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.

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