Behavioral Economics and Healthcare Decision-Making

People fail to quit smoking despite their knowledge of the health risks associated. Others fail to take medications that help prevent debilitating disease. The benefits of exercise and the costs of fried foods are well known, yet many neglect healthy action. The amount of control we have over our health and wellness is important, but also has potentially drastic impacts. The vast majority of the population lacks the calculative abilities to consistently understand what measures must be taken to maximize their wellbeing. And for those who do, they often make plans that are not followed through with the necessary actions. Behavioral economist Richard Thaler and legal scholar Cass Sunstein coined the term “libertarian paternalism,” a concept that, when implemented, can help influence decisions to make choosers better off with the freedom to opt-out of specified arrangements [1]. In order to fully understand this concept and its implications, one must understand the framework of two different economic models.

The world of standard economics frames people as individuals who make choices to maximize their utility, using the available information that they have processed appropriately. Preferences are considered time-consistent and independent of how information and decisions are set out. However, it is easy to see how some aspects of this model do not always hold. The field of behavioral economics works to explain such discrepancies by coupling the psychology of decision-making with economic theories. The idea is to try and explain and predict irrational behavior. Individuals demonstrate very evident irrational behavior in healthcare- and nutrition-related decisions.

Your best friend, for example, may know they want to work out and eat healthily to lose weight. However, junk food tastes great and exercise takes a lot of effort, so healthy decisions get pushed to “tomorrow” day after day. Long-term benefits are simply less tangible in the present moment than immediate gratification. People have an innate tendency to hold the present in a much higher regard than the future. They are said to possess “present bias”. When immediate gratification is an option, we are far more likely to choose it. “Loss aversion” is the behavioral economic term for the tendency to be more sensitive to loss than the possibility of gain. These concepts help explain why it is so difficult for many to adopt healthy lifestyles. After all, the future is filled with uncertainties, whereas action in the present is far more solidified.

Individuals possess a wide variety of innate cognitive biases. One such bias is the status quo bias, under which people have a preference for the current state, which is used as a baseline to serve as a reference point. Any deviations from this point are perceived as a loss. Many experiments and studies have demonstrated that this bias exists in health-related situations. For example, people have demonstrated preferences for their current medications, even when better alternatives are offered. A study conducted by RTI Health Solutions surveyed over 500 asthma patients using combination maintenance therapy about different aspects of their medications, such as cost and speed with which they worked [2]. They tested for bias by introducing medicinal alternatives that had better performance statistics. More than half the time, 55%, subjects chose their current medication. The results of this study, as well as many others in the field, indicate that status quo bias may play a strong role in stated-choice situations, particularly with daily maintenance medications. This innate tendency for individuals to make decisions that make them worse-off should be of concern in the realms of public health.

A key concern stems from how people are lead to stick with their current state rather than initiate and complete a search for a more suitable alternative. A similar bias that has strong applications in the healthcare field is default bias. For example, one must opt-in to become an organ donor in the United States. The choice is automatically made for you that you will not be an organ donor, unless you indicate otherwise. But would outcomes differ if it were an opt-out policy – if the default was that you are an organ donor, unless you indicate otherwise? The standard economic view argues that there would be no difference in outcomes, but research has determined otherwise.

A study conducted by the Center for Decision Sciences at Columbia University investigated the effect of defaults on organ donation agreement rates [3]. They asked participants whether they would be donors, each participant receiving one of three possible scenarios. For the opt-in condition, they were told that they had just moved to a new state where the default was to not be a donor. For the opt-out condition, the given situation was identical except that the default was to be a donor. The third condition was neutral, since participants had to make a selection with no prior default. The results demonstrated that the default situation played a strong role. When the default was not to donate (opt-in), only 42% consented to being donors, whereas when donating was the default (opt-out) 82% agreed to be donors [3]. For the neutral category, 79% consented and this figure was not statistically different from the opt-out result [3]. This result suggests that most Americans actually favor organ donation, but that explicit consent, or opt-in, policies impose costs and deter desired behavior. It suggests that changes to defaults could increase donations in the United States, where there is a shortage of organs year after year. However, as with any policy that takes advantage of behavioral tendencies, there will always be opposing views, which cause controversy.

The insights from behavioral economics provide strong arguments and explanations for human behavior. It is clear that policies can be put in place to help steer people in the “right” direction in terms of their health. However, there are opponents to this practice who fear that this “soft paternalism” rests on a slippery slope that can devolve into “hard paternalism”, where policies are “heavy-handed” or coercive. Others argue that we innately possess cognitive biases that should be addressed in the public policy realm, to improve public health and increase the welfare of the population. The field of behavioral economics is relatively new and young, but developing at a rapid pace. Research will continue to critically observe human actions and reactions in order to understand our behaviors, and potential policies will be investigated to promote healthy practices.


[1] Sunstein, Cass R. and Richard H. Thaler, “Libertarian Paternalism Is Not An Oxymoron,” University of Chicago Law Review 70, no. 4 (2003): 1159 – 1202.

[2] Mohamed, Ateesha F., A. Brett Hauber, F. Reed Johnson, D. Meddis, and S. Wagner, “Status-Quo Bias in Stated-Choice Studies: Is It Real?”, Value in Health 11, no. 6 (2008): A567-A568.

[3] Johnson, Eric J. and Daniel G. Goldstein, “Do Defaults Save Lives?” Science 302 (2003): pp. 1338-1339.

Image References:

[1] Are You and Your Brand Plan Suffering from Status-Quo Bias? August 31, 2012. Dan Reinhardt. Available from: URL:

[2] Status quo bias, July 12, 2012. Leighton Winkler. Available from: URL:


Dahlia Coopersmith is a senior at Cornell University majoring in Policy Analysis and Management and minoring in Business. Follow The Triple Helix Online on Twitter and join us on Facebook.