Much like Stickk, HealthyWage.com is a website designed to effect positive health behaviors.  Unlike Stickk, the basic form of HealthyWage doesn’t rely on loss aversion.  Instead, it pays users (with money from corporate sponsors and advertising) when they achieve healthy behaviors.  It also provides support through social networking and educational materials. 

However, users can choose to take advantage of the benefits of loss aversion and “SuperSize” their reward amounts, putting some of their own money at risk.

To check out the website, click here.

We’ve discussed Stickk.com’s unique approach to battling procrastination before. The idea intrigued me enough that I entered into my own commitment bond with -– who else? -– my wife. Check out this ironclad contract:

I, Eric Ferguson, in the interest of not becoming a “Biggest Loser” candidate and maybe even getting totally buff and stuff, do hereby resolve to achieve the following goals in 2010:

• Run at least 15 miles each week
• Complete at least four weightlifting workouts each week
• Consume 2,500 or fewer calories six days a week, with the seventh day constituting a “free day”

To track my progress, I will keep a journal and obtain verification from an impartial third party for each workout. If I fail to meet any of these goals in a given week, I shall pay $20 to Jill Ferguson, who likely will use this money to buy something really lame, such as new washcloths or a Tori Amos album.

Signed,
Eric Ferguson

I’ll keep you apprised of my progress, but I really must be going. I’ve got some miles to run.

My wife has enough Tori Amos records already.

From last week’s New Yorker “News Desk” blog comes an anecdote about Peter Orszag, budget director for the Obama adminstration, who is a strong believer in behavioral economics.  Turns out, Orszag uses principles of behavioral economics to keep himself on track in his personal life.

We were sitting in his office one day and he brought me over to his PC and typed in the URL for stickK, a site that helps users achieve their life goals by creating strong incentives. Orszag said he used the site when he ran marathons. StickK has different tools, known as “commitment devices,” to incentivize its users, and Orszag uses one that makes a credit-card donation to an “anti-charity” — some cause that he finds loathsome — if he doesn’t reach his goal. He even recruited a friend as a “verifier” to make sure he couldn’t cheat the system.

StickK was co-founded by Ian Ayres, a lawyer and professor at the Yale School of Management, as well as a member of the Center’s advisory board.  For more about the site, visit stickK.  And for the full story on Orszag, click here.

As we noted earlier this week, a finance column in Friday’s New York Times applies common nutrition advice to our financial lives.  These tips play on the same principles of behavioral economics that we’re studying at The Center to improve the use of the pharmacy benefit.  There are three key principles that guide our research:

Hyperbolic discounting, which we’ve discussed many times in this blog, demonstrates that future events feel about half as important as events today.  So in instances where work today garners downstream benefits — such as weight loss — people tend to procrastinate.  Or, as Ron Leiber writes in the Times’ column, “Hassle, in effect, overcomes habit.”

Loss aversion means that people work harder to avoid losses than to obtain gains.  This is one of the keys behind commitment bonds, voluntary contracts people make in which the payouts are based on targets they set in advance.  So, for example, participants might agree to pay $50 a week if they don’t meet their predetermined workout goals.

Social comparison (or social norms) captures the importance people place on knowing how they are doing relative to others.  A common example of this is spending money to “keep up with the Joneses.”

These principles have significant implications for our lives.  Whether in diet, finances, healthcare, or other domains, it appears our brains use the same heuristics to analyze situations and shape our actions.

Tra dire al fare, c’e in mezzo il mare. 

Between saying and doing lies the sea.  – Italian Proverb

I’ll gladly pay you Tuesday for a hamburger today.  – Wimpy

Procrastination is sort of the cognitive equivalent of a perpetual motion machine.   It happens when a desirable behavior is consistently more attractive in the future than it is in the present.  As a result, we truly have every intent to engage in the activity… later.  This cycling – embracing a behavior in the future but setting it aside today – is procrastination.

As we’ve studied procrastination, we’re learning a lot about the way the brain works.  And this understanding is helping us think more powerfully about how to motivate behavior change.

In the last entry, we looked at a bit of the neuroscience of procrastination.  In a nutshell, the delta system of the brain is sensitive to the benefits and costs of a behavior we’re contemplating regardless of when they occur in time.  In contrast, the beta system cares only about the present.  In other words, the delta system cares just as much about your future self as your present self, but beta only cares about you right now.  So when it comes to exercise (or losing weight or getting the oil changed or writing a blog entry), delta calmly weighs the advantages and disadvantages, but beta sees only the downside.  But when it comes to planning to do those things, everything is in the future, so beta isn’t interested.

There are many ways to use this framework to focus attention on potential solutions in the pharmacy benefit.  Although we’re not ready to share all of our ideas just yet, there are a couple pretty potent approaches that might gain traction in healthcare and wellness.

Defaults as Psychological Judo

The first is to change the default behavior.  This is a very simple but powerful idea.  David Laibson (a member of the Center’s advisory board) and his colleagues have thoroughly studied the application of defaults in the setting of 401(k) participation, and the results are remarkable.  With the standard approach, 401(k) participation rates run in the 30% to 40% range.  Employers can goose participation by raising match rates, but those incentives are surprisingly weak.

It turns out that modest participation isn’t because employees don’t want to participate.  They understand that that should be saving more, that they won’t have a pension, and that by participating they’re getting free money (when the employer offers a match).  Failure to participate happens (believe it or not) because enrolling requires effort, even though that effort is small relative to the benefits.  People simply put off enrolling – they procrastinate.

Laibson and crew cracked this problem by changing the default.  Instead of defaulting employees out of 401(k) participation, they told employers to default them in.  This psychological judo (kudos to Express Scripts’ Chief Brand Officer Larry Zarin for the term) puts procrastination on the side of motivating desirable behavior.  Now the effort – even though it’s minor – is required to stop participating.  As a result, participation rates more than double, and employee satisfaction remains very high.

Commitment Bonds

Changing the default works when the burdens of the desired behavior – e.g., enrolling employees into a 401(k) plan – can be borne by the employer.  But in other situations, this is (unfortunately) not possible.  Getting in shape, for example, requires the person who receives the benefit (better health) to incur the cost (exercising).  In these situations, we need a different approach.

If we can’t reduce the cost of participating in a behavior in which the long-term benefits outweigh the costs (e.g., exercise), what can we do?  One option is to increase the costs of not participating in that behavior.  As we can guess from hyperbolic discounting, this approach will be most effective if the costs of non-participation are imposed in the present rather than downstream.

This approach sounds a bit draconian (e.g., “get on that treadmill or give me $50”), and can clearly lead to employee disruption.  But there’s a tricky way we can use hyperbolic discounting to advantage the preferred behavior and eliminate disruption.

One potential solution is something called a commitment bond.   Commitment bonds are voluntary contracts people make in which the payouts are based on targets they set in advance.  You could, for example, create a commitment bond in which you pay $100 (or some different but attention-getting amount) if you don’t achieve your weight-loss goal each week. 

Commitment bonds combine insights about the underpinnings of procrastination with loss aversion, another powerful psychological principle.  They allow us moments of lucidity (“I should lose weight”) by contemplating a desirable behavior in the future.  Because the behavior is in the future, the beta system is silent and delta takes over.  But here’s where it gets interesting.  Delta can now contemplate the creation of a penalty – in the future – should we not adhere to the behavior we’re seeking (e.g., losing weight).  Because the penalty (lose $100 if you miss your weight loss goal) is in the future, beta still remains quiet.

This “tie me to the mast” approach allows each of us to voluntarily alter the incentive landscape we will face in the future and to do so without the interference of the beta system.  As a result, we can tip the scales in favor of pursuing the behaviors that we want by raising the cost of noncompliance such that we’re better off – even in the here and now, with beta screaming at full volume – to engage in the behavior we’d planned earlier.

There’s a lot we still need to learn about commitment bonds: how large the penalty needs to be, whether rewards for compliance improve the success rates, the role of an independent observer to determine whether goals were achieved, the impact of social networks and expectations, and many other questions.  But there’s little doubt about the scientific plausibility of the approach.

To learn more about David Laibson’s work on 401(k) plans, check out the recent blurb in Wired.  And to give commitment bonds a whirl, visit stickk.com, a website co-founded by Ian Ayres.