Economic Incentives Affecting Patients’ Health-Related Behaviors

Throughout their lives, patients make numerous complex decisions relating to their health. They engage in healthy (or risky) behaviors associated with diet, exercise, car safety, and smoking; they choose occupations and places to live that can place them in harm’s way or expose them to deleterious environments. Medical students should have a conceptual understanding of how economic incentives shape healthy behaviors. Grossman (1972) provides an excellent model that can be used for this purpose. Grossman suggests that medical care can be viewed as one input into a “production function” that creates health. In this framework, health is a durable good in much the same way as education or a home. People make investments in their health, just as they invest in graduate-level education or new plumbing, for the purpose of realizing better outcomes in the future. The importance of this model lies in its predictive ability. The model explains why people (rationally) might have differing demands for health and, within a set of health care choices, might act on preferences that vary among individuals and/or among subpopulations. For example, a highly paid professional athlete may have more motivation to stay fit than an accountant. An understanding of this model would allow physicians to better predict patients’ behaviors and to appreciate the limits on what medical care can do.

Grossman’s model is an example of a broader set of “rational choice” models. Other rational choice or behavioral models may be more appropriate; what is important is that students understand the scientific underpinnings of the particular model being presented and not simply its application.

Costs, Cost-Effectiveness, and Physician Responses to Financial Incentives

Given the resource limitations noted above, it is not unethical to consider cost when providing patient care. In fact, the real cost of engaging in an activity is the benefit lost by not using the same resources for the most highly valued alternative. In the health care arena, cost-effectiveness is the formal study of the costs and benefits of a medical intervention to determine whether it is worth undertaking. Benefits are measured in terms of some standard clinical outcome, such as mortality rate, years of added life, or quality-adjusted life years. This is closely related to cost–benefit analysis, although in that case benefits are measured in monetary equivalents. Unfortunately, concepts such as cost-effectiveness are used in health care without an understanding of these formal methods, and misallocation of resources often results (Drummond et al., 1987). Eisenberg (1989b) provides a useful guide to the economic analysis of clinical practices. The goal is not to teach medical students to be analysts, but rather informed readers who can understand the usefulness and limitations of studies that use such terms as “cost-effective” in describing treatment options.

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