Personal financial incentives to improve health

• Abstract
• Purpose of health policy or idea
• Characteristics of this policy
• Political and economic background
• Purpose and process analysis
• Expected outcome
• References

Featured in half-yearly report: Health Policy Developments 12

Abstract

The usefulness and feasibility of personal financial incentives to improve people's health-related behaviours is a topical health policy issue in both the public and private (e.g. employers) sectors, in the UK and elsewhere. Proponents of financial incentives argue that this instrument protects autonomy, in the sense that the target group is free to uptake or ignore the incentive, and is thus less paternalistic than traditional regulatory policies. This report will consider financial incentives.

Purpose of health policy or idea

Health harming personal behaviours are endemic to most developed countries, and are possibly as common as they are because their benefits occur in the present whilst their costs occur in the future. For example, the pleasures of smoking and consuming high fat and sugar content food occur at the point of consumption, and yet their health-related costs possibly occur many decades hence. Personal financial incentives - i.e. paying people to refrain from health harming behavours and engage in health improving behavours - are currently being debated, piloted and more broadly implemented in the UK and elsewhere. These incentives may, in theory, 'balance' the immediate pleasures derived from a health harming behaviour, encouraging the individual to refrain from (or, in some cases, engage in - e.g. uptaking regular exercise) that behaviour.

The rationale underlying personal financial incentives is simple economics - money is a source of utility, people are utility maximisers, and therefore if you pay someone to do something, they are more likely to do it. However, objections can be raised against this rationale. For example, paying people to undertake some actions may undermine their intrinsic motivation to do them, as demonstrated in Titmuss' classic Gift Relationship, in which he showed that paying people to give blood rather than requiring them to donate voluntarily led to a poorer quality blood supply. Observations such as these are known as 'crowding out' - i.e. paying people to do things may crowd out their willingness to do it, and thus one may sometimes find that their behaviours move in the opposite direction to the one that the policy maker intended to encourage.

Nonetheless, as noted above, financial incentives are being mooted in the UK in relation to, for example, reducing obesity, improving dietary intake in pregnant women, encouraging the uptake of long-acting medications in people with psychotic disorders, and reducing the incidence of substance misuse. These initiatives will be considered in more detail below.

Main points

Main objectives

The objective is clear - to use financial incentives to alter people's behaviours so that they engage in less health harming, and more health improving, activities.

Type of incentives

Here I give four cases where financial incentives are being mooted and/or tested in the UK:

1. There is currently a cross-government strategy for reducing obesity, and the government had considered using financial incentives to encourage people to lose weight by eating more healthily and engaging in more exercise. The signs are that, for the time being, the Government has stepped back from considering financial incentives here, because they are nervous that the electorate might not be receptive to using tax finances to pay people to do (and not do) things that many think that the ought to be doing (or not doing) anyway. It is very possible, however, that the issue of financial incentives may re-surface in this policy domain.
2. There is a health in pregnancy grant, to be introduced as part of the Health and Social Care Bill in 2009, that pays women in the 25th week of pregancy who attend an advice session on how to eat a healthy diet.
3. Researchers are piloting a programme to test the impact of finanical incentives on adherence to anti-psychotic medications. This work is on-going. 
4. NICE, who are very interested in the use of financial incentives, have approved the use of vouchers that can be exchaged for treatment-related goods and services (e.g. anti-depressants) issued to drug addicts who demonstrate a drug-negative test. This initiative is likely to be assessed by researchers through a randomised controlled trial.

There are additional pilots currently being tested. For example, in Dundee in Scotland, the health authority has piloted the use of vouchers that can be exchanged for groceries for smokers who demonstrate a 'smoke free' carbon monoxide breath test.

Groups affected

Potentially, in the future, all patients, but at the moment, pregnant women, those with psychotic disorders, drug addicts, smokers, Taxpayers

Degree of Innovation	traditional		innovative
Degree of Controversy	consensual		highly controversial
Structural or Systemic Impact	marginal		fundamental
Public Visibility	very low		very high
Transferability	strongly system-dependent		system-neutral

Political and economic background

There has been no change of government (yet), but the general 'climate' seems to be averse to too much government intervention into individual lives. Over the last decade at least, there has been much debate on the intrusion of the state, from the subject of identity cards, to banning smoking in public places. Therefore, financial incentives, which, at least at face value, protect autonomy (people can take them or leave them) probably fit within the prevailing political climate.

However, it is worth noting two things: (i) many experts, particularly ethicists, are concerned that financial incentives may prove to be excessively coercive; (ii) the government has backed away from these forms of incentives to some extent over recent months, possibly fearful of an electoral backlash against them (i.e. the electorate may resent public money being used to pay people money to do things that most people may feel they ought to be doing anyway).

Purpose and process analysis

Current Process Stages

	Idea	Pilot	Policy Paper	Legislation	Implementation	Evaluation	Change
Implemented in this survey?

Origins of health policy idea

A number of policy entrepreneurs are promoting the idea of using financial incentives, but, in terms of practical health policy, the idea has been taken seriously on a broad scale in only very recent years. The notion of financial incentives fits in with Thaler and Sunstein's influential recent book, Nudge, whereby they argue that the government (or non-state actors) can frame choices so that people are better able to make the choices they really want to make. However, I suspect that most of the initiatives and actors who have mooted the use of financial incentives in the UK were not directly influenced by Thaler and Sunstein (indeed, the current government openly shunned the ideas expressed in Nudge - the Conservative Party have, on the other hand, openly endorsed the book). Generally, thus far, it is perhaps also important to re-emphasise that most of the initiatives around financial incentives are - at most - only at the pilot stage. It is thus an instrument that is being considered, rather than a major instrument of government health policy (thus far, at least).

Initiators of idea/main actors

• Government

• Patients, Consumers

• Opinion Leaders

Approach of idea

The approach of the idea is described as:
new: I would say that it's a new approach, on the whole, that feeds into the idea of individual autonomy, and is therefore perhaps symbolically linked to markets and choice.

Stakeholder positions

I would assume that the targeted groups would, on the whole, be in favour of the initiatives, but the most important stakeholder group is the electorate. The introduction of financial incentives on a national scale is very likely to create huge media interest. The electorate's reaction to the introduction of these types of incentives is unknown, but as noted earlier, the government is clearly concerned that many of these initiatives won't win electoral approval because, as already said, people may be reluctant to see their taxes directed towards payments for smokers, drug addicts etc to alter their habits.

Actors and positions

Government
Central government	very supportive		strongly opposed
Patients, Consumers
General public	very supportive		strongly opposed
Opinion Leaders
There are some opinion leaders who are in favour, and there are other who are against	very supportive		strongly opposed

Influences in policy making and legislation

Most of the initiatives are at the pilot or randomised controlled trial level. The payments for pregnant women are likely to be introduced as part of the Health and Social Care Bill. I have already discussed the main stakeholder concern above.

Legislative outcome

pending

Actors and influence

Government
Central government	very strong		none
Patients, Consumers
General public	very strong		none
Opinion Leaders
There are some opinion leaders who are in favour, and there are other who are against	very strong		none

Positions and Influences at a glance

Adoption and implementation

Most of this is too early to say. Clearly, for the initiatives to work, the targeted groups have to be motivated to change their behaviours by the promise of the financial incentives offered. In studies that have analysed financial incentives generally, there is mixed evidence of their effectiveness. For instance, they have been shown to increase patients' compliance with medication, but their influence in motivating people to adopt healthier lifestyles over obesity concerns and to reduce smoking behaviours has been, on the whole, minimal. In general, the size of the incentive, its source (e.g. government, charity), and the type of behaviour they are targeted towards can all be important factors in determining whether the incentive works. All of hese issues ought to be subjected to further study before these initiatives are introduced on a national scale.

Monitoring and evaluation

I would suspect that the government, via the Department of Health, will monitor and assess any policies that are introduced on a national scale. Some of the pilot policies will, I think, be followed by NICE, and academic researchers will assess and evaluate pilots and RCTs. Adam Oliver, Theresa Marteau and Richard Ashcroft will establish a Wellcome funded Centre for the Study of Incentives in Health in April 2009, which will assess and evaluate policies regarding financial incentives in health over a five year period.

Dimensions of evaluation

Outcome

Results of evaluation

The initiatives have not yet been evaluated, and are generally at the pilot or RCT stage.

Expected outcome

The policy initiatives are interesting, but they need to be thoroughly evaluated. It is not clear that they will be effective, or indeed whether they will have unanticipated effects, for example, if the form of crowding out effects, mentioned earlier. They are also numerous ethical issues to consider, such as whether we ought to be paying people to do things that most might think they ought to be doing already, and whether financial incentives are coercive, particularly when targeted at the poor, who may do things because they need the money, not because they really want to do them. In short, the policy initiatives are worth considering, but as yet we do not know enough about them to recommend them for national implementation.

Impact of this policy

Level of Equity

system less equitable

system more equitable

Too early to tell. However, if they do prove to be effective, and are targeted at the poor (and are not deemed to be excessively coercive), they may be used as a tool to address health inequity, quite apart from their potential to improve population health.

References

Sources of Information

Titmuss R. (1970) The Gift Relationship. Allen and Unwin, London.

Jochelson K. (2007). Paying the patient: improving health using financial incentives. Kings Fund, London.

 Thaler RH, Sunstein CR. (2008) Nudge: improving decision about health, wealth and happiness. Yale University Press, New Haven.

Frey B Jegen R. (2001) Motivation crowding theory. Journal of Economic Surveys 15: 590-611.

Author/s and/or contributors to this survey

Adam Oliver

Suggested citation for this online article

Adam Oliver. "Personal financial incentives to improve health". Health Policy Monitor, October 2008. Available at http://www.hpm.org/survey/uk/a12/4