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The evolution of health economics

01 st Nov The evolution of health economics

TRAC on Health Economcics

The evolution of health economics


Why do 70% of smokers in the US say they want to quit, but only 3% do so each year? When the cost of trying to quit is both large and immediate compared to benefits that are too distant to act as a motivator, understanding the economics that drive healthier behavioural decisions is the potential key to effective, future healthcare. Take the example of a recent smoking caseation programme that adopted financial incentives to change the behaviour of the smoker. In adopting a financial deposit and reward approach, the programme yielded results that were triple the efficiency of competitor schemes.

In everyday life, we’ve widely seen behavioural economics at work as the approach is adopted by health and life insurance companies. In offering discounted gym membership, fitness clothing and equipment with their insurance packages, there are immediate financial incentives driving a person’s behaviour to be healthier. Whilst the benefits are good for the individual and ultimately for the healthcare system; overall the insurance company will likely pay out less in treating the symptoms of diseases related to issues such as obesity.

Dr Kevin Volpp, an authority in behavioural health economics, caveats that effective behavioural health incentives are not solely based on financial rewards but also need to be tailored in their design. For instance, a company aiming to see reductions in staff sick days might look to reward employees based on their improving body mass index rates with a salary top up. But where that could likely go unnoticed in the taxed, monthly pay cheque, perhaps a quarterly bonus could be a better way for the individual to notice the reward enough for it to act as a continued motivator. For a company like ours, the tailored solution sees healthy team activities rewarded by tangible perks. No one size fits all.

On a macro-scale, Volpp calls for a change in the: “…paradigm of health care delivery from a reactive visit-based system to one that is much more proactive in managing population health.” The argument he presents hopes for a shift of resources from innovation that is focused on developing new treatments towards innovations that are focused on issues such as improving health behaviour and influencing social determinants of health.

It’s a modern call-to-action that Australia were revolutionary in implementing. Since the 1980’s (and arguably earlier) health economics became part of the national healthcare psyche with the adoption of the national drug subsidy programme, the Pharmaceutical Benefits Scheme. Since then, health economic evaluation has evolved from covering pharmaceutical products to modern, novel health technologies and even healthcare systems. Unlike the UK’s dedicated agency (NICE), Australia has three comparative advisory committees, each recommending health treatments, technologies and services suitable for government financial subsidies.

When it comes to our expectations for the future of health economics, the revolution has arrived. So, from smoking cessation schemes, to insurance package perks and even health evaluation of national services – it’s not difficult to see that the evolution of behavioural health economics will have a prominent place on the horizon.

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