Tuesday, July 20, 2010

Present-Oriented versus Long-Term Benefits

While reading this Salon article about whether cheaper doctors provided worse care this passage stuck out to me:

In addition, a doctor's ability to build a large client base—and gain leverage for negotiating with insurers—might have little to do with patient outcomes. Studies have shown that patients' hospital preferences are more responsive to improvements in amenities like wireless Internet and on-demand video than the likelihood that the hospital will help them get well.

This is not all too surprising. When using cost-benefit analysis, individuals rely upon certain heuristics, or short-cuts for complicated decisions. One of the most often discussed is a present-oriented bias. Individuals often give greater weight to current benefits, over long-term benefits when making decisions. This TED talk by Esther Duflo makes this point.

In this talk Prof. Duflo discusses an experiment her team did with vaccinations. In this experiment they had two groups. Both groups were offered free camps for people to get their children immunized. Group 1 was given the option of going to these camps. While Group 2 was given an incentive, in this case, a kilogram of lentils. Group 2 had much higher immunization rates. This was a striking finding because if rational cost-benefit decision-making holds true that would imply, the benefits of immunization against the costs of getting a disease, or B(immunization) vs. C(Getting Disease), should be less than the benefits of immunization plus the benefits of free lentils, or B(immunization + lentils) > B(Immunization).

But, in her talk, she comments on how a kilogram of lentils is an inconsequential incentive, it is only enough food for barely a day. So therefore, once again assuming rational cost-benefit decision-making, B(lentils) > C(Getting disease), which if you think about it should not seem true. The long-term costs of getting a disease can include, among other things, high medical bills, time away from work, death etc. What the talk shows is how present-oriented benefits, a la free lentils, can play into the hands of peoples' present oriented bias. From that sort of discussion, it is not surprising to find out people care more about whether or not they have a nice television or a good wifi connection versus a good doctor, because the benefits of a good doctor accrue over time whereas the inability to surf the web are something that individuals accrue at the time of stay in the hospital. This strikes a blow into attempting to do cost-control at the consumer level, which unfortunately, is what a lot, not all, that the PPACA (health care reform) relies upon. It means there needs to be much more effort at getting providers to pare down the cost, not consumers.

**I am a big proponent of the health care legislation, though I feel, like many, it is a necessary but not sufficient step in changing our health care delivery and price system.

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