The Promise of Behavioral Economics for Health

Most policy and management approaches to health care are highly transactional, taking their lead from management efforts in other sectors. Efforts to improve healthcare quality often are implemented through pay-for-performance financial incentives to physicians for meeting clinical or economic targets. Efforts to steer patients away from expensive or low-value care often are implemented through high copayments or deductibles. Health systems increasingly take on financial risk with bundled payments or other structures to make them accountable for value.

Each of these programs is designed to motivate humans—clinicians, patients, or managers. They typically trade on people’s desire to make themselves better off—penalizing us for doing the wrong thing or rewarding us for doing the right thing. The problem is, humans don’t always act in their own self-interest. Instead, we often make decisions that seem out of touch with our goals—for example, becoming a smoker or failing to wear a seatbelt.

The field of behavioral economics recognizes that we often make decisions in ways that seem irrational. It’s irrational to eat the piece of chocolate cake if you are trying to lose weight, except that the chocolate cake is right in front of you and it looks really good and, well, the diet can start again tomorrow. That irrationality weakens the effectiveness of the transactional financial incentives often employed to get us to do what we ought to do.

The field of behavioral economics starts with the observation that people are often irrational. But the real value of behavioral economics is that we tend to be irrational in highly predictable ways. Many commercial enterprises exploit these patterns of irrationality. Credit card companies and car dealerships lure new customers with “$0 down” and fleeting-but-tempting teaser rates of “0 percent interest,” playing on people’s tendency to focus on the present rather than the future. States market lottery tickets that return pennies on the dollar and promote these games in ways that ignore more realistic expectations, using one-sided messages such as, “You can’t win if you don’t play,” rather than the equally accurate message, “you can’t lose if you don’t play.”

The same decision errors that can be used against us can also be used in our favor. The promise of behavioral economics for health is that many of the same messages, incentives, and choice structures used so effectively to lure people into situations where they may be exploited can be redirected to attract them to healthier choices that improve their well-being. Health programs are more likely to be successful if designed not based on how perfectly rational people ought to make health decisions but on how humans actually make them.

David A. Asch, MD, MBA, is executive director, Penn Medicine Center for Health Care Innovation, and John Morgan Professor at the Perelman School of Medicine and The Wharton School, University of Pennsylvania, Philadelphia.

David Asch, MD, will be presenting as a featured speaker at HFMA’s ANI 2017, taking place June 25-28 in Orlando. This blog post touches on the theme of Asch’s presentation, Behavioral Economics and Better Results. For more information or to register, go to