I have written a number of posts lamenting the fact that behavioral economics isn’t used much in public policy. Moreover, most of work so far is limited to field of finance.
I am delivering a talk on behavioral economics and health care later today at the National Academy of Social Insurance. Today’s event is being held in honor of Peter Diamond’s winning the Robert Ball awardfrom NASI. Peter is not only brilliant but also a wonderful friend and colleague, and I am thrilled that he has won this award.
Peter has been interested in behavioral economics, which combines insights from psychology with those from economics, for almost 40 years. The talk emphasizes my belief that effective policy design, including policies affecting health care, must reflect more of the insights from behavioral economics — that is, we need a bit more “Psych 101″ in addition to “Econ 101″ in the design of public policies.
It is an excellent speech where Orszag discusses how defaults etc can be used to reduce overall costs while maintaining the quality of healthcare services. The speech also discusses how healthcare services are faring in US. It is quite an important industry as the speech tells us and can’t be ignored:
Put simply, health care costs are the single most important factor influencing the federal government’s budget trajectory—and they already exert a major influence, larger than most of us perhaps realize, on our paychecks. According to the Congressional Budget Office’s (CBO’s) projections, without any changes in federal law, total spending on health care will rise from being 16 percent of the economy in 2007 to being 25 percent in 2025 and almost 50 percent in 2082, and net federal spending on Medicare and Medicaid will rise from being 4.1 percent of the economy to being almost 20 percent over the same period.
The primary driver of future costs will be the increasing cost for treating each beneficiary, rather than the increased number of older beneficiaries.
This is good stuff.