Framing the Contraception Coverage Debate with Behavioral Econmics

Greg Mankiw and many other economists are puzzled by the Obama administration's change in policy from A to B on contraception coverage for employer health care programs. (from Mankiw's blog here is his version of A and B)


A. An employer is required to provide its employees health insurance that covers birth control.

B. An employer is required to provide its employees health insurance. The health insurance company is required to cover birth control.

Rationally we would expect A & B to be the same. It does remind me of a classic behavioral economics problem created by Tversky and Kahneman. Suppose you need to purchase a new suit and a fancy pen. The suite cost $500 and the pen $25 in your local store.

A. Would you travel 15 minutes to go to a store where the suit cost $500 and the pen $18?

B. Would you travel 15 minutes to go to a store where the suit cost $493 and the pen $25?

More people would travel for  A than B even though both save you $7. This is because we often use the percentage of savings to figure out if something is worth it. Or as Dan Ariely puts it in his book Predictability Irrational we may pay $200 to add a soup course on a $5,000 catering bill, but still clip coupons for 25 cents on canned soup from the supermarket.

I wonder if this is all a framing issue and by including contraception in a larger bill for health care it becomes more like the catering bill than condensed soup.