Why Should We Study the Use of Personal Financial Incentives to Improve Health-Related Behaviour - Term Paper Example

Why should we study the use of personal financial incentives to improve health-related behaviour? In spite of all the advantages money, credit, and the financial markets provide for individuals, there is an argument to be made as to whether we are better off as a society because of it. As a result of the impact of the recent crisis in the global credit and banking markets, many have come to question whether the use of credit, and its implied magnification of the importance of money in terms of consumerism, has actually resulted in improving the lives of individuals by making them more prosperous, happier, and healthy, or has it simply provided an illusion of these things. If the latter case is true, the demands of consumerism and unrealistic spending could simply be classed in the way drug use is; it makes a person feel better in the short term, but is actually a poison that will hurt them over the long haul. There is no question that the allure of money has been reinforced over the course of the recent economic catastrophe; personal financial incentives have motivated many bankers to pursue maximum short-term profits at the expense of ethical and moral behaviours, such as loosening their lending requirements to the point that they finance up to 125% equity, and make imprudent loans to people with no jobs, no income, and no assts. If it is true that the power of financial motivation can change personal behavior in the negative, i.e., to put themselves in jeopardy just to keep up with other consumers, then perhaps a similar use of financial motive can be applied to encourage individuals to improve health-related behaviours. At the basic foundations of economics, this hypothesis seems reasonable under two assumptions: First, that people are largely rational in that they will attempt to maximise their satisfaction subject to whatever constraints they encounter. Colin Camerer and Richard Thaler (1995) suggest “most behaviours can be explained by assuming that agents have stable, well-defined preferences and make rational choices consistent with those preferences”. The second assumption is that individuals will weigh the potential gains against the potential losses in an informal risk/reward analysis. When the potential gains or losses change, e.g., the risks outweigh the rewards (or vice versa), the behaviours of people will change accordingly. Daniel Ariely, behaviour economist from the Massachusetts Institute of Technology, believes the hypothesis can be enlightened through two behavioural systems; social norms and market norms. Social norms are those motivations that serve to drive human behaviours according to cooperation, long-term relationships, and trust. Market norms are motivations that centre on money and competition, and encourage individuals to put their own interests ahead of others. The latter system is often associated with people whose behaviours can be easily motivated by monetary rewards. They attempt to manipulate economic principles within the social system to get what they want, and they engage in this behaviour regardless of whether they are popular or not. Vohs, et al. (2006: 2009) have demonstrated how such people tend to involve money-related activities, such as conversation with money-related words or judging a person’s worth by the amount of money they (and others) possess, within their own lifestyle, e.g., people can develop extraordinary tolerances for working much longer hours, endure psychological pain and tremendous stress, as well as suffer the consequences associated with social disapproval if the financial reward is high enough. McClure, et al. (2004), a psychologist at Princeton University, has further uncovered the emotional effect of monetary reward on human behaviours through brain imaging technique. A group of volunteers was used in the study, and the individuals were informed that they would be given a voucher from Amazon.com; they were required, however, to decide if they would accept the gift immediately, or postpone receipt until a later time. For those participants who chose to take immediate advantage of the offering, researchers noted brain activity in the areas linked with emotion, which is the area of the limbic system that often connects with impetuous behaviour and drug addictions. Lea and Webley reaffirm the idea of a “money-drug” effect by demonstrating the ability of an offer of money to activate the same neurological pathways that make biologically beneficial activities, e.g., sex, feel so rewarding. Accordingly, money can be perceived by individuals in the same physiological context that is stimulated by pornography; there is a trigger of temptation through both mind and emotions which does not involve a drug or require actual physical stimulation. Personal finance vs. health To support the perceived impact of personal financial incentives on health-related behaviours, numerous examples on how the change of personal finance has impacted on the health-related behaviours can be cited; economists have studied and hypothesized that when the personal financial conditions of an individual changed during an economic downturn, the total outcome of health would likely be improved. For example, in sex-consuming behaviours, sociologist Venkatesh found that high-end sex workers engaged in more business transactions during the economic downturns, while low-end sex workers saw no change or even less business. This was explained as being the result of the fact that people with low economic vulnerability often suffer the least amount of impact from a downturn, so they can carry on their usual behaviours. Those who are exposed to high economic vulnerability are more negatively affected and therefore often decrease their participation in nonessential behaviours; such as buying sex. In terms of the total health outcome, the result is that more people would engage in safe sex practices and the total health outcome would be improved. This is as a result of the fact that high-end sex workers are more aware of their wellbeing than their more pedestrian counterparts, particularly with respect to sexually transmitted diseases and sexual violence. Accordingly, safe sex practices are more frequently used between the high-end sex workers and their clients. Moreover, the high-end sex workers are said to consider themselves as therapists, just like psychologists and yoga teachers, to “improve the mental health” of their customers. Even though the claim is ethically arguable, it may imply some reasons for the short-term growth of high-end sex transactions during economic downturns. Additionally, given that the low-end sex workers receive fewer sexual transactions from street corners, fewer sexually-transmitted diseases will be exchanged between them and their clients. Sexual violence will be also minimised. As a result of this entire dynamic, it is believed that the change of personal financial incentives can possibly improve the aggregated health outcome from the sex-trading industry. As another example, one involving drinking and eating behaviours in the U.S., a study based on the data from the Centre for Disease Control and Preventions Behavioural Risk Factor Surveillance System (BRFSS) surveys, reveals fewer people tend to engage in alcohol binges during economic downturns. Ruhm (1995), found that during such economic hard times, the rate of drinking and drunken-driving was reduced. When the state unemployment rate was increased by 1%, the consumption rate of 0.4% for beer or wine was reduces. Another study showed that the prevalence of smoking and obesity actually declined when financial times were hard, while the number of people who exercised tended to increase during these same economic downturns (Ruhm 2004). Personal financial incentive Wheelan (2002) has presented a case of how the diminishing black rhinos in Africa can be saved by the power of personal financial incentives. This very interesting study initiates at a time when the black rhinos were treated as a communal resource; they were neither protected from poachers nor raised. The reason for this was that the large animals, like rhinos and elephants, would cause massive damages to local crops. Accordingly, local residents would have great incentives to exterminate them as a way to protect their crops. More importantly, the black market, which involves enormous trading in rhino horns, created the ultimate incentives to capture or kill the black rhinos. In other words, the black rhinos were worth far more dead than alive to the people of impoverished southern Africa, as their demise resulted in crop protection and financial gain. If this dynamic continued, the numbers of black rhinos would soon fall to the point of extinction. To halt this vicious destruction, a program was implement where the black rhinos were assigned to local residents for management and care; black rhinos literally became private resources. Local residents gained commissions from the eco-tourism industry through conserving the animal. The more black rhinos individuals would preserve through protecting them rather than killing them, the more financial return the individuals would receive from the revenue provided by the tourists. Accordingly, local residents now have much better personal financial incentives to protect and raise such wild animals. This has enabled the survival numbers of black rhinos to increase dramatically in Africa. The example of the black rhinos can be used to understand the dilemma of British healthcare services. Because the healthcare services in the UK are literately free of charge as a result of being funded by the tax system, people receive assured healthcare services for any of their medical problems. As a result of this provision of healthcare at no charge, people understand the government will pay for their healthcare no matter what. As a result of this situation, a large number of “freeloaders” are motivated in such a way that they will either utilise the healthcare services regardless of the extent of their problems or, even worse, care little about their own poor health-related behaviours. In this way, the free healthcare services provided in the UK can be viewed in a similar was as the wild black rhinos in Africa, i.e., communal resources. Accordingly, no individual has any financial incentive to curtail their own poor health behaviours, nor are they incentivized to appreciate the value of healthcare services.  There is some evidence to indicate that the requirement to purchase private insurance or the implementation of a pay-as-you-visit system could improve these irresponsible behaviours of individuals who take advantage of the no-cost healthcare services provided in the UK. The argument is that such a system requiring individuals to pay for private insurance or per-visit charges would encourage people to reduce or eliminate their poor health-related behaviours through financial incentive. The more poor health-related behaviours people engage in, the higher the healthcare cost they would encounter. Therefore, this approach can be regarded as the negative scheme of personal financial incentive. If this approach were adopted, people would only seek out healthcare services when they had serious medical conditions and be more prone to use the healthcare system only when truly needed. Moreover, it can be deduced that people would start to improve their health behaviours as a result of the increase in insurance premiums or the per-visit charges of healthcare treatment once they accessed healthcare services, i.e., they would associate good health practices with a positive financial incentive and ultimately reduce their use of no-cost national healthcare services. This argument is easily subjected to criticism, however, because it violates the notion of socio-economic equality; a fundamental principle of the NHS. That is to say, the philosophy of the UK healthcare system is that any person from any class, regardless of their incomes, should have the right to access healthcare services without the burden of cost. The criticism points out that the negative structure of personal financial incentives will likely leave out those genetically sick and poor, resulting in a situation where any uninsured person—or someone who cannot afford the pay-per-visit cost—will fail to receive the adequate healthcare service to which they have a right. There is another incentive scheme, however, which can be called the positive scheme of personal financial incentive. In modern society, many individuals are easily drawn to short-lived, appealing, and unhealthy behaviors such as smoking, drinking, and eating fast food as a result of their desire for happiness. These kinds of behaviours have the ability to offer a type of immediate pleasure to people; they provide instant gratification. The benefits of long-lived, hard-to-maintain healthy behaviours do not offer such immediate satisfaction and, as a result, are not often a priority. Moreover, the result of no-cost healthcare services has put the ultimate responsibility of individual health into the hand of the government; the government is only able to ensure adequate healthcare services and not able to enforce healthy behaviours on individuals. Therefore, the positive scheme of personal financial incentives seeks to produce the opposite effect, in which people behave healthily as a result of the incentives of personal financial return. This can be achieved, just like the case of black rhino, by assigning individual health behaviour responsibility back to individuals and sharing the reward of their successful healthy achievements by giving them a portion of cost savings from future health spending. This positive approach to individual behaviour is more effective than the negative scheme of personal financial incentives because large numbers of people can be expected to be driven by market forces. Within this model, individuals will always be seeking to maximise their “gains,” so they are likely to improve their health behaviours. Further, it should be noted that assessing the cost individual health is easier than assessing the cost-effectiveness of a universal healthcare service. The former has mature medical technology, low cost, and capability to cover a large population; the latter often ends up in the conflict of the classical ethnical dispute of whether it is cost-effective to provide certain services, e.g., palliative care for dying patients. One challenge to the use of this proposed positive scheme can be seen in the question of the ethics associated with using the taxpayers’ money, as a personal pecuniary incentive, to improve individual health-related behaviours; as individuals should always assume the responsibility for their health behaviours, why should they receive a financial incentive for acting in their own best interest? The answer is fairly simple; people are only rational in the sense that they will weigh the gain and loss for their health behaviours in the short-term. The tendency to act in their own self-interest for the long-term is diminished when people have to choose between short-term pleasure and long-term benefit, e.g., smoking gives pleasure now but will almost certainly bring suffering later while exercising now is not pleasant even though it will result in people living longer. As a result of this time-related conflict, individuals are often confused as to exactly what they actually stand to gain or lose. Accordingly, many people make choices that are irrational in the long-term but pleasurable in the short-term; thus, they choose poor health-related behaviours. Also, the ease of making an unhealthy choice surrounds more people’s daily living. It is easier to locate a McDonald’s than a healthy salad bar, and the advertisements for Coca-Cola are much more appealing than simply drinking water. People are in need of extra incentives to balance the negative motivations they infer from commercial advertising. Furthermore, the government would require only a fraction of the estimated future spending on healthcare to motivate people to change their behaviours now and develop a healthy national population. For example, if there are 100 obese people who are at high risk of soon becoming diabetics or suffering from cardiovascular disease, the government must budget for 100% of the healthcare resources needed to treat obesity, diabetes, and cardiovascular disease later. Is that budgetary drain on the taxpayer somehow more ethical than charging these individuals a fee for healthcare? What if they are genetically obese or in poor economic conditions? What about a scenario where the total cost of diabetic treatment now would cost the same amount as adding 40 years to the lives of others through education and public service advertisements; should these others pay for their healthcare treatment? Another ethical consideration is the fact that this group of high-risk individuals are often disfavoured by the insurance companies, in which case they would be left out with no healthcare services at all. In conclusion, the negative scheme of personal financial incentives is designed to put a restriction on the access of healthcare service as a means for inducing healthier behaviours, while the positive scheme of personal financial incentives focuses on moving the motivation for healthier behaviours back to the individual. There is no doubt about certain facts: People need to behave more responsibly in terms of positive health choices; changes in the system need to be made to encourage this change in public behaviour; financial incentives can and should be used to both provide accessible healthcare to every individual in society as well as encourage more healthy behaviour. The topic of finding the right combination of universal healthcare and individual financial incentives to induce individuals to understand that healthy behaviour is in their best interests is ripe for additional research. Finding the right mix would accomplish society’s standard of care along with encouraging individuals to be less of a drain on national healthcare resources through improvement in their lifestyle choices. Read More