Need

As research surrounding the rise in obesity, the prevalence of cancer and other rises in mortality continues, the debate over who should pay for the accompanying cost of healthcare is more heated than ever. Not unlike the tax code, the details of healthcare reform find themselves buried in thousands of pages of legal documents no matter which side of the political aisle is proposing a change. As a result, patients and consumers of healthcare in general find themselves at the mercy of lawmakers when it comes to making financially prudent decisions regarding their health. In addition, they must rely on their own previous knowledge and understanding of healthcare related terms, or have the fortitude to devote the energy (intrinsic cost) to learning enough about the products and services available to utilize their insurance resources optimally. Regardless of which government or employer sponsored health insurance program consumers are using to subsidize the cost of healthcare, it is paramount that they learn the basic functions and processes required to maximize the benefit they receive from their insurance provider. It is toward this maximization of benefits (or utility) that we wish to focus our attention in this upcoming Experiment Station cycle.

As consumers increase health management decisions, so too do the financial decisions increase related to health care. Consumers have been facing a multitude of financial pressures and one of these pressures clearly relates to the 2008 global financial crisis. Financial information is complicated and the majority of consumers feel that they lack the adequate knowledge and skills for obtaining and processing the information. In addition, consumers do not realize the influence that psychological factors have on their financial decisions. All of these factors complicate consumer financial decision-making across the lifespan. The consumer-driven approach of decision-making assumes that the simple provision of information will be sufficient to affect consumer choice, the process of using data to inform choice is actually quite complex (Hibbard & Peters, 2003). 

Studies have been conducted on what information consumers would like related to health insurance plans (Edgman-Levitan & Cleary; Paez et al., 2014) and health literacy (Kutner, Greenberg, Jin, & Paulson, 2006). However, there has been little research conducted regarding consumers decision-making related to health finance. Getzen (2000) studied health care expenditures on the individual (micro) and national (macro) levels. He concluded that the amount spent on health care is determined by the amount available to spend rather than the amount of disease, but it has not always been incorporated in discussion of health policy. 

Figure 1. Multilevel model of determinants of health expenditures. Without insurance (left) both income and health status affect expenditures at the micro level. At the macro level, income effects are still strong, but variation due to differences in health status is no longer visible. The short arrows indicate that income also affects health status directly at both the micro and macro levels. With insurance (right), the pooling of funds removes the income constraints at the micro level, and tends to strengthen the correlation of individual health status with expenditures. At the macro level, income effects still dominate (Getzen, 2000). 

As more attention is paid to healthcare, one important aspect of discussion has been the link between health care choices from preventive care behavior, coverage for various procedures and treatments, and the financial implications on both consumers and the public. The impact of financial capability and health care decisions is bi-directional. In other words, as one makes choices on health care, they may endure financial hardships; this creates a financial toxicity in the system where the stress of the finances can hinder recovery (deSouza & Conti, 2017). 

This project will assess barriers and motivators that influence the decision-making process on the micro level (consumers) through a health and healthcare lense. Unlike its predecessor, this project will examine the consumption patterns and decision-making practices of families when the observed services are not necessarily consumed as a matter of choice. Project investigators will continue to examine the effect of economic, psychological, and sociological factors on healthcare spending at the household or family unit level of analysis. The focus of this new project remains centered on information management and financial decision making, as was the previous project. However, due to an increase in the national discussion surrounding the cost of healthcare for both consumers and the public, this proposal recognizes a need for families to be better informed of their options regarding the cost and accessibility of a critical economic good when that good is necessary to sustain life and has a significant and immediate impact on the family. 

Importance of the Work and Consequences if not Done

Health care has become increasingly expensive for the Americans, with a growing share of health costs shifted to consumers. According to a report by the Kaiser Family Foundation, consumers paid an average of $6,435 premiums for single coverage and $18,142 for family coverage in 2016, which were up by 58% since 2006 and 20% since 2011 (Kaiser Family Foundation, 2016a). In addition, 83 percent of consumers had to pay deductibles, which cost $1,478 on average for single coverage and was up 49% since 2011 (Kaiser Family Foundation, 2016b). The deductibles are generally higher for consumers covered by plans sponsored by small employers (an average of $2,069) than those sponsored by large businesses (an average of $1,238) (Kaiser Family Foundation, 2016b). The rising insurance premiums and the increasing use of deductibles and other cost-sharing requirements post financial threats to low-income households, especially those uncovered by public health plans such as Medicare and Medicaid. For instance, compared to those covered by Medicaid, low-income household covered by private insurance plans spend ten times as much on healthcare, and devote a greater portion of their budgets to health care expenses (Majerol, Tolbert & Damico, 2016).

Consumers often need to make healthcare decisions in consideration of their financial resources. For instance, to control health insurance premiums, a growing number of families are switching to high-deductible plans compatible with Health Savings Accounts (HSAs) (Kaiser Family Foundation, 2016a). At the same time, those with high-deductible health plans tend to limit their non-preventive outpatient office visits, prescription drug fills, and various preventive services (Fronstin & Roebuck, 2016). In particular, low-income households who have high-deductible plans are more likely than their high-income counterparts to reduce their outpatient office visits and influenza vaccinations. However, such decisions may result in unexpected losses in financial and health capital. The same report shows that lower-income households who switched to high-deductible plans turn out to have more emergency room visits and in-hospital admissions than those who have regular health insurance plans (Fronstin & Roebuck, 2016). Meanwhile, those with high-deductible plans do not seem to be able to take advantage of the tax-exempt investment opportunities in their HSAs. According to an EBRI report, they tend to use the HSAs as checking accounts designated for health expenses rather than investment accounts. In 2016, only four percent HSA-eligible consumers had investments other than cash (Fronstin, 2017).

The uncertainty of health care policies also elevated the health-related financial threats to households, especially those with family members employed by small businesses. Insurance coverage is closely associated with health outcomes. Those who are uninsured are more likely to experience declines in health and function, preventable health problems, severe disease at the time of diagnosis, and premature mortality (Hoffman, 2008), which in turn have financial consequences. Kim, Yoon, and Zurlo (2012) show that negative health events increase unsecured household debt, and about 20% of the increased debt could be attributable to out-of-pocket expenses. 

There is a pressing need to understand how American households make health decisions in relation to financial decisions and how the health of household members affects household finances and vice versa. There is a tradeoff between the human capital of health and financial capital when a household manages its resources. In a household economics framework, health is produced with inputs of market goods and services, and it also determines the amount of time available for market and nonmarket production (Anderson & Grossman, 2009). Our innovation is to apply the behavioral economics theories to the context of health and finance. This study will examine how psychological factors like self-control, mental accounting, and framing influence health decisions and health behaviors, which are interlinked with financial behaviors and financial outcomes. This research is well suited for a broader land-grant community educational and research priority. Building upon what we have learned about financial decision-making and information management across the lifespan, this new research fills an important gap in understanding family resource management of health and finance. 

The renewal of this project is also important for its potential contribution to the field of family and consumer economics. The research is informed by the latest advancements in behavioral economic theories and is expected to improve the overall well-being of American households. Our previous research over the past two decades as well as the existing literature clearly shows that psychological factors play a powerful role in influencing consumer financial decisions. For instance, consumers tend to make decisions using heuristics, thereby using the least amount of mental energy (Kahneman, 2011). Consumers’ decision-making process is influenced by psychological principles such as self-control, mental accounting, and framing (Shefrin and Thaler, 1988). The findings of this research project are expected to inform stakeholders of the motivators and barriers to sound family resource management for health and finance. Behavioral interventions could be formulated to improve the efficiency of households’ health and finance management and help consumers improve their health outcomes as well as their financial well-being. 

Technical Feasibility

One of the benefits of conducting research as a multi-state team is the ability to leverage the resources, skills, talents and expertise of team member towards the accomplishment of a goal that is greater as a whole than the theoretical sum of its parts. For this phase of the project we will be utilizing the vast amounts of combined expertise that our team possesses in the areas of both quantitative and qualitative analysis to conduct an online randomized control trial in an attempt to measure the true effect of behavioral economic interventions on the household’s ability to maximize utility under pressure (combined health and financial loss).

As we have done in other iterations of this project, we will conduct a thorough review of the literature surrounding the object of our observation: irrational, health-related household financial decision-making. Irrational household economic behavior is the primary assumption of behavioral economics and the reason for which effective intervention may be necessary. Leveraging the qualitative and quantitative skills of our multi-state team we will simultaneously collect focus group data and analyze multiple secondary datasets to identify a core set of irrational financial behaviors exhibited by health-constrained households in the United States. Due to our group cohesion, organization and degree of experience working as a team, aggressively attempting these three simultaneous, short-term goals is not unreasonable nor is it unprecedented.

Following this discovery process, we will explore some of the findings within a focus group study. This will allow us to more deeply probe some of the issues we have identified from the literature and the exploratory work with quantitative and qualitative data.

Our final phase will then utilize experimental design to determine the sensitivity of some of the choices being made between economic capital and physical/health capital with respect to heuristics and other behavioral biases influencing economic choices such as anchoring, recall bias, and representativeness bias. Using an experimental design based on scenarios helps to enhance internal and statistical conclusion validity by increasing control over the manipulated variables and reducing random, unmanageable variables (Jin & DeVaney, 2011). Written scenarios will be developed to simulate the financial/health related decisions. Subjects will be randomly assigned to one of the scenarios. The scenarios will be varied to manipulate factors which are frequently involved in decision making. The researchers will include constructs from information management (such as source of information, use vs. avoidance) and constructs from the behavioral life-cycle hypothesis. For example, in a pilot study by a team member, the participants were assigned to one of two instruments (Mountain, Gutter, Ruiz-Menjivar, & Copur, in press). After ascertaining basic information including financial knowledge, preferences, and experiences with homeownership, participants were presented with two scenarios and asked to select the mortgage (Adjustable Rate Mortgage or Fixed Rate Mortgage) they would choose in that situation. However, in one instrument the participant also received a one-page explanation of the difference between an Adjustable Rate Mortgage and Fixed Rate Mortgage, including when one should choose one over the other. The team will utilize an Internet sampling firm to provide sufficient responses for the study. The firm would facilitate random assignment to the different scenarios. 

Advantages for doing the work as a multistate effort

This team has over a decade of successful collaboration bringing different skills and expertise to the table. This allows for pursuit of mixed methods as well as working to establish robust samples for qualitative studies. In addition, we have identified various strengths of team members which serves to expedite our efforts and avoid time loss as a result of improper task assignment. For this project we will also be able to leverage collaborators from our respective campuses, mainly from areas of public health or healthcare administration. Several of our team’s members are participating in a Culture of Health Pilot project funded by the Robert Wood Johnson Foundation; this could create unqiue opporunities as the two projects proceed. 

Outcomes

Findings and implications will be reported to consumer educators including the extensive Cooperative Extension network. We would prepare and distribute fact sheets through eXtension.org. We also plan to present this research at appropriate conferences including: Association for Financial Counseling and Planning Education, American Council on Consumer Interests, Family Economics Resource Management Association, Extension Health Outreach Conference as well as others. We also will submit manuscripts to relevant journals including: The Journal of Consumer Affairs, Journal of Financial Counseling and Planning, Family and Consumer Sciences Research Journal, Journal of Family and Economic Issues, International Journal of Consumer Sciences, Journal of Economic Psychology, and other relevant journals in the field of consumer economic behavior. 

In addition we see the possibilities of publishing our extensive literature review, and the results of our quantitative and qualitative discovery processes in peer-reviewed journals. The findings from our online randomized control trial may also be useful in the medical field in the form of training manuals and webinars for healthcare providers, researchers, administrators and of course, patients, their families and those who care the most about their recovery.

Potential Impact

This project is expected to result in a greater understanding of how families make financial decisions especially how they consume and ultimately manage large amounts of complex information in stressful situations (specifically the loss of health). The results should provide a foundation for developing, implementing, and evaluating educational initiatives to increase health literacy, health insurance literacy and improve financial decision making in the face of physical, financial, emotional and psychological change. We anticipate that the results of this study will encourage educators, medical practitioners and insurance providers to include the sociological factors of family, peers, and the influence of social media in educational settings, personal interactions and outreach programs. This project will result in a better understanding of how consumers use or avoid information and which sources of information are used and/or avoided by different sub-groups of consumers based on demographic and psychological factors. It will inform patients and practitioners about the endogenous relationship between financial stress and health outcomes. Also, the results can be used to recommend public policy initiatives and suggest new or enhanced approaches for reaching consumers beyond traditional audiences. 

Our outcomes will help to bring patients, health care practitioners and insurance providers together in a way that fosters goodwill between these three equally valuable stakeholders in the health of our nation. We hope that insurance providers will make it easier for patients to understand the impacts of their decisions to see a doctor or pursue a course of action that may require expensive surgery. That doctors and nurse practitioners will better understand their role in disseminating complex information and find more effective ways to help patients avoid crucial, financial mistakes. We expect our outcomes to open the pathway to better patient-doctor conversations about money. That family members will know how, when and what types of questions to ask, and to whom, in an attempt to help avoid costly financial errors and improve patient outcomes through understanding, comprehending and acting on that information. We expect to have an impact on the overall understanding of how reactions (negative, positive or neutral) to the financial consequences of medical procedures affects, on average, the outcomes of those same procedures. 

Finally, as demonstrated in previous projects, we expect to explore, utilize and share our discoveries of innovative and cost-effective ways to collect data. This group has a strong reputation among those in the field of consumer and family economics as a leader in innovative research methods and experimental design. Past projects have implemented the use of online learning platforms, crowdsourcing internet marketplaces, online survey distributors and social media outlets. As more ways to collect data become available we will be there on the front lines finding new ways to gather useful information about families and the various methods they use to make critical, financial decisions.