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INCENTIVES FOR WELLNESS: TACKLING ISSUES OF EFFECTIVENESS, BIOLOGY, SCOPE, AND COST SHIFTING
Author(s) -
Cawley John
Publication year - 2014
Publication title -
journal of policy analysis and management
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.898
H-Index - 84
eISSN - 1520-6688
pISSN - 0276-8739
DOI - 10.1002/pam.21768
Subject(s) - incentive , citation , scope (computer science) , psychology , library science , economics , computer science , microeconomics , programming language
Morgan Downey raises several interesting issues in his essay. We agree on several points, for example, that current regulations are "really quite porous," with the result that enrollees will be able to get the rewards even if they do not alter their health behaviors. There are also several areas of disagreement that merit further discussion, and I focus on those in this essay. To provide context, my position is that financial incentives for healthy behavior can improve social welfare by internalizing the external costs of risky behaviors and help people with time-inconsistent preferences to adhere to a healthier lifestyle. To achieve the goal of increasing social welfare, the penalties for risky health behaviors should be set equal to the external costs. The design of the rewards (in terms of their frequency, salience, and the amount of loss aversion they invoke) may be critical in determining their effectiveness.