Tiger Woods and Health Care Reform
American presidents have been trying to reform our health care system since at least the Nixon era, but with only limited success. Past reform efforts have failed for many reasons. For starters, the U.S. health care system is complex, with the medical industry making up almost 1/6 of our economy. But perhaps the biggest obstacle to reform is a psychological one: thoughts of health-care reform too often trigger images of putting for bogey instead of putting for par.
I am referring to the psychological power of loss aversion, a phenomenon that behavioral economists have been studying for several decades now. Most of us, you see, seek to avoid losses with greater fervor than we seek to achieve equal gains. If given a 50-50 chance of either winning or losing $100, we decline. The $100 loss looms larger than the $100 gain. For similar reasons, most people express greater interest in surgical procedures that carry 90% survival rates than in ones that carry 10% mortality rates, even though these procedures are identical. Thinking about mortality triggers loss aversion. This week we even learned that loss aversion influences putting behavior among professional golfers. When putting to avoid a bogey, golfers are more aggressive than when putting for birdie, and consequently are more likely to make their putts. Few things are more motivating than the desire to avoid losses.
Which brings us back to health care reform. When President Clinton attempted an overhaul of our health care system in the 90's, his administration correctly recognized the need to control health care costs. Without cost containment, they knew it would be impossible to expand health care insurance to the millions of people who lacked such coverage. So the Clinton administration looked for ways to increase the number of Americans enrolled in managed care plans, which at that time had achieved some success in controlling health care expenditures.
The problem with the Clinton approach was that it made Americans feel like they were losing their traditional health care. Managed care was infamous for saying no -- for denying people health care services and for limiting their choice of doctors. By taking things away from people, managed care triggered loss aversion. Consequently, the American public never supported Clinton's reform efforts.
The Obama administration is steeped with people knowledgeable about behavioral economics, who hope to keep the public from slipping into a state of loss aversion. Not surprisingly, then, the administration has enthusiastically embraced research out of Dartmouth University, demonstrating huge regional variations in medical expenditures that have not been accompanied by any variation in health care quality. According to this research, some cities in the US spend twice as much per capita on health care as other cities without experiencing any discernible improvement in health.
Obama's people hope that Americans will perceive health care reform as a win-win opportunity, with lower health care costs through the elimination of waste and inefficiency, accompanied by more stable and secure health care coverage. But even if the administration succeeds in assuaging the fears of the general public, they face a much stiffer challenge with the health care industry. Any success they have in controlling health care costs will, after all, create losers. If we spend less money on health care in the US, then someone in the health care industry is going to take a financial hit. One person's waste is another person's income.
No surprise, then, that both the insurance industry and the AMA have begun pushing back against elements of the Obama plan. These groups stand to lose money under health care reform. Hospitals are likely to lose money too, as are drug companies, medical device companies, and other powerful parts of our vast health care industry. All of these groups will be motivated to fight health care reform.
The Obama administration has made a point of distinguishing its behavioral approach to economics from the more traditional approach embraced by the Bush administration. Ironically, though, it is the Bush administration that understood how to pass health care reform without triggering loss aversion. When George W. Bush decided to push for a Medicare drug plan, he recognized that the pharmaceutical industry would wield its powerful lobbying strength against his efforts if they feared a loss of income. So he crafted a plan that benefited the drug industry. Politicians on the left criticized these concessions to industry, but it is hard to imagine the drug plan passing without such concessions.
Obama should draw a lesson from his predecessor. If he causes the health care industry to perceive his health plan as a threat to their incomes, his plan will face stiff resistance. For health care reform to succeed, people in the health care industry need to keep making exorbitant sums of money for awhile. Over time, the government can gradually ratchet down health care costs. But initially, Obama needs to reduce the number of people who perceive health care reform as a loss.
The cost will be steep. But the alternative will be more costly. We cannot afford to make reform feel like a health care bogey.
Peter Ubel is author of Free Market Madness: Why Human Nature Is at Odds with Economics -- and Why It Matters (Harvard Business Press, 2009), and Director of the Center for Behavioral and Decision Sciences in Medicine at the University of Michigan.
Loading comments…
Want to reply to a comment? Hint: Click "Reply" at the bottom of the comment; after being approved your comment will appear directly underneath the comment you replied to
That's like the police telling me I should continue to pay protection money to the mob because they'll be upset that they're losing money.
I want the money they've been draining from our health care system to go to ... god forbid ... health care. I'm happy to chip in for my less healthy neighbor. Even if he has bad lifestyle habits. Because I know, one day, one of my kids might have profound medical needs, or my grandchildren, or my cousin's cousin's. I don't care who benefits from my additional payments as long as it goes to health care and not greed.
I'm amazed at how many people don't get how completely, totally ticked off we are out here.
My senator, Ms. Cantwell, needs to feel a little loss aversion because if she doesn't vote for a good, solid, national public option (at the least), she will lose my vote.
Cantwell is my Senator, too. I donated to her campaign, but am deeply disappointed in her timd approach to health care reform. She suddenly seems to be siding with Baucus, Conrad, Mary Landrieu et al. Why? Cantwell represents the great and fairly progressive state of Washington. She doesn't need to be afraid to support a public option.
She will lose my vote, too, but unfortunately she is not up until 2012.
If you are so upset and there is such a great need and it is so easy to break even, why don't you start your own not-for-profit insurance company. I propose that a not-for-profit insurance option would be able to control administrative costs better than the government. With a good business-plan you would be sure to attract investors and customers immediately. It could really be worth your while. Let me know if you are interested and I'll provide a shell of a business plan for you.
Here's another golfing analogy. Leaving out the public option is like a hole-in-one for the insurance companies.
Bingo ! Let's just keep providing those insurers with huge amounts of our hard-earned money.
"For health care reform to succeed, people in the health care industry need to keep making exorbitant sums of money for awhile."
Nonsense! What is needed is to trigger loss aversion in the minds of Senators that are obstructing the reform. If said Senators realize that they stand a significant probability to lose their job, they'll do what they must do. BTW, just read the multiple stories of people struggling with health care insurance at mybarrackobama.com/healthcarestories and it'll become obvious that the means to throw recalcitrants Senators out of office are right there.
And that is far more economical than giving yet again, lots of money to the health care industry.
I just realized you are a doc at U of M. Cool. I practice medicine in Michigan about one hour away from you. Look into how much non-reimbursed care is given away in your area and in Detroit by physicians and hospitals.
Now, consider if that was reimbursed at Medicare rates or better.
I think that could improve many physicians and hospitals bottom lines.
Not only that, it would help with ER services, as ER's are notorious money losers. But w/ good health reform even junkies and gun shot wound victims would have insurane.
Further, getting compensation for what was otherwise free care (or someone forced onto medicaid rolls) helps take off some of the burden of radiology and surgical procedures (like knee replacesments, which are a cash cow to some small hospitals) as the only way for hospitals to get paid.
Ummm....I think you understand economic psychology a little better than you understand health care.
When you assert that "hospitals stand to lose money" I think you are forgetting hospitals already
render tons of free care for which they are not reimbursed.
Basically, people go to the hospital, rack up huge bills, and can't pay. Often they are forced into bankruptcy protection and the bill gets written off.
Hospitals then compensate for these losses usually by high dollar radiology and procedural services.
However, if everyone has insurance then hospitals may actually get better reimbursed for the services the provide without necessarily sacrificing on the high paying tests and procedures.
It could be a wash, a loss, or net benefit to hospitals.
Sure, some hospitals might take a hit, but only if reimbursement rates from PRIVATE insurance goes down.
I take issue with Dr. Ubel’s conclusion. The last thing we should consider is “people in the health care industry need to keep making exorbitant sums of money for a while.”
This defies logic.
The problem is “exorbitant sums of money”.
We spend twice as much as others to rank number 37 in health statistics. A travesty!
We hand “exorbitant sums of money” to people in the system. They deliver a shoddy product.
Don’t believe the lie. Our health care is among the worst. Statistics provide unequivocal proof.
This problem is comparable to that of the US auto industry. At issue is Quality. US auto companies are bankrupt because they neglected quality while chasing profits, just like our health care system.
Basic to Quality Improvement in system management is that responding to failure (low quality) is more expensive than designing and producing a quality product.
This equally applies to health care. In health care, failure is illness and injury. In our system profit comes from failures.
We must reprioritize, emphasizing Preventive Medicine. Profit from prevention accrues to us, the people, in better health at lower cost.
Improvements in responding to failure (illness and injury), like Evidence-based Medicine, Electronic Medical Records, competitive bidding for drugs and supplies, and streamlined management will help somewhat, but big reform comes only through prevention.
Prevention is mostly inexpensive education in the media, school, home, workplace, and medical facility, requiring very little increased expenditure, for huge savings.
That 37th in health statistics statistic is much more nuanced than you might think. I'm not saying that we do everything the greatest, but I would like to encourage people to learn more about what the WHO values before we gnash our teeth about not being the greatest. Having looked through some of the surveys people cite I can see a clear slant towards a single-payer system or European societies in general in many of the metrics.
For example, America did horrible in a Mirror Mirror survery. One of the questions that stood out to me was whether you had the same doctor for the past 5 years. America ranked worst. OK, we are one of the most mobile societies in the world. I dont' expect my doctor to follow me when I move. While our sytems may also shuffle people from doctor to doctor, who would know that from that question how much is attributable to our systems vs. our culture. You may want America to look more European because you share their values - to that end you may yearn for a single payer system, then you wouldn't see a slant at all. But most of America (outside the huff-po echo chamber) does not yearn to be European. We should pursue to improve metrics that matter to Americans.
Go Buckeyes!
What if Lincoln capitulated to the south because of the "economic" and "money flow" issues?
ridiculous
I'm sick of this "we need to keep giving the poor insurance babies more money so they can feel all good inside" while they pillage the America people's lives. I'm a realist, I know these guys are powerful, but their entire business plan is draconian and an utter scam. Single-payer isn't going to happen but with a strong public option it could at least lead to a slow death in for-profit health care.
IF YOU MAKE MONEY FROM THE HEALTH OF YOUR CITIZENS YOU ARE A PROFITEER.
And morticians are murderers! Doctors should work for free!
Couldn't disagree more with your conclusion.
My own sense is that the narcissistic self-aggrandizing greedy profiteers who comprise Big Pharma and the lobbying arm of the AMA will continue to do anything to insure the continuance of the same system that has seen medical costs skyrocket while health care in the USA has fallen relative to other civilized nations with universal coverage underwritten by a OnePayer System.
Talk all you want about they feel they must still be profiting------the plain truth is they WILL be profiting and won't ever stop voluntarily from taking as much as they can off the backs of the suffering.
These people and these corporations are psychopathic. For them the bottom line is always the most important detail, just as long as it flows toward them.
Interestingly, the exact same argument can be advanced as to why America has not withdrawn its troops from other nations-----------unless it is done more slowly, the military and the arms manufacturers will fight against the change: when the truth is equally that they will NEVER of their own accord stop the occupation and fighting and creation of enemies.
It is what they do.
As profits are what Big Pharma and the AMA do------they have had many chances to alter their gameplan to one more humanistic and sensible. I say they no longer deserve a say in what happens.
Let them hold bake sales like we have had to do to help someone get medical attention.
"Couldn't disagree more with your conclusion."
I second that. Arguing that in order to introduce health care reform we must appease the industry by making it even more profitable sounds like insisting that we should have given Hitler the Czech Republic, Slovakia and Poland to satisfy his insatiable tyrannical appetite and stop his rush to world domination. Yes, I use the comparison of the industry with the Hitler's regime very pointedly, because both were/are led by psychopathic individuals who care(d) only about their own interests and fulfilling their own agendas (read: money and power). Enough is enough. There won't be any significant change in the system so ironically called "health care" in this country when for-profit motives remain in play.
In the final analysis, Americans spend more money than any other nation on earth on healthcare and are statistically less healthy than most first world countries with nationalized healthcare. The healthcare lobby and their bed partner, the GOP are fully engaged in churning out the misinformation and scare tactics. This is where advocates of reform must hit them head on and call them on it with the facts. Yes, you can get better healthcare without breaking the bank. The problem is that there is too much greed and fleecing the system. The focus in the US is on milking the healthcare cash cow, not healthy patients. Don't want government bureaucrats making your healthcare decisions? How about a greedy insurance executive or a doctor like my kid's pediatrician who my wife overheard bragging about how many patients she could see in an hour. "Top that one" was the comment to her colleague.
Bush pushed through his Medicare Drug Plan because the drug companies wanted it. They knew having private insurers run it would mean their costs wouldn't be controlled. It should never have passed. The drug companies should have been required to negoiate with the government, just as TRIKCARE does, which provides drugs to active duty and retired members of the US military.
Maybe people should have a choice...private insurance and single payer. Let people choose..
It never ceases to amaze me how lame excuses can be contrived to explain away something that is fundamentally absurd. Apparently, it's abhorrently unacceptable for huge corporations to earn less money, which they consider synonymous with "losing" money. But the millions and millions Americans who are perpetually "losing" money to health care industries by way of higher costs and premiums are perceived as uninformed or unable to comprehend the workings of big business when they cry foul.
Dr. Ubel,
This is an interesting post but in the end you are suggesting conciliation with powerful interests in the health care industry without even considering that, with 72% of the American people wanting a strong public option, that confrontation is also a possibility. Buckling in front of these interests is a political choice not one based on the science of behavior. For one the occupant of the White House seems to be for a public option and there are such things as mass movements that MIGHT arise if politicians in Washington show the solicitude that you counsel.
Maybe Feinstein's multi-millionnaire husband Richard Blum hasn't found a way to make some big money off the new healthcare system. Incompetence and greed prevails. He is on the University of California Board of Regents. To crack down on fraud at UC, which has contributed substantially to UC's budget problems, the UC Regents hired a new UC Chief Auditor, who is a nurse by trade, at a $ 500,000 salary. This also illustrates what is wrong with the current American healthcare system.
mikecal, can you provide a link re: the 72% wanting a public option?
Thanks in advance
http://www.nytimes.com/2009/06/21/health/policy/21poll.html?_r=1&scp=1&sq=healthcare%20poll&st=cse
"The national telephone survey, which was conducted from June 12 to 16, found that 72 percent of those questioned supported a government-administered insurance plan"
72%???
Really?
That is the number being touted on many of the blog entries here at Huffington. Mikecal doesn't have to provide a link. Just look through the other blog entries.
You must be logged in to comment. Log in or connect with
