Economic View: Public Policies, Made to Fit People

I HAVE written here before about the potential gains to government from involving social and behavioral scientists in designing public policies. My enthusiasm comes in part from my experiences as an academic adviser to the Behavioral Insights Team created in Britain by Prime Minister David Cameron.

Thus I was pleased to hear reports that the White House is building a similar initiative here in the United States. Maya Shankar, a cognitive scientist and senior policy adviser at the White House Office of Science and Technology Policy, is coordinating this cross-agency group, called the Social and Behavioral Science Team; it is part of a larger effort to use evidence and innovation to promote government performance and efficiency. I am among a number of academics who have shared ideas with the administration about how research findings in social and behavioral science can improve policy.

It makes sense for social scientists to become more involved in policy, because many of society’s most challenging problems are, in essence, behavioral. Using social scientists’ findings to create plausible interventions, then testing their efficacy with randomized controlled trials, can improve — and sometimes save — people’s lives, all while reducing the need for more government spending to fix problems later.

Here are three examples of social science issues that have attracted the team’s attention:

THE 30-MILLION-WORD GAP One of society’s thorniest problems is that children from poor families start school lagging badly behind their more affluent classmates in readiness. By the age of 3, children from affluent families have vocabularies that are roughly double those of children from poor families, according to research published in 1995.

The research found that one of many reasons that poor children often have difficulty learning to read is that they suffer at home from what might be called a “word deficiency.” The caregivers of these children simply don’t speak or read to them as often as those in better-off families. The study estimated that by age 3, a poor child would have heard 30 million fewer words than a child growing up in a family of higher socioeconomic status.

Until recently, this word gap has been hard to address. One promising new approach is being tested by Dr. Dana Suskind, a professor of surgery and pediatrics at the University of Chicago. Parents or caregivers who want to improve their children’s language skills can be coached to improve their interactions with them. (For example, interactive exchanges are better than soliloquies.)

New technologies, like the digital language processor developed by the LENA Research Foundation, whose work focuses on language problems in young children, can aid in this effort by letting parents receive feedback on the frequency and nature of their verbal interactions with their children. (Think of it as a box score for those interactions.) Providence, R.I., has won a $5 million grant from the Bloomberg Philanthropies for a Providence Talks program to use these kinds of techniques to improve school readiness for low-income children.

In this domain, the team’s role is multifaceted. There is no silver bullet for closing the word gap, but by encouraging more trials nationwide, providing evaluation expertise and distributing results, we can help give poor children their best chance to succeed.

DOMESTIC VIOLENCE The team will primarily lend support and expertise to federal agency initiatives. One example concerns the effort to reduce domestic violence, a problem for which there is no quick fix. But a good place to start is to ensure that each component of a victim’s support system works as well as it can. One such component is the National Domestic Violence Hotline, which victims can call for advice and support. Like other call-in centers, it can become busy and put callers on hold. Many victims hang up before they’ve had a chance to speak with a counselor.

In this case, the Administration for Children and Families is building an alliance of call centers to collaborate on experimental trials to see how best to keep callers on the line long enough to get assistance. Avoiding long periods of silence with callers, and offering an estimate of the waiting time, can help achieve that goal. So can composing the initial message in a way that maximizes the chances that a caller won’t hang up.

HEALTH COMPLIANCE One reason for high health care costs is that patients fail to follow their treatment regimen.

A good way to approach this problem is via a behavioral assessment, identifying obstacles to that compliance. As Sendhil Mullainathan, a Harvard economist, discussed in this space recently, one such obstacle is the co-payment, the patient’s share of a treatment’s cost. He sensibly suggests that for some highly effective treatments, there should be no co-payment at all. That’s a good place to start.

A thorough assessment could also uncover other factors that reduce patients’ adherence to best medical practices. If forgetting to take a medicine is the problem, a variety of interventions can help — from changing the medication’s design (a once-a-day dose is easier to remember than one taken three times a day) to using technology that reminds patients to take their pills.

Similarly, offering phone or text reminders of medical appointments can reduce no-shows and ensure that lab tests are done on time. Information technology makes these mental crutches easy to use, and is the focus of the team’s collaboration with the National Coordinator for Health Information Technology.

All of these examples show that the role of behavioral science in policy isn’t for the government to tell people how to think or act. It is to help them achieve their own goals. Parents want their children to excel, callers to a victims’ hot line want help, and sick people want to get well. Offering aids is like providing an alarm clock: it may help people get to an appointment on time, but no one is forcing them to use it.

Richard H. Thaler is a professor of economics and behavioral science at the Booth School of Business at the University of Chicago. He has informally advised the Obama administration.

Your Money: Fine Print and Red Tape in Long-Term Care Policies

But some family members are shouldering another type of burden: one that involves piles of paperwork and repeated phone calls, as they are forced to navigate a labyrinth of requirements to collect benefits that the insured spent many years paying.

“There is no possible way an elderly person who is ill and needs help can possibly do this work,” said Fiona Havlish, who coordinated her father’s home care in Pottstown, Pa., before he died last year, a week after his 90th birthday. “It took six to eight weeks to get the insurance into place, and this was working on it every single day. It was an incredible amount of work.”

Ms. Havlish, a former nurse who now works as a life coach in Boulder, Colo., said she first had to find a home care agency that was not only covered by the long-term care policy but one that she felt comfortable entrusting with her father’s care. Later, she had to follow up continually with the aides and doctors to make sure they were filing the proper paperwork so that they insurer would pay. “Three months after he was gone,” she added, “I was still fighting with them over paper.”

At least the bill for her father’s care was eventually paid. In other cases, families have had to fight to overturn denials, and have gone as far as hiring lawyers to file suit. Many Americans now in their 80s and 90s who are collecting benefits — or trying to — bought their policies decades ago when the policies were more restrictive than now. On top of that, many insurers have since left the business after mispricing the policies and failing to judge the economics of the industry, which has made collecting payments even more difficult.

“Everything is not rosy,” said Jesse Slome, director of the American Association for Long Term Care Insurance. “When insurers stop selling or exit the business, many of them hire these third-party administrators to adjudicate claims and that is where interpretations don’t seem to be as liberal.”

Insurance agents who have specialized in long-term care policies for a couple of decades, however, told me that most of the top-rated insurers pay claims without issue. And clearly, claims worth billions are paid each year: An estimated 264,000 people received long-term care benefits at the end of 2012, according to Mr. Slome, and $6.6 billion in benefits were paid that same year.

Still, “the process can be pretty daunting for people,” said Bonnie Burns, a policy specialist at California Health Advocates, an education and advocacy group.

If you need to file a claim on behalf of a loved one, it helps to know why claims are denied and where filers tend to get tripped up. Here’s what I gathered, from longtime brokers, consumer advocates and lawyers who do battle with insurers on these issues:

DEDUCTIBLES In the long-term care world, deductibles work a bit differently than typical insurance policies. The policies have waiting periods, or elimination periods, and they are typically measured in days: 30, 60, 90 or 100 days. So if your policy covers $150 a day for in-home care, and you have a 60-day waiting period, you will typically owe the first $9,000 — 60 times $150 a day — before the policy kicks in.

But the way the waiting periods are counted is critical, too. “If a person is getting home care a few days a week, and the company only counts those days of care toward the waiting period, the total time needed to satisfy the waiting period will be much longer than 60 days,” Ms. Burns said. “So it isn’t just the $9,000, but the total time that has to be satisfied.”

With certain older policies, meanwhile, the insured person must also spend three days in the hospital before the policy will pay any benefits. “Some of these older policies have requirements that most states don’t allow today,” Ms. Burns said. “But these requirements must still be met in these older policies.”

ELIGIBILITY To become eligible for benefits, patients must be expected to need “substantial assistance” for at least 90 days, either because they are suffering from a form of dementia, for instance, or because they can’t perform two basic daily activities from a list of six, including items like bathing, getting dressed and eating. (This applies to certain policies written after 1997.)

“What we are finding today is that when people are getting assessed, they fire on 8 or 10 cylinders on some days and they will trick people,” said Brian I. Gordon, president of MAGA, a long-term care insurance agency in Riverwoods, Ill. “They want to become Superman the day the assessor comes out. And then the insurer may deny the claims.”

Glenn R. Kantor, a lawyer in California whose firm focuses on insurance claims, said he represented a woman, blind from severe macular degeneration who was receiving benefits for home care. But when the representative from the insurer asked her if she could bathe by herself, the woman told the company she could as long as her aide led her into the shower and gave her soap and a washcloth. Shortly thereafter, the insurer cut off her payments.

Then, “they sent her to collections to get the money back,” Mr. Kantor said, because the caregiver was not within arm’s length but left the bathroom to go into the next room while the woman bathed. The insurance company settled, but the terms were confidential so Mr. Kantor could not divulge the insurer or the exact amount it paid.

Bound to Sea but Buried in Debt, Spain’s Fishermen Blame Bloc’s Policies

Since then, they have run into problems: declining fish stocks, tighter quotas on catches, rising operating costs and a sharp economic downturn that has slashed both fish prices and demand.

The impact has devastated much of Spain’s coastal economy. It has also generated intensifying criticism of European Union policies that, environmental groups and experts say, have increased fishing communities’ dependency on subsidies to make up for the decline in both revenues and fish populations, even as the bloc continues to pay generous subsidies to scrap older vessels to upgrade Europe’s fleet. The new boats are typically bigger and more powerful, adding pressure on declining fish populations.

Coastal regions, they warn, are in the grip of a vicious downward spiral, with steep economic and environmental costs that they are urging leaders to halt.

“Spain has been one of the worst examples of using public money to modernize and increase the capacity of the fleet,” said Saskia Richartz of Greenpeace in Brussels, the group’s European Union oceans policy director. “We have now reached a crisis point, with a generation of fishermen whose boats are owned by banks and who have no fish to catch.”

In coastal areas like Sanlúcar de Barrameda, a town in the south near Cádiz, as fishermen struggle to repay the mortgages on their vessels, many say they resent that bloc policies distorted their financial incentives and then left them high and dry once Spain’s economic crisis hit.

The European Union stopped directly financing boat purchases in 2005 to curtail the size of Europe’s fleet, but for many here the damage was already done. José Antonio Díaz León, the president of the fish market of Sanlúcar, home to about 100 fishing boats, estimated that “95 percent of the owners here have a mortgage on their boat, which many simply can no longer afford.”

Among Sanlúcar’s disillusioned is José Odero, who bought a new boat worth almost $650,000, with twice the tonnage of his previous vessel. Although the world financial crisis was already under way at the time, Mr. Odero said he had no difficulty securing a bank mortgage and had felt confident that the investment would translate into higher revenue. He declined to say whether he received a European Union subsidy.

The investment was “a massive mistake,” Mr. Odero said, as quota restrictions, falling fish prices and rising fuel costs left his income stagnant. This year Mr. Odero was forced to ask his bank to delay his mortgage payments of about $1,025 a month.

“I’ve been given a bit more time, but I’m slowly drowning in financial problems,” Mr. Odero added. “I would love to sell my boat now, but there’s nobody willing to pay decent money for it.”

His story is repeated in places like the northwestern city of Vigo, Spain’s biggest fishing port, where fishing helps sustain about 60,000 of its 300,000 residents, according to local officials.

Claudio Fernández Ibañez, chief executive of Hermanos Fernandez Ibañez, a fish brokerage house in Vigo, said many fishermen had no choice but to scale back or shut down. “Those who have not managed to amortize fully their boat purchase costs before the crisis are now really suffering, trying to sell unaffordable boats for which there is really no demand,” he said.

Given the economic crisis, he said, Spanish consumers are downgrading to cheaper and largely imported fish, with prices for products like swordfish dropping 40 percent this year. “The E.U. is putting all the focus on the environmental impact of fishing and ignoring completely our economic problems,” he said.