Friday, June 22, 2012
Prospect Theory and Healthcare Reform
For my alumni book group, I’m reading Thinking Fast and Slow
by Nobel Laureate Daniel Kahneman, widely recognized as one of the important
founders of what has come to be known as behavioral economics.
In Kahneman’s Prospect Theory, people weigh losses more
heavily than gains, so that they are to a greater extent affected
psychologically by the loss of a hundred dollars than by a gain of the same
amount.
Prospect Theory has come to take an important place in the
thinking of economists and it occurs to me that it also helps explain why
health care reform is so difficult.
Every reform has winners and losers and, as explained by
Prospect Theory, the losers feel the effects more strongly than the winners.
It is clear to me that the medical profession is the big
loser in health care reform. When my
career in health care began in the 1950’s, doctors were the dominant force in
everything medical. Through the AMA and
state and county medical societies, they controlled medical schools, medical
licensure, state and local health departments, and, for all practical purposes,
hospitals. Until Medicare, it was almost
impossible to enact a piece of legislation that organized medicine opposed.
That level of influence has been diminishing gradually for
some time and health care reform has brought it into steep decline. The role of doctors as arbiters of quality
has been taken over outcomes measurement, clinical protocols and other tools of
the quality movement. The growth of technology,
the increasing complexity of the payment system, and other factors have
strengthened the role of hospitals to the extent that they have largely
supplanted the medical profession as the dominant force in the provider side of
health care.
The profession has largely lost its will to fight back, but
society continues to hold doctors in high esteem and displays no desire to
acknowledge their diminishing role, or even to talk about it. There are various efforts under way to more
effectively integrate the components of medical care and to establish
accountability for outcomes, but none of them come right out and say that this
means that doctors will be part of a system that they no longer control.
It is an unusual application of Prospect Theory, but it
seems to be no less real.