Let's start our discussion of health incentives by examining a couple of

programs that do not heavily leverage behavioral economics.

We know that incentives work simply by changing the effective ratio of

benefit to cost.

While most of our discussion will focus on health behavior,

we'll start with a well known example of this,

in the context of health service utilization, to illustrate that as we

change the effective prices that a consumer faces utilization will change.

Then we'll go through some examples of standard economic incentives,

in which we provide a reward to participants who complete certain tasks.

Let's start with this example here, of what happens when an annual drug benefits

cap was put in place of $1,000 among some Medicare Advantage beneficiaries.

As you can see from the graph in the left, fairly quickly,

there was a significant percent decrease in medication utilization.

This was between 30 and 40%.

This significantly reduced total spending on pharmacy by about 28%.

But it unfortunately also led to an increase in emergency room

visits of about 9%, hospitalizations of about 13%.

What that meant was that on net, this program didn't actually save money.

More concerning, mortality rates were actually higher

once this drug benefits cap was put in place compared to when it was not.

This is an example of how as you change somebody's benefits,

think about a health insurance plan as a giant incentive plan.

You can make some services less attractive, more costly, and

therefore less likely to be consumed.

Lots of evidence of this in the context of health benefits.

Let's turn now to talking about smoking,

the leading cause of preventable mortality among Americans.

More than 400,000 Americans die each year of tobacco-related illnesses, but

only 3% per year quit smoking.

Smoking cessation programs have been shown to be highly effective, and

cost effective.

Yet their utilization tends to be very low.

We did a study to examine whether we could use financial incentives to increase

the rate at which people sign up for a smoking cessation program and complete it.

We enrolled 179 veterans at the Philadelphia VA Medical Center

who were interested in quitting smoking.

We randomized them to either a free program with free pharmacologic aids,

such as nicotine patches for quitting smoking.

Or the same program plus incentives of $20 for

attending each of five classes that were part of the smoking cessation program, and

an additional $100 if they quit smoking 30 days after program completion.

Self-reported smoking was then confirmed with cotinine tests.

Let's look at what happened.

The incentive program doubled the rate of the smoking cessation program enrollment

from about 20% to 43%.

It also significantly increased the program completion rates from 12% to 25%.

There was an important behavioral element to this, which is that we gave

the $20 incentive to each participant immediately at the time of the class.

So they were getting frequent feedback without any delay.

We then found that after program completion, smoking cessation rates were

actually significantly higher in the short-term, 16.3 versus 4.6%.

However, we did see relapses between the 75 day mark and

the sixth month mark at which we next checked for smoking cessation.

Such that the intervention difference in smoking sensation rates was no

longer significant, it was a difference of about 6.5% versus 4.5%.

This led us to think that what we needed to do in designing our next study was

really focusing more on longer term cessation because that is of course

where the health and economic benefits are.

We got support from the Centers for Disease Control to do a larger term study

among 878 participants from 85 General Electric work sites across the US.

We conducted a two-arm randomized controlled trial in which we randomized

participants to either information about smoking cessation programs versus

the same information plus a package of incentives that were worth $100 for

completing a smoking cessation program, $250 for cessation within 6 months.

$400 if they were then able stay smoke-free for

an additional 12 months, and we could confirm that biochemically.

Eligibility was tied to quitting within the first six months, and

after 12 months the incentives were discontinued.

At 12 months, we found significant differences in quit rates.

5% in the control group.

14.7% in the incentive group.

A ratio of about 2.9.

We then observed what happened in the subsequent six months and

measured quit rates at 18 months.

We found their quit rates of 3.6% in the control group,

9.4% in the incentive group, a ratio of 2.6.

So there are some relapses, but

they happen at roughly the same rate, in the control and the incentive group.

Based on this GE implemented a plan for all 152,000 employees in the US in 2010.

There are two behavioral elements to this program,

there's a deadline which helps to reduce procrastination.

And the incentives also are awarded outside of premium structure

because of mental accounting, which makes them more salient and more visible.

The Corcoran Collaborative has reviewed all of the smoking cessation incentive

studies in workplace settings and they did what's called a meta analysis.

A meta analysis is a structured review of the data that in essence takes all

the studies that meet certain criteria, in this case they were all randomized trials.

And takes advantage of the fact that,

although many of these studies were too small to really have enough statistical

power to test outcomes, pooled together we can say something much more

meaningful than we could by looking at many of these studies alone.

The study I just described to you was a well powered study, but

many of the studies that were reviewed were much smaller.

Instead of having 878 participants, many of them had 30, 40, 50 participants.

So the confidence intervals around their findings were very wide.

Pooled together, what we find is that at six months there's an odds

ratio of programs that offered incentives for

smoking cessation compared to programs that did not of 1.72.

Meaning that there's an increase in the odds of a successful

cessation confirmed biochemically of about 70% from these programs.

There are also a number of studies that have been done,

around what's called contingency management,

the use of incentives to help substance abusers stop using various drugs.

These have been done in a lot of different contexts.

And here's another example of a meta analysis

that looked at the factors that predicted the greatest success in these programs.

Here we're looking at effect size, and the farther you are on the graph to the right,

the more effective the intervention.

We see the point estimate as a dot, the 95% confidence interval as a line.

Two things stand out in looking at the results from this meta analysis.

One is that the larger the reward, the bigger the effectiveness of the program.

The other is that the immediacy of the reward is a significant predictor

of the effectiveness of the program.

As these studies show, incentives can be very effective in changing behavior.

The designs do not have to be particularly complicated.

But two keys highlighted here are, to give feedback close in time to the desired

action, and make sure the reward is salient and visible to the beneficiary.

Another key element is to make sure the incentive is large enough to

get the attention and

increase engagement amongst those whose behavior you are trying to influence.

Standard Incentives

Health Care Innovation

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