The Psychology of Health Reform

James Suroweicki takes an interesting look at the politics of health reform through the lens of the literature on loss aversion from psychology and behavioral economics. The lesson: People fear change. His advice:

Still, just because you can’t change human nature doesn’t mean you can’t change health care. The key may be to work with, rather than against, people’s desire for security. That’s surely one reason that Obama has consistently promised people that if they like the health insurance they currently have they can keep it

. This promise will make whatever reform we get more inefficient and less comprehensive, but it also assuages people’s anxieties. It might even be possible to use the endowment effect and the status-quo bias in the argument for change. After all, although people tend to feel that they own their health insurance, their entitlement is distinctly tenuous. Because it’s hard for individuals to get affordable health insurance, and most people are insured through work, keeping your insurance means keeping your job. But in today’s economy there’s obviously no guarantee that you can do that. On top of that, even if you have insurance there’s a small but meaningful chance that when you actually get sick you’ll find out that your insurance doesn’t cover what you thought it did (in the case of what’s called “rescission”). In other words, the endowment that insured people want to hold on to is much shakier than it appears. Changing the system so that individuals can get affordable health care, while banning bad behavior on the part of insurance companies, will actually make it more likely, not less, that people will get to preserve their current level of coverage. The message, in other words, should be: if we want to protect the status quo, we need to reform it.

This seems sensible. However, two problems remain.

One is that along the same lines as the research Surowiecki is talking about, people find the experience of contemplating potential future loss to be intensely unpleasant. Insofar as people are already walking around filled with anxiety about loss of employer-provided coverage or rescission, then this kind of message will appeal to them. But if you run around trying to tell people they don’t have things as good as they think you do, will they embrace your policies or just decide you’re an unpleasant jerk? Nobody likes the bearer of bad news.


The other is that in politics you not only need a message but also messengers. Not just a plan for change, a constituency for it. And the main constituency for health reform consists of people who don’t think the present system is fundamentally sound. That’s a big part of the reason the public plan element of Obama’s proposals has become such an emotional touchstone for the left. The public plan is a fairly modest part of a fairly modest package of reforms, but it’s the slice of the package that holds out the prospect of eventual transformation of the system into something quite different and less driven by corporate profits.