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Using Insights from Behavioral Economics for the Design of Financial Incentives Improving Medication Persistence - An Experimental Analysis
We develop a financial incentive scheme based on the concept of loss aversion to improve persistence behavior, a primary target of efforts to improve health outcomes for patients with chronic disease. According to the conceptual framework of medical persistence by Djawadi et al. (2014) a combination of loss aversion and mental accounting operations dynamically influences patients’ cost-benefit assessments. In the beginning of the treatment patients take the medicine without experiencing any improvements. Once health state improvements evolve patients comply with medication to compensate the losses of their previous health investments, but gradually discontinue with therapy, as soon as these losses are compensated.
Methods
We design a conventional economic laboratory experiment which simulates the course of events inherent in medical treatments from an economic perspective. Our experiment consists of two stages. The working stage mimics the beginning of the treatment and induces feelings of losses as subjects have to work on a task but only receive a fraction of their proper income. Entering the investment stage with these losses subjects decide over 12 periods between lottery A and lottery B. These lotteries represent the economic consequences of discontinuing and continuing with therapy. Lottery A with a higher risk of losing money can be chosen without any prior investments whereas for playing Lottery B with higher winning chances subjects have to invest some of their monetary endowment. Once a lottery is lost subjects drop out of the experiment and are not allowed to make any more decisions. We incorporate loss aversion and the timing in our incentive scheme in the following way: as soon as subjects have compensated the losses from the working stage they receive an up-front bonus which is added to their balance account. Subjects are only allowed to keep this bonus if they do not dropout of the experiment before the last period.
Results
Our persistence measure is based on the lottery choices A and B. We define the persistence rate as the ratio of lottery B over lottery A choices. We find that persistence rates in the incentive treatment and the baseline sample of Djawadi et al. (2014) are almost equally high in early periods, but from period 7 on where subjects compensated their losses, significantly higher persistence rates are observed in the incentive treatment (Log Rank χ² =34.69 ; p<0.0001). We further compare this behavioral pattern with an additional control treatment which does not provide any losses in the working stage and thus serves as an upper bound for high persistence rates. We find that persistence rates in the incentive treatment are significantly higher than in the control treatment (Log Rank χ² = 28.91 ; p<0.0001), indicating that the bonus not only mitigated the steady decline of persistence behavior but rather encouraged subjects to continue steadily with lottery B until the end of the experiment.