Are cost-inclusive evaluations worth the effort?

Relative costs are as important as relative effectiveness when choosing between program alternatives or among a set of programs competing for scarce funds. Nevertheless, the number of cost-inclusive evaluations remains comparatively small. This article presents the results of three first-time cost-inclusive evaluations each performed by an experienced evaluator. Each evaluator performed a different type of cost-inclusive evaluation using different tobacco control programs as examples: "standard" cost-effectiveness analysis, threshold or break-even analysis, and a simulation model. Results are presented in terms of the challenges faced, and informational and insight benefits gained, as well as in terms of program cost-effectiveness. All three evaluators agreed that the benefits from performing cost-inclusive evaluations are well worth time and effort involved. They also found that this type of evaluation provides abundant information that can be used to improve program effectiveness and cost-effectiveness.     

Red light,green light: Color priming in financial decisions

Colors are widely present in the financial decision making arena: at firms’ and data providers’ websites; television reports; newspaper publications; advertizements; security market displays, with colors such as red and green prominently employed. Our experimental analysis involves a between subject design exposing subjects to financial substance on colored backgrounds and exploring the effect on their investment decisions. We focus on financial decisions under uncertainty about probability, examining subjects’ investment valuations and the probabilities they assign to the possible outcomes.This study explores the role of color exposure as a priming factor in financial decision making. Priming is a process of activating particular connections or associations in memory prior to carrying out an action or task. The associations occur when a certain stimulus or event increases the availability of specific information categories and, as a result, affect decision making.The results indicate that red color priming emphasizes value losses of the underlying asset. To wit, subjects who were exposed to red (R) assigned higher valuations and probabilities to events involving the loss domain, than to events involving the gain domain, relatively to the valuations assigned by subjects who were exposed to green (G). The aggregated evaluation given by the R subjects when the investment payback was subject to negative (positive) underlying asset returns was higher (lower) than that of the G subjects by roughly 15% (19%) of the invested amount.     

Issues of quality and consumer rights in the health care market

This Issue Brief describes how the structure of the health care market has changed in the recent years. It outlines the growth in managed care and the changes in the types of managed care plans available. In addition, it discusses the issue of quality in the health care market. It also includes an overview of the legislative topics and issues relating to quality and consumer rights that policymakers are currently considering. Growth in national health expenditures, the medical care price index, and employer health care costs has slowed significantly since 1990. This decreased growth has coincided with substantial increases in managed care plan enrollment. The percentage of employees enrolled in managed care plans increased from 48 percent to 85 percent from 1992 to 1997. Quality is a multidimensional concept. Although individuals may agree on its components, they may disagree on the relative importance of these components. Therefore, disagreement exists not only on how to measure quality but also on how it is defined. Consequently, policy decisions need to be based on an evaluation of a particular law's effect as opposed to its stated goal or intent. This distinction is important because a law that addresses access or consumer rights does not necessarily address the quality of care a consumer receives. Ultimately, whether an individual believes that a law truly addresses quality will depend in a large part on his or her subjective opinion of what quality entails. To date, comparison of the quality of managed care plans with that of fee-for-service plans has not produced results that uniformly differentiate between these two plan types in either a positive or a negative way. In addition, it is important to note that the current debate on the quality of care provided in the health care market is not new to the present managed care era. The regulations and mandates discussed in this report would not guarantee increased quality in the health care market, unless quality is defined as easier access for those with health insurance. However, if quality is defined as the success of the outcomes of health services provided, the effect of these regulations on quality is in need of further research. Yet, the regulations would have some impact on the costs of health benefits and insurance. This impact has been estimated to be relatively small to substantial, depending on the interpretation of the mandates and assumptions derived from that interpretation. Regardless of the magnitude of the estimated increases, some research has shown that these regulations could have serious implications for the likelihood of small businesses offering health benefits. While these health plan regulations effect on quality depends on one's definition of quality, costs would increase regardless of the definition one uses. Consequently, these regulations would come at a price. Thus, legislators must decide between: (a) imposing regulation that would increase access and consumer "rights" for those with insurance but would be of questionable value to the quality of outcomes, and (b) allowing existing market forces to improve quality through experimentation and competitive forces.     

Behavioral economic phenomena in decision-making for others

We examine whether biases identified in the behavioral-economics literature apply in decision-making for others (DMfO). We conduct a laboratory experiment in which subjects make decisions on behalf of themselves and others in eighteen tasks that measure the following biases: present-bias in time preferences, reflection effect in risk preferences, compound risk aversion, decoy effect, anchoring bias, endowment effect, and identifiable-victim bias. In our experiment, DMfO is DMfO simpliciter: unincentivized decisions made by one individual on behalf of another–the individual making decisions faces no direct costs or benefits when engaging in DMfO (as she would in a principal-agent framework or with bequest motives), and DMfO is not framed as giving advice or guessing others’ behavior. Although we find that DMfO is by and large statistically indistinguishable from decisions for oneself, we identify the following self-other discrepancies: (i) willingness to pay (i.e., bids to procure goods and donations to charity) is higher in DMfO than in decisions for oneself in tasks associated with the anchoring bias, end owment effect, and identifiable-victim bias; and (ii) the propensity to give uninterpretable responses is higher in DMfO than in decisions for oneself. We also find order effects, with DMfO more similar to decisions for oneself when DMfO follows decision making for oneself. Lastly, in response to open-ended items soliciting self-reports of subjects’ approach to DMfO, most subjects report having followed some version of the “Golden Rule” (e.g., deciding for others as they would for themselves) or having tried to maximize the other subject’s payment or utility; very few subjects report motivations that can be construed as rivalrous.     

Assessment of workplace product accessibility: a human factors perspective

This paper illustrates the advantages of using human factors evaluation techniques as a method of informing rehabilitation service provider decisions about client care and assistive technology selection. Successful integration of accessibility evaluation techniques can strengthen an evidence based service program and offer service providers another tool for providing efficient, effective, and rapid services to individuals in need. With accessibility evaluation data showing the functional abilities required to operate a given product or set of products, it is possible to empirically demonstrate that an individual has the potential to successfully utilize the provided workplace equipment. Conversely, if the accessibility evaluation data reveal that the functional capabilities required to use a product exceed the capabilities of a given user, it would be possible to demonstrate the need for particular interventions or accommodations. With accessibility evaluation data, service providers can make better informed decisions about client care.     

Small employers and health benefits: findings from the 2000 Small Employer Health Benefits Survey

Many small employers (between two and 50 workers) are making decisions about whether to offer health benefits to their workers without being fully aware of the tax advantages that can make this benefit more affordable. Fifty-seven percent of small employers did not know that they can deduct 100 percent of their health insurance premiums. Nearly one-half of small employers are not aware that workers who purchase health insurance on their own generally cannot deduct 100 percent of their health insurance premiums. Small employers are largely unaware of the laws that have been enacted by nearly all states and the federal government with the intent of making health insurance more accessible and more affordable for many small employers. More than 60 percent did not know that insurers may not deny health insurance coverage to small employers even when the health status of their workers is poor. Most employers offer sound business reasons for offering health benefits to workers. Many have found that it helps with employee recruitment and retention, increases productivity, and reduces absenteeism. Nearly 50 percent of the employers offering dependent (family) coverage report that the workers do not take coverage for their dependents because the dependents have coverage from somewhere else. Twenty-seven percent report their employees decline dependent coverage because they cannot afford the premiums. Many small employers that do not offer health benefits are potential purchasers. Twelve percent are either extremely or very likely to start offering health benefits in the next two years, and 17 percent are somewhat likely to start offering health benefits. A number of factors would increase the likelihood that a small business would seriously consider offering a health benefits plan. Two-thirds of small-business owners said they would seriously consider offering health benefits if the government provided assistance with premiums. Almost one-half would consider doing so if insurance costs fell 10 percent. In addition, one-half would be more likely to seriously consider offering a health benefits plan if employees demand it. Many small employers with health benefits have recently switched health plans, and 34 percent report that they did so within the past year. Affordability for the employer and the worker is clearly a critical factor affecting the likelihood of switching health plans. Nearly all employers who have switched health plans within the past five years cite cost as the main reason. One-third of companies offering health benefits think they will change coverage, and 5 percent think they would drop coverage if the cost of health insurance were to increase by 5 percent.     

How attorney representation and adjudication affect Canadian arbitration and labor relations board decisions

Few studies have investigated the effects of either attorney representation or attorney adjudication on arbitration board decisions, and none has investigated these effects on labor relations board decisions. I examine the effects of lawyers, as both representatives and adjudicators, on arbitration and labor relations board decisions in an analysis of 272 Canadian discipline cases involving the right to refuse unsafe work. My results show that the employee is more likely to have management’s discipline overturned if she uses a lawyer when the employer does not. However, the employer gains no comparable advantage by hiring a lawyer when the employee does not. In addition, neither side benefits by hiring a lawyer when both do so. Attorneys are also no more or less likely than non-attorneys to overturn or reduce management’s discipline.     

Part/whole percentaging as a useful method in policy/program evaluation

Part/whole percentaging analysis is a simple and meaningful way of evaluating alternative policies, decisions, or other options with multiple goals measured on different dimensions. That kind of analysis involves converting the raw scores of each alternative policy on each goal into a part/whole percentage by summing the raw scores for each goal and dividing each raw score by the total. One can then sum the part/whole percentages across the goals for each policy after assigning at least tentative relative weights to each goal. Part/whole percentages are added for goals that one would like to maximize and are subtracted for goals that one would like to minimize. Where the relative weight of a goal or score is too difficult to determine, one can determine the threshold value at which there is a tie between the tentative first choice and the second choice, and then just determine whether the actual value is above or below the threshold value. The aggregated part/whole percentages for each policy can be used to choose the best policy, the best subset of policies, or to allocate a budget across the policies in proportion to their aggregated part/whole percentages.     

A reverse sunk cost effect in risky decision making: Sometimes we have too much invested to gamble

The sunk cost effect refers to the empirical finding that people tend to let their decisions be influenced by costs made at an earlier time in such a way that they are more risk seeking than they would be had they not made these costs. This finding seems to be in conflict with economic theory which implies that only incremental costs and benefits should affect decisions. The effect is often explained in terms of prospect theory of (Kahneman, D., Tversky, A., 1979. Prospect theory: An analysis of decision under risk. Econometrica 47, 263–291), suggesting that sunk costs may induce a ‘loss frame,’ consequently causing risk seeking behavior. We argue that sunk costs may also result in risk aversion. In the present study we investigated the effect of time and effort investments (Behavioral Sunk Costs) on risky decision making in gain and loss situations. The results show that, in agreement with prospect theory, participants were more risk averse in gain situations than in loss situations. Moreover, incurring Behavioral Sunk Costs appeared to increase risk aversive choices, i.e., a reverse sunk cost effect. Furthermore, the results suggest that, in loss situations, Behavioral Sunk Costs mainly lead to risk aversive behavior if opting for the ‘safe’ alternative is not accompanied by an increased possibility to regret the decision.     

Health insurance portability: COBRA expansions and job mobility

This Issue Brief discusses continuation-of-coverage mandates under the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA). It provides background information on health insurance portability and job mobility, data on the cost to employers of providing continuation of coverage to former employees, and a summary of empirical research on COBRA's effect on employee benefits and job mobility. COBRA coverage can be considered advantageous for most workers, as it allows continuation of the health insurance policy they had in place at work when they lose or leave a job. Although employees can be required to pay 102 percent of the premium for COBRA coverage, they can usually realize significant savings compared with the cost of purchasing the equivalent insurance policy in the private market. Many employers consider COBRA to be a costly mandate for three reasons. First, premiums collected from COBRA beneficiaries typically do not cover the costs of the health care services rendered. Second, COBRA imposes an additional administrative cost on employers. Third, many employers view the penalties for noncompliance as excessively large. According to a survey conducted by Charles D. Spencer & Associates, of the 10.2 percent of employees and dependents who were eligible for COBRA coverage in 1996, over 28 percent elected it. In addition, average employer claims costs for COBRA beneficiaries amounted to $5,591, compared with $3,332 for active employees in surveyed plans. According to Employee Benefit Research Institute estimates of the Survey of Income and Program Participation (SIPP), the COBRA population is much older than the general insured population. COBRA beneficiaries also have higher personal income than the general insured population, with this difference being almost entirely due to differences in retirement income. Any attempt to expand COBRA coverage, either through subsidies or by allowing workers to choose from plans with lower premiums, would likely result in increased employer health care costs. As a result, employers may consider various alternatives to reduce, shift, or eliminate the impact of this increased cost. One alternative would be to continue requiring active employees to share in the increased costs through higher employee contributions. A second alternative would be to reduce or eliminate health care benefits for active employees and/or future retirees and their families. A third alternative would be to reduce the size of the work force eligible for health insurance benefits. Finally, employers may pass additional costs on to workers or consumers.     

Behavioral economics of death and dying decisions: Both rational and irrational approaches

A decision to accept death and forego life-extending medical procedures can be both rational and irrational. This article reviews perspectives on death from the viewpoint of behavioral economics, which relies on psychology as the basis of decision-making in this regard. According to behavioral economics, both the benefits of living and the costs of death should be emphasized so that a person who is thinking about suicide reconsiders that option and, hopefully, changes his or her mind and tries to safeguard life and avoid life-threatening risks. One way to make dying decisions more rational is to write out a living will or advance directives to help doctors understand a patients’ intentions with regard to decisions about dying should they become unable to articulate that intention at some later, critical, life-or-death situation. Living wills and advance directives can therefore reduce the chances of mercy killing or euthanasia, especially in the context of a developing country, especially when life-extending technologies are limited.     

A cost-benefit analysis of a smoking cessation program

Smoking cessation programs are usually evaluated in terms of the percentage of participants who have stopped smoking at least 6 months after the program's completion. This paper shows how a relatively low rate of behavior change may actually result in a high ratio of benefits to costs. Cost-benefit analysis is done for a specific program but the procedures and cost estimates are generalizable to other smoking cessation programs. Benefits to the firm included reduced costs of insurance and the savings due to employee absenteeism and disability. Costs included the program costs as well as the opportunity costs of the participants. Data from the literature and from the specific program are combined to form conclusions about the effectiveness of the program.     

Base rates revisited: Assessment strategies for HIV/AIDS

The efficiency of a diagnostic test is largely determined by the base rate, or prevalence, of disease in the population under study, with the consequence that low prevalence diseases are often difficult to detect. However, a review of clinical decision‐making, from a Bayesian standpoint, indicates that even relatively inefficient measures may be effective when combined in appropriate ways, and when the costs and benefits of detection versus non‐detection are considered. In the case of HIV/AIDS, a number of factors, including low prevalence population characteristics, the tendency to distort critical information, and the horrendous consequences of this disease, severely complicate the decision‐making task. The present paper reevaluates the problem of prediction as it relates to HIV/AIDS by examining the use of multiple tests, the relevance of Bayesian utility theory, and the significance of both immediate and projected costs and benefits.     

Shifting the bell curve: the benefits and costs of raising student achievement

Benefit-cost analysis was conducted to estimate the increase in earnings, increased tax revenues, value of less crime, and reductions in welfare costs attributable to nationwide implementation of rapid assessment, a promising intervention for raising student achievement in math and reading. Results suggest that social benefits would exceed total social costs by a ratio of 28. Fiscal benefits to the federal government would exceed costs to the federal treasury by a ratio of 93. Social benefits would exceed costs to each state treasury by a ratio no lower than 286, and fiscal benefits would exceed costs to each state treasury by a ratio no lower than 5, for all but two state treasuries. Sensitivity analyses suggest that the findings are robust to a 5-fold change in the underlying parameters.     

We Can Run But We Can't Hide:

Long-term care costs are not covered to any significant extent by public or private insurance. As a result, nursing home patients often must use their entire life savings to pay for their care and once impoverished turn to welfare in the form of Medicaid, the federal-state health care program for the poor. Private-sector solutions, such as private long-term care insurance, should expand to play a larger role but cannot solve the whole problem by themselves. Reform of the Medicaid program to make the means test less onerous would be desirable, but this approach would retain the welfare stigma. What is needed is a public insurance program to which everyone would contribute and earn the right to benefits when they need them without having to prove impoverishment. Any public insurance program should leave a substantial role for the private sector. Public costs of a social insurance program would be high but not unaffordable, especially since society will incur most of these costs even without an expanded public program.     

Costs and benefits for farmers participating in innovative marketing channels for quality food products

The extra benefits and costs for farmers participating in six innovative marketing channels for quality products in Belgium are analysed. A theoretical model serves as an analytical device to structure the qualitative comparisons with the common marketing channel and with direct sale. The analysis is mainly qualitative, because many benefits and costs cannot be quantified exactly. In the analysis, transaction costs are explicitly taken into account because they constitute a real cost when switching from a common to an innovative marketing channel. In all six marketing channels, higher costs are compensated for by higher revenues due to higher prices and a higher turnover and by reduced uncertainty. These factors encourage farmers to enter quality food projects. In addition, we found that co-operation decreases transaction costs and that collective initiatives enable farmers to enter the pathway of quality food production without investing excessive labour or capital.     

Demand for decision autonomy and the desire to avoid responsibility in risky environments: Experimental evidence

This paper experimentally studies individuals’ willingness to pay for the authority to make risky decisions for themselves, and the willingness to take responsibility for others, as primary determinants of leadership willingness. We consider a setup involving a pair of individuals, where one individual is designated to make both parties’ decisions by default. Depending on treatment, either party can express a willingness to pay to change this situation. If one’s willingness to pay to make her own decision herself is positive (negative), we interpret it as a demand for autonomy (a desire to delegate). On the flip side, if one’s willingness to pay to avoid making a decision on behalf of another person is positive (negative), we interpret it as a desire to avoid responsibility (a demand for authority). We find that on average, individuals are willing to pay positive amounts of money to make their decisions themselves, and incur positive but smaller opportunity costs for the right to make decisions for others. Certain individual and contextual characteristics emerge as important predictors. Notably, (1) men are more likely to demand both autonomy and authority at the same time, (2) individuals with other regarding preferences are more likely to pay to avoid taking responsibility for others’ decisions when the probability of loss is high. Exploring differences between individuals’ own decisions and the decisions they make on behalf of others, we find that subjects with other-regarding preferences tend to “cautious-shift” when making decisions on behalf of others. Also, we find that individuals who would like to avoid responsibility also tend to “shift” their decisions when put in a decision-making role. The results have implications for the allocation of decision-making authority in pairs and leadership.     

A neuroeconomic theory of (dis) honesty

We develop a theory of dishonesty based on neurophysiological evidence that supports the idea of a two-step process in the decision to cheat. Formally, decisions can be processed vía a costless “honest” channel that generates truthful behavior or vía a costly “dishonest” channel that requires attentional resources to trade-off costs and benefits of cheating. In the first step, a decision between these two channels is made based on ex-ante information regarding the expected benefits of cheating. In the second step, decisions are based on the channel that has been selected and, when applicable, the realized benefit of cheating. The model makes novel predictions relative to existing behavioral theories. First, adding external complexity to the decision-making problem (e.g., in the form of multi-tasking) deprives the individual from attentional resources and consequently decreases the propensity to engage in dishonest behavior. Second, higher expectations about the benefits of cheating results in a higher frequency of trial-by-trial cheating for any realized benefit level. Third, multiplicity of equilibria (characterized by different levels of cheating) emerges naturally in the context of illegal markets, in which expected benefits are endogenous.