A few words about behavioral economics. It is a field born not so long ago from the work of Nobel laureates Daniel Kahneman and Amos Tversky, who applied cognitive psychology to how we make decisions under the conditions of risk. Traditional neoclassical economic theory maintained (and still does to a large extent) our rationality with vigor, yet something was amiss. If we were so rational, why did some of our most basic choices seem not so?
The current generation of behavioral economists, like Ariely, sits firmly at the nexus of economics and behavioral sciences, and through creative and telling social experiments are extending our knowledge of human nature not only in the economic sense, but in our social and professional interactions as well. “Predictably irrational” is geek brain candy, in which the author describes his personal and academic quest with poignancy and self-deprecating humor. His journey started abruptly with a devastating accident that left him with burns on 70% of his body. Through the ensuing three years of recovery he suffered many painful moments, leading him to question the assumptions made by his experienced clinicians about pain trade-offs. This tragedy turned into a boon for the rest of us by thrusting his creative mind into this exciting and burgeoning field.
I will not try to talk about each and every concept in his book; for this I urge you to purchase it yourselves – it is a terrific read. I do, however, want to apply some of his ideas to what I know and care about, and that is our healthcare system.
One aspect of Ariely’ research has focused on understanding the nuances of what he refers to as social vs. market interactions. That is, social interactions being ones where we interact without any overt financial incentives, while market interactions explicitly involve an exchange of money. One fascinating experiment Ariely and coworkers performed illustrated several aspects of these interactions. This experiment took place at a daycare center in Israel, where at baseline the parents occasionally would be late picking up their children without any penalty other that the guilt associated with keeping the teacher late. To discourage this behavior, a scheme was imposed, whereby the parents were allowed to be late, but at a monetary cost commensurate with their lateness. The change in their behavior was profound, wherein, instead of the desired effect of reduced lateness, they now felt entitled to be late as they were now engaged in a commercial relationship justifying this behavior. Even more striking was the effect of reversing the decision and going back to the guilt as the driver of the desired behavior: the parents’ lateness behavior of the market interaction persisted even into the realm of what had now reverted to a social contract. Ariely sees this as an illustration of the difficulty with restoring a social context to what had been a market interaction, however briefly or temporarily.
Other examples of this distinction are described, where companies that try to promote social interaction with their employees are better off using gifts rather than checks or cash to incentivize performance and loyalty. Although the difference between such vehicles seems subtle, as it turns out cash invariably turns things in the direction of market interaction, fostering a sense of entitlement that overwhelms good will.
Let us now apply this to medicine in the US. Over the last century medicine went from a community-based cottage industry to a multi-trillion dollar behemoth. Back then it was not unusual for the doctor in the community to service his patients’ needs not for a formal payment, but for a chicken or a sac of flour. So, in a sense, although not exactly gifts, these ways of payment avoided the formal exposure to dollars and cents. And this perhaps maintained the relationship as a hybrid of market and social interaction.
Today, the idea of bartering for medical services is laughable. The bureaucracy supported by healthcare financing, viewed by many pundits as a reliable engine of economic growth, would not do well with such a model. And as there is more and more scrutiny of individual clinician performance, there is also more and more talk about rewards and punishments, both of which take monetary shape. Extending the social vs. market dichotomy to this phenomenon, it becomes obvious why there is such rampant discontent in the ranks of the physicians in particular: when money is the only feedback, the amount becomes a proxy for the worth of the service, and even one’s sense of self-worth. Once this interaction is set up, the amount of the payment will determine not only what kind of a service is provided, but how appreciated the clinician feels. No wonder many are so cynically eschewing Medicaid patients, and threatening to do the same with Medicare as their reimbursements dwindle.
But imagine for a moment a different system of healthcare. In this system the doc does not need to worry about maximizing her income. In this system there is a well-established floor and a well-established ceiling of salaries, with not too much distance in between. Having taken this financial wild card out of the interaction, the clinician’s reward can now become the practice itself. If reimbursement no longer serves as the proxy for one’s worth, perhaps the therapeutic relationship can now enter the realm of a social, rather than market, contract. In this construct, the clinician can focus on achieving good relationships with her patients, and on promoting good health outcomes.
Am I oversimplifying? After all, how does such a system ensure quality and efficiency? Well, again, it is possible that rewards can come in the form of restored social status rather than zeros on a check. You will concede that there is a misperception that physicians are paid too much for what they provide. The same field of behavioral economics tells us that these judgments are not made in a vacuum. Perhaps we are setting up an erroneous comparison group. Do Fortune 500 CEOs get paid too much? I think so, yet, we are in no way ready to limit their looting practices with regulation. Yet those executives’ incomes would make any self-respecting doctor blush. As a corollary, are these executives providing a vital service to the society? We can certainly argue about this, but there is no argument whether docs do. So, how much is too much? You tell me. My only point is that if we set a reasonable salary for our physicians (and reasonable would be defined not by government and industry bureaucrats in isolation from the physician community, but arrived through vigorous and transparent debate) then these highly skilled individuals can go back to prioritizing their therapeutic relationships above all other incentives, thereby regaining their own sense of social self-worth and their status within the community.
You may say that I am naïve in thinking this. I do not think so, especially having understood better our predictably irrational ways. What can I say, even the name of the phenomenon, predictable irrationality, suggests that this scenario, so implausible to some, may be the very remedy that we all need to restore medicine's social contract.