8, 17–19, 20, 42, 137, 149–62, 163–64, 244 See also health care expenses Proctor, Bernadette D., 143 projection bias, 72–75, 81, 83–85, 99, 126–27, 166, 169 Pronin, Emily: on bias, 95 Pronovost, Peter, 226; on checklists, 209, 210–13, 215, 220, 221–23, 227–28, 239; on CLABSI prevention checklist, 209, 210–13, 215; on heuristics, 222, 223; interview with, 220–25; on mindful variation, 221–22; on network approaches, 223–24; on physician overconfidence, 221; Safe Patients, Smart Hospitals, 220; on Securities and Exchange Commission, 224–25, 228 prospect theory, 6, 27–28 prostate-specific antigen test, 56, 114 PSA test, 56, 114 public goods, 32–33 public policy, 23–24, 37; behavioral economics interventions, 64–68, 94–98, 168–72, 229–45; defaults in health care policy, 234–35, 241; government intervention in markets, 3, 236, 243; regarding public health, 170, 171–72, 236 See also Patient Protection and Affordable Care Act (PPACA) puerperal fever, 185–86, 210 Putler, Daniel, 31 Quarterly Journal of Economics, 21 Rabin, Matthew: on addiction, 125; on projection bias, 72–74, 84; on selfcontrol, 124–25, 128–29 Rabin, Robin Caryn, 53 Rand Health Insurance Experiment, 151–54, 156 rationality: behavioral economics on, 6, 7, 35, 38, 98, 141–42, 232; inde x as bounded, 175–76, 189, 232; neoclassical economics on, 3, 4, 6, 10, 11–12, 35, 36, 73, 88, 105, 123, 125–26, 130, 157, 166, 191, 217; rational thinking vs intuitive decision-making process, 102–10, 112, 119–24, 125–27, 128–30, 132–33, 137, 141–42, 174, 180, 184, 192, 194, 195, 196–97, 214–15, 221, 227, 235, 236, 242, 246 Reason, J T.: on Swiss cheese model of error, 220 Redelmeier, Donald A., 188–90 regret bias, 30, 192 Reid, Harry, 79 replication/confirmation studies, 233–34, 244 research agenda for behavioral economics, 230, 242–45 retirement savings, 15–17 Rice, Tom, 91–92 Rifkin, William, 51 Riis, Jason, 71 Riordan, Michael H., 150 risk: vs benefits, 108, 110–11, 116–17, 118–22, 130; experimental evidence regarding, 26–28, 35–37, 105–8, 150, 191–92; overweighting of small probabilities, 26–28, 150, 170, 191–92, 229–30; risk-as-feelings model, 105–7; risk pooling, 41, 85; risk seeking vs risk aversion, 27–28, 30, 35–37, 109–10; risk tolerance, 106 Roberts, John, 150 Robert Wood Johnson Foundation, 245 Robinson, James C., 163 Roebuck, M Christopher, 118 Ross, Lee, 95; on vividness, 137 Roth, Alvin, 161–62 Rothman, Sheila, 51 Rottenstreich, Yuval, 108, 191 Rozenblit, Leonid, 234 Rudnick, Tamar, 96 rules of thumb, 174 Rustichini, Aldo, 19, 157–58, 164 Ryan, Richard, 86, 193 Sabate, Eduardo, 117 Sackett, David L., 115, 117 salience, 191, 208, 217, 240, 241; defined, 138–39, 219; hand washing’s 289 lack of, 187, 191; and payment decoupling, 139–40, 144–46, 149; of prices, 138–39, 142, 144–47, 153, 162, 163, 164; of symptoms, 219; vs vividness, 137, 138–39, 142 Samuelson, Paul: on economics textbooks, 20–21 Santos, Laurie R., 65 Sapira’s Art & Science of Bedside Diagnosis, 183 satisfaction/happiness See happiness/ satisfaction satisficing, 176, 232 Savage, Leon: on assumptions vs predictions, 4–5; billiards player analogy, Sayette, Michael A., 127–28, 146–47 Scheibehenne, Benjamin, 88 Schelling, Thomas: on micromotives and macrobehavior, 201–2, 209, 215 Schkade, David, 73 Schmidt, Jean, 51 Schram, Arthur, 90 Schul, Yaakov, 102 Schwartz, Barry: The Paradox of Choice, 246–47; on tyranny of freedom and paradox of choice, 87–88, 176 Schwartz, Janet A., 174 Schwartz, Lisa, 57, 59, 202 Schweitzer, Maurice E., 184 Science, 48 Scott, Anthony, 193 Sears, David O., 21 Sebelius, Kathleen, 51, 55 self-awareness, 67, 238 Semmelweis, Ignaz, 185–86, 210 Shadegg, John, 52 Shaffer, Victoria A., 197 Shafir, Eldar, 188–90 Shah, Anuj K.: on heuristics, 179–80 Shampanier, Kristina, 17–18, 149–50, 153, 156 Shaneyfelt, Terrence M., 184 Shapiro, Jesse M., 155 Shea, Dennis, 15–16 Shefrin, Hersh, 30 Sherbino, Jonathan, 226 Shieh, Yiwey, 56 Shimkus, John, 52 Shulman, Lee S., 173 Shumway, Tyler, 30 side effects, 116–17, 120–21 290 i n d e x Silva, Jose, 141 Simon, Herbert: on bounded rationality, 175–76, 189; on heuristics, 175–76; on human rationality, 1, 175–76, 189; on satisficing, 176 Sirovich, Brenda E., 202, 205, 208 Sisson, Stephen D.: on heuristics, 180–81, 182, 183 Slonim, Robert, 159–60 Slovic, Paul, 108; on affect, 104, 137; on experiential vs analytic systems of thinking, 102–5, 126; on heuristics, 175 Smith, Adam: on invisible hand of market, 3; on over-rating differences between situations, 72; on sympathy, 78; Theory of Moral Sentiments, 72; Wealth of Nations, Smith, Jessica C., 143 Smith, Lamar, 80 smoking cessation, 125–28, 168, 170, 236; commitment devices for, 237; financial incentives for, 22, 128, 133, 237 Snowberg, Eric, 29 Snow, John C., 115, 117 soccer goalkeepers, 100–101, 110, 114, 129, 131 socialism, 80, 81 social norms, 241; defined, 157; vs economic norms, 156–62, 164–65, 243; and network approaches, 223–25 Social Security, 81, 83 Sonnemans, Joep, 90 South Carolina, 25–26, 44 Sox, Harold C., 119, 173, 195 Space, Zachary, 53 Spears, Britney, 105 Sprafka, Sarah A., 173 Statman, Meir, 30 status quo bias, 27, 28, 163, 189, 196, 214 Stewart, Jon, 67 stickK.com, 132–33 Stigler, George: “De gustibus non est disputandum,” 122–23; on rational addiction, 123 Studdert, David M., 190 subjective probabilities, 27–29, 150 Sunstein, Cass R.: on choice architecture, 97–98, 246; on commitment devices, 133; on defaults, 13, 97–98, 246; on libertarian paternalism, 95–96, 131–32, 246; Nudge, 17, 97–98, 246 Supplemental Appropriations Act, 25 supplier-induced demand, 206–7, 231 Susan B Komen for the Cure, 61 Svenson, Ola, System (intuitive) vs System (reflective) thinking, 130, 174, 192, 196–97, 227, 235, 236, 242; regarding affect, 103, 104–5, 109, 121–22, 128, 137, 141–42; as experiential vs analytic thinking, 102–5, 122–29, 132–33; experimental evidence regarding, 105–10, 112, 119–22, 124–25, 127–28, 132–33; heuristic vs deliberate decision making as, 180, 184, 194, 195, 208, 214–15; Kahneman on, 102–3, 221, 246 Tasic, Slavisa: on illusion of regulatory competence, 234 Taubes, Gary, 48 Taylor, Shelley E., 138 Tea Party, 26 Tetlock, Philip, 11 Thaler, Richard H.: on choice architecture, 97–98, 246; on commitment devices, 133; on defaults, 13, 97–98, 246; on endowment effect, 33, 189; on libertarian paternalism, 95–96, 131–32, 246; Nudge, 17, 97–98, 246; on payment decoupling, 139–40; on willingness to pay vs willingness to accept, 33 Thompson, Ian, 56 Thompson, Suzanne C., 138 Thrall, James, 49 Titmuss, Richard: The Gift Relationship, 159, 162 Todd, Peter M., 88, 178 Tufte, Edward: on context of information, 65–66, 67 Tversky, Amos, 119, 235, 246; on belief in the law of small numbers, 56–57, 177–78; on bias, 176–78; on framing, 35–36, 109; on heuristics, 175, 176–78; on loss aversion, 26–28, 30, 147–48, 189; on overweighting small probabilities, inde x 26–28, 150; on power of zero, 150; “Prospect Theory: An Analysis of Decision Under Risk,” 6, 20, 26–28, 30, 147–48, 150 Ubel, Peter A., 198 unemployment insurance, 81 uninsured, the, 96, 202; and PPACA, 39, 40, 79, 82–83, 84–85, 94 Urban Institute, 240 U.S Department of Health and Human Services, 45 U.S House of Representatives, 25, 49, 78–80; Health Subcommittee of Energy and Commerce Committee, 52–53, 54–55, 63 U.S Preventive Services Task Force, 202; framing by, 54–55, 241–42; procedure manual, 45, 47; recommendations regarding mammography screening, 26, 44–64, 110–11, 176, 196 U.S Public Health Service, 45 U.S Senate, 25, 79 U.S Supreme Court, 240 utility: behavioral economics on, 27–28, 32–33; maximization of, 3–4, 6, 27–28, 70, 86, 123, 140, 150, 165, 168, 176; neoclassical economics on, 3–4, 6, 27–28, 86, 123, 140, 166, 168; utility function, 6, 27–28, 166 Vallone, Robert, 177 value-based health plans, 163–64 Van Boven, Leaf, 33–34; on hot-cold empathy gap, 77–78 Van Den Bos, Jill, 216 Van der Pligt, Joop, 124 Van Harreveld, Frenk, 124 visceral factors, 123–25, 126, 128 Visco, Fran, 49 Vitter, David, 52 vividness, 149, 191; defined, 137–38; experimental evidence regarding, 291 138; of prices, 137–39, 142, 162, 163; vs salience, 137, 138–39, 142 Vohr, Eric, 209 Volpp, Kevin G., 22–23, 241 Waber, Rebecca L., 154–55, 164 Wall Street Journal, 50 Wasserman Schultz, Debbie, 51 watchful waiting, 111, 112, 129, 234, 237 Waxman, Henry, 63 Wehner, Paul, 207 weight loss, 133, 168, 170; commitment devices for, 22–23, 134, 236 Weiner, Anthony, 80 Weinstein, Neil: on adverse events, 107, 130 Weiss, Marisa, 51 Welch, Gilbert, 47–48 well-being, sense of, 69–72 Wennberg, Jack, 203 willingness to pay vs willingness to accept, 32–34, 59 Winter, Sidney, Wolf, James, 197 Wolfers, Justin, 29 Woloshin, Steven, 202 Wong, John B., 173, 195 World Health Organization, 117, 186, 209, 221 Young, Neal S., 233 Young-Levi, Karen, 53 zero prices: and affect, 150, 153; behavioral economics on, 8, 17–19, 20, 42, 137, 149–62, 163–64, 244; experimental evidence regarding, 154–56; neoclassical economics on, 17, 19 Zikmund-Fisher, Brian J., 198 Zingales, Luigi, .. .Irrationality in Health Care Irrationality in Health Care What Behavioral Economics Reveals About What We Do and Why Douglas E Hough Stanford Economics and Finance An Imprint of Stanford... Pronovost, and Professor George Loewenstein for their time and valuable insights that illuminated the ways in which behavioral economics can explain what is going on in health care and health care. .. Should We Care? 1 Keeping What We Have, Even If We Don’t Like It 25 Managing Expectations and Behavior 69 Understanding the Stubbornly Inconsistent Patient 100 Understanding the Stubbornly Inconsistent