Cash Incentives for Healthy Options

I often use Stephen Landsburg’s famous quote which claims that the whole of Economics can be summed up in four words “people respond to incentives” - so it was interesting to read in my morning newspaper that the Department of Health is considering rolling out a wider programme of cash incentives for people who can demonstrably show that they are making progress towards a healthier lifestyle.

Nicholas Timmins writes in the Financial Times that

“In Dundee, smokers are being offered £12.50 a week by the NHS if carbon monoxide testing shows they have quit. In Essex, pregnant women can claim a £20 food voucher from the NHS after stopping smoking for one week, £40 after four weeks and another £40 at the end of a year if they have still quit. Brighton offers children £15 for quitting smoking for 28 days, while overweight patients in Kent are also being offered incentives for losing weight.”

This short paragraph could form the basis of an excellent discussion about different forms of government intervention designed to affect health outcomes. I try to focus on three key words when teaching the impact of government intervention. Policies tend to work best when they are EFFECTIVE, EFFICIENT and EQUITABLE.

So what roles can direct financial incentives from the taxpayer for people to quit smoking, lose weight or eat better have both in the short term and over a longer time horizon?

If such incentives work what will be the longer term benefits for the health service and for the tax payer?

Are they better than regulations, taxation and attempts to improve information?

Is it fair to appear to reward unhealthy behaviour? What of those tax payers who do not smoke, maintain a healthy diet and weight and who make few if any claims on the health and welfare system?

Can the law of unintended consequences come into play? If you pay teenagers to stop smoking, will more of them start in the first place?

How will the cash payments be used?