Perspectives

“Show Me the Incentive, and I Will Show You the Outcome”

Why Consumer Incentives Could Finally Fix Healthcare—If We Let Them

“Never, ever, think about something else when you should be thinking about the power of incentives.”
— Charlie Munger

Incentives shape human behavior more than any rule, policy, or guideline ever will. From the airlines that nudge us to spend points before expiration to the tax code that motivates retirement saving and home ownership, the power of incentives is a law of human systems.

Yet, in healthcare—the most consequential system in most Americans’ financial and physical lives—we’ve built a landscape where incentives are vague, opaque, and often work against the consumer’s best interests.

Imagine applying the same incentive confusion to other industries:

• In auto insurance, if you drive safely, you might get a discount. Telematics-enabled plans make this real-time and actionable.
• In energy use, smart thermostats and time-of-use pricing reward consumers for shifting demand—saving both the utility and the consumer money.
• In airlines, tiered loyalty status turns spending and flying choices into a currency that alters behavior.
• In education, income-share agreements and scholarships reward completion, not just enrollment.

But in healthcare? Consumers rarely know the cost before they make a choice—let alone whether their decision to choose a lower-cost, high-quality provider earns them any share in the savings.

The Healthcare Incentive Disconnect

Behavioral economists have long argued that for incentives to work, people need:

1. Visibility of the incentive and its conditions.
2. Control over the decision that influences the incentive.
3. Trust in the outcome.

Uwe Reinhardt put it bluntly: “It’s the prices, stupid.” Without transparent and guaranteed prices, incentives are meaningless. You can’t reward a patient for choosing a $5,000 knee replacement over a $25,000 one if they didn’t know either price before walking in.

That’s why traditional PPOs and even most “consumer-directed” health plans fall short. They place cost burdens on the consumer (through deductibles and coinsurance), but don’t equip them with the tools—like guaranteed prices and easy provider comparisons—to make rational choices. That’s not incentive. That’s abdication.

The Munger Principle in Healthcare

Charlie Munger once said, “If you want to change behavior, you have to change the incentives. It’s as simple as that.”

Episode-based care models, like Oxbridge Health’s Episode Advantage program, do just that.

They make healthcare shoppable by publishing guaranteed prices for full episodes of care (like a joint replacement, maternity, or diabetes management). Then they unlock a world of behavioral incentives:

• Choose a lower-cost, high-quality provider? You keep part of the savings.
• Complete your episode with fewer complications? You earn a reward.
• Use decision tools to make informed choices? You avoid out-of-pocket expenses entirely.

These are the real incentives that behavioral economists like Richard Thaler and Cass Sunstein argued for in Nudge: positive reinforcement and visible trade-offs that influence behavior without coercion.

What Needs to Happen Now

For incentives to truly shape healthcare behavior, we need three structural changes:

1. Guaranteed, Transparent Pricing – Consumers must know the total cost of care up front. No surprise billing. No estimates. Just certainty.
2. Defined Episodes of Care – Bundled care that covers everything from diagnosis to recovery, so consumers can compare full journeys, not just facility fees.
3. Shared Savings Models – Consumers and employers should split the difference when smarter choices save money. That makes consumers active participants—not passive recipients—of their own care.

When these pieces come together, you unlock the most powerful force in economics: aligned incentives.

A Better System, Built on Smarter Choices

We know incentives work. We’ve seen them transform industries, reshape consumer habits, and save billions in energy, transportation, and logistics.

It’s time to bring that same discipline—and optimism—to healthcare.

If we give people guaranteed prices, clear outcomes, and a piece of the savings, they will shop wisely. They will pick higher-value providers. And they’ll become co-architects of a more rational, sustainable healthcare system.

Or, as Munger might put it: if you show them the incentive, they’ll show you the better outcome.