Saturday, September 22, 2012

Rewarding healthy living

Would you rather have (choice a) $100 more automatically deposited in your bank account every month or (choice b) a lump sum payment of $1,000 at the beginning of the year?

Think about it. You will probably logically conclude that either: 1) "the first choice is more money, so I will take that" or 2) "I need the money sooner rather than later, so I would take the second choice."

Behavioral economics has a different answer: You will take the second choice because you will notice it. The act of getting and depositing a big check makes more of a psychological impact than little amounts that you don't notice. At the same time, you are more likely to save the big payment but spend the little ones. 

This why Bush economic stimulus of 2008, where people received a one-time big check (choice b), was great politics but poor stimulus, whereas the Obama payroll tax cuts found in the stimulus package were the exact opposite. Little paycheck increases are bad politics, but good economics (choice a). 

I am not sure where Behavorial Economists come down on bottomless payroll tax cut pits.

This applies to life outside of taxes, too. America's largest life insurance company, Humana, has teamed up with America's largest retailer, Wal-mart, to provide discounts on healthy food. Show your Humana insurance card at the checkout and Walmart will give you a discount (or really a gift card to spend on other things at Wal-mart) right then and there on pre-approved healthy foods. Fruits and vegetables mostly. No health-washing marketing gimmicks. Health insurance companies are now understanding that healthy lifestyles do not begin and end at the doctors offices. This is going to lead to a vast improvement in health outcomes.

This is good-marketing for Humana and a great money making scheme for Walmart, but imagine a slightly different program: receiving a large lump sum payment in the mail at the end of the month for healthy behavior.

It doesn't have to be just for good, either. Gym-pact is a program where you have to pay more for your gym membership if you don't go. That's right. It creates a financial reward for visiting the gym and a penalty for not doing so. I don't have a gym membership because I don't want to pay for it and then not go. As I can't commit to going consistently, I won't sign up at all. This turns the normal logic on its head. Would you go the gym if you were paid to do so?

Imagine a world where the government - knowing that they will spend less money on health care if people live healthier lives - will reward you for buying healthy groceries, going to the gym, and getting annual check ups? Swipe a card every time that you do something healthy and it gives you points that can later be redeemed for cash or special offers with partner companies. Check online anytime to see how many points you have earned and what you can do with them. It's a gamification of real life.

Why have Mary Poppins as a Nanny when you could have Mayor Bloomberg?

Most government programs are paid for taxes that already come out of people's paychecks. They won't notice is a little more is taken out (as they didn't notice a little more was put in), but they will notice if they get a check in the mail or redeem points for a vacation. People will strategize on how to maximize their financial benefit, which will require them to think about how to live and be healthier. Everyone wins. 

2 comments:

  1. How about subsidizing healthy food instead of the shit that is being subsidized now? Or is the idea to create a more hands-on/individualistic policy?

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    1. I agree, but the two ideas are not mutually exclusive. Let's do both! I believe that individuals will notice more and act more responsibly if they get a rebate check/reward points for being healthier, as opposed to it just being a few cents cheaper at the grocery store.

      Thanks for commenting!

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