Hypothetical Mean

Commentary from an Actuarial and Economic Perspective

Archive for May 2009

Financial Incentives to Stay Healthy

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Can we solve our healthcare crisis by providing financial incentives to stay healthy, as conservative Blue Dog Democrats ($ WSJ) in the House want?  People’s behaviors and lifestyle choices are notoriously hard to change over the long-run.  But here’s a thought experiment.

Let’s say that you paid every American $25 for each one hour workout, and require us all to workout once a day.  That’s roughly $750 per month, almost enough to pay for the entire health insurance premium for a family of 4 for an entire year.  So obviously the cost of such an incentive is wildly prohibitive.  And how long do you think people would keep working out like that?  What would be the short-term utilization increase caused by increased health consciousness and injuries?

On the other hand, how much would you pay to avoid a heart attack?  I humbly suggest that any financial incentive to stay healthy is dwarfed in comparison to the non-financial incentive to avoid death or debilitation.  Congress and the Blue Dogs are delusional if they think they can design a financial incentive for you to stay healthy that measurably augments everyone’s natural desire to stay healthy because they don’t want to die.

Written by Victor

May 12, 2009 at 10:19 pm