Insights August 2012

Behavioural Economics Explains Why Ontario Doctors Are So Livid

Steven Lewis


Ontario is in a fiscal mess and is looking to its physicians to help out. The government wants to freeze the total amount of money paid to physicians, which means rolling back the fees on a number of diagnostic and surgical procedures. Some physicians’ incomes will drop. Shockingly, they are not amused.

It is hard to muster much sympathy for a profession that has prospered so spectacularly over the last dozen or so years. Little rings so false as a medical union’s hyperbole. No practice will be financially unviable because of the measures unless it was financially unviable before. Doctors were in the top 1% of income earners before the freeze and will remain so afterward. They will not be shutting their doors and leaving for Creston, BC or Shellbrook, SK. (This isn’t an I-dare-you; it would be good if they did.)

The OMA ought to know that it’s a bad time to bluff with the cards they’re holding. The doctor surplus is already upon us in specialties like cardiac surgery and orthopedics. With Lean, advanced access scheduling and multidisciplinary clinics, family doctors are able to look after many more patients than before. In the US office visits per full-time equivalent physician declined a staggering 8% in a year. Recently a consortium of American specialty societies published a list of 45 widely overused tests and procedures. Suddenly that hoary old assumption of a limitless desire for health care seems a little shaky.

Regardless, the doctors are in high dudgeon, and it’s important to understand why. That understanding comes from the literature that marries behavioural psychology to economics. You could argue that the doctors should just shut up and be grateful for the largesse that North America uniquely continues to grant them, suck it up, and take their modest lumps. But that flies in the face of how people behave, and it has nothing to do with their objective circumstances.

Reality can be expressed as a simple syllogism. Humans are more complicated than neoclassical economists have assumed. Doctors are humans. Therefore doctors are more complicated than collective agreements have assumed.

Let me explain – or better, read Nobel laureate Daniel Kahneman’s remarkable book, Thinking, Fast and Slow. Kahneman is a psychologist who won his Nobel in economics. One of his and others’ important findings is that people react more strongly to losses than to gains of identical size. The prospect of a $10 cut in my allowance for not mowing the lawn is a stronger motivation than the prospect of a $10 increase for mowing the lawn. We are more loss-averse than we are gain-seeking. Adding to what we have is less valuable than not losing what we have.

If the government said to physicians, you’re getting 0.5% a year for the next 4 years and not a penny more, they would grumble and whine and plead hardship, because that’s what they do. But they wouldn’t march in the streets or shamelessly ask their patients to sign petitions on their behalf. But tell them they’re getting -0.5% a year and all hell will break loose. In either case they will soon adjust to the new reality, and it won’t make any tangible difference to their happiness. Humans are enormously adaptable. Conrad Black did pretty well in prison.

But the money is only part of the loss physicians are feeling. It must look on some days that their whole identity is falling apart. Every Commonwealth Fund international survey shows how badly Canada and the US do on comparisons of access, quality, and efficiency. Study after study hammers the system over unjustified variation and failure to meet evidence-based standards of care. Other professions want to claim doctors’ hitherto sacred turf. In response to their own complaints about shortages, governments added huge numbers of new seats to medical schools. That has made the volume-drive fee-for-service system even more unaffordable, just as the fiscal worm turned. Getting what they asked for accelerated the great unraveling.

Very few people want to retool in middle age. It’s never fun to discover that what you have done, how you have done it, and the outcomes you’ve achieved cannot bear the weight of objective analysis. The truth often hurts, like when journeyman boxer Bert Cooper beat the stuffing out of Canada’s carefully managed Great White Hope Willie De Wit on Valentine’s Day of 1987 in Regina.[1]

If only governments had acted on these insights long ago. All of these pay-for-performance schemes, rural area premiums, bidding wars, and bonuses for following practice guidelines are based on a flawed understanding of human motivation. First, beyond about $75,000 a year it’s not really about the money, and where it is, the effect wears off, like a short-acting drug. Second, such inducements are reductionist in a highly disrespectful sense: they assume that all doctors care about in the end is money. Third, they are carrots when it is clear that sticks work better. A fine is stronger medicine than a bonus, especially in the rarefied atmosphere of physicians’ earnings.

What behavioural economics tells us is that the typical collective agreement between doctors and governments stands in the way of the improvements and behaviour changes that both parties ostensibly want. Both sides ignore the evidence to their own detriment. Medical unions equate money with well-being as delusionally as governments do. Governments pitiably think they can buy cultural change and quality improvement by increasing pay, and unions are only too happy to take their money. Regardless of how much money changes hands, there is only peace, but not happiness.

When you read accounts of high-performing health systems, the one thing that never comes up is how much people are paid. To my knowledge there is not a single story of transformation that attributes any of its success to increased pay.[2] The greatest insight of behavioural economics is that economics explains far less about human aspirations and motivations than traditionally assumed. Macroeconomics may emerge intact, but it looks like microeconomics is becoming the handmaiden of psychology.

If neoclassical economists want to know how it’s going to feel when the intellectual revolution is complete, they should talk to their doctors. The choice is simple: go down with the old order, or help create the new one based on what is known and cannot harmlessly be ignored.

[1] Don’t cry for Willie. He sensibly gave up boxing shortly after the Cooper beating, and became a lawyer. Now that’s changing your practice after a bad outcome.

[2] Sometimes reform includes more money, notably the large increases for British GPs. But no expert on the subject has stated that it was the pay that thwarted improvement or the pay that made it possible.

About the Author(s)

Steven Lewis is president of Access Consulting Ltd., in Saskatoon, Saskatchewan, and is an adjunct professor of health policy at the University of Calgary and Simon Fraser University.


Karen Barber wrote:

Posted 2012/05/09 at 11:12 AM EDT

Great stuff, Steven. Getting back to the basics that make humans tick - respect, intrinsic motivation, seeking to understand behavior and the policy/systems that impact that behavior - could this be the foundation for transformation?


Monique Moreau wrote:

Posted 2016/07/19 at 11:09 AM EDT

You seem to have forgotten the 1990's in Ontario when many physicians did leave, or not even establish here, because of Rae economics, with clawbacks, individual physician caps, reduced medical school slots, and so on. It took 15 years to recover.
The excess of current physician people power flows from the cuts to availability of OR time and hospital beds. The outcome of that is people waiting ever longer for their procedures and treatment. But, yes, by all means, pile it on to the backs of physicians; we are used to being the scapegoat for the poor management of the health care dysfunctional system in Ontario.
Now let's announce to the nurses, teachers, police, firefighters, and so on that they are earning too much, more than society can afford, and they need to have their salaries rolled back 7-30%. Let's see how that plays out.


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