Positive Financial Incentives Research Articles

Carrots, Sticks, and the Evolution of U.S. Climate Policy

The Inflation Reduction Act (IRA), enacted by Congress in 2022, is the most significant federal investment in decarbonization in U.S. history. The law makes hundreds of billions of dollars available for clean energy tax credits, grants to state and local governments, and other financial incentives for public and private investments. The IRA’s focus on incentives, or “carrots,” marks a significant departure from the emphasis on prescriptive regulations and penalties, or “sticks,” that are prominent in federal and state climate policies that predate the IRA. This Article situates the IRA within the existing climate policy framework and explores the long-term impacts of the new law. The Article begins with an overview of regulations and tax incentives to reduce greenhouse gas emissions leading up to 2007. The Article then discusses the emphasis on pricing carbon through federal Cap-and-Trade legislation from 2003 to 2011, and the return to prescriptive regulation under the Clean Air Act when those federal bills failed. The Article contrasts these efforts with the positive financial incentives included in the IRA, tracking the evolution of the bill and the political and economic circumstances that created the policy window for Congress to pass such an impactful law. The Article concludes with a discussion of the lasting impacts of the IRA and the interplay between the existing policy instruments.

Public preferences for policies promoting a healthy diet: a discrete choice experiment

BackgroundWorldwide obesity rates have nearly tripled over the past five decades. So far, policies to promote a healthier diet have been less intrusive than those to reduce tobacco and alcohol consumption. Not much is known about public support for policies that aim to promote a healthy diet. In this study, a discrete choice experiment (DCE) was used to elicit stated preferences for policies varying in intrusiveness among a representative sample of the public of The Netherlands.MethodsThe choice tasks presented respondents a hypothetical scenario of two policy packages, each comprising a mix of seven potential policies that differed in level of intrusiveness. We estimated mixed logit models (MXL) to estimate respondents’ preferences for these policies and performed latent class analyses to identify heterogeneity in preferences.ResultsThe MXL model showed that positive financial incentives like subsidies for vegetables and fruit yielded most utility. A tax of 50% on sugary drinks was associated with disutility while a tax of 20% was associated with positive utility compared to no tax at all. We identified three subgroups with distinct preferences for the seven policies to promote a healthy diet, which were characterized as being “against”, “mixed” and “pro” policies to promote a healthy diet.ConclusionPreferences for policies promoting a healthy diet vary considerably in the Dutch population, particularly in relation to more intrusive policies. This makes selection and implementation of a policy package that has wide public support challenging.

Using Conditional Cash Payments to Prevent Land-Clearing Fires: Cautionary Findings from Indonesia

Land-clearing forest fires in Indonesia cause enormous private and social losses in the form of greenhouse gas emissions, deforestation, habitat destruction, worsened human health, and strained international relations. These fires are almost always deliberately set, often (but not always) by smallholders as they seek to expand farm size. The Government of Indonesia has taken primarily a regulatory approach to preventing these fires by imposing bans and making them illegal. This paper studies an alternative approach, explored in part through a large policy experiment focused instead on the use of positive financial incentives. We first summarize our 275-village randomized control (RCT) policy experiment from 4 fire-prone districts in West Kalimantan. These results showed no effects on fire outcomes from a conditional cash payment, even though there were some changes in behavior. The article then draws on survey results and other published documents to explain qualitatively why the results occurred. We argue that climate variation, government policy on decentralization, population density, and accidents appear to explain fire outcomes among villages more than did the opportunity to “win” a conditional payment of USD 10,800. Fundamentally, this sum did not compete with the high net present value of land for growing oil palm. The high net present value appeared to prove irresistible to a small percentage of villagers, despite the illegality of using fire to clear forested margins. More generally, this article provides a broad, cautionary understanding of why policies that only use conditional payments to prevent fires are unlikely to be successful in Indonesia’s oil palm regions.

From Volume- to Value-Based Payment System in Washington State Federally Qualified Health Centers: Innovation for Vulnerable Populations.

The reimbursement system at 16 Federally Qualified Health Centers in Washington State transformed to a per-member-per-month model with a prospective adjustment for quality performance. The results of this qualitative study suggest that 3 to 5 years would be required to achieve significant progress in the Triple Aim goals of the initiative and also demonstrate that Federally Qualified Health Centers are potentially more advanced in their readiness to offer value-based care. By providing positive financial incentives without downside risk, the state is stimulating replicable models of care, and in longer term such reforms may lead to a greater care coordination and a whole person-centered care.

Decentralization and the environment: Assessing smallholder oil palm development in Indonesia.

Indonesia's oil palm expansion during the last two decades has resulted in widespread environmental and health damages through land clearing by fire and peat conversion, but it has also contributed to rural poverty alleviation. In this paper, we examine the role that decentralization has played in the process of Indonesia's oil palm development, particularly among independent smallholder producers. We use primary survey information, along with government documents and statistics, to analyze the institutional dynamics underpinning the sector's impacts on economic development and the environment. Our analysis focuses on revenue-sharing agreements between district and central governments, district splitting, land title authority, and accountability at individual levels of government. We then assess the role of Indonesia's Village Law of 2014 in promoting rural development and land clearing by fire. We conclude that both environmental conditionality and positive financial incentives are needed within the Village Law to enhance rural development while minimizing environmental damages.

Can we increase organ donation by reducing the disincentives? An experimental analysis

Our research utilizes the experimental economics laboratory to investigate the impact that reducing disincentives has on organ donation. The experiment consists of four treatments across different levels of donation related costs, which reflect the disincentives associated with being an organ donor. Our experimental results indicate that sizable increases in the organ donation rate are achievable if we reduce the level of disincentives present. The largest observed donation rates arise when a financial return is offered for being an organ donor, which is prohibited under the National Organ Transplant Act (NOTA), but nearly 80% of the gains observed under the positive financial incentives can be achieved if all of the disincentives are eliminated.

Financial incentives to work: the size of the margin between benefit and in-work incomes

Financial incentives to work are an important consideration for policy makers in the realm of welfare and tax policy. Dominating one corner of the classic ‘iron triangle’ used by policy advisors to illuminate trade-offs between incentives to work, income adequacy and fiscal cost, poor financial disincentives to work can contribute to ‘trapping’ people in poverty. Further, as modern welfare systems have become increasingly ‘active’, with a strong focus on work and increased independence from the state, positive financial incentives have increasingly come to be seen as an important precondition for the effective operation of the welfare safety net.

The Road to Differentiation in Slovenia

While diversity of higher education institutions is in principle almost unanimously viewed as a favorable condition, the mechanisms to achieve it are the source for much contention. Positive financial incentives ("carrots") are proving to be more politically palatable, and hence easier to implement, than negative financial measures ("sticks"). The article describes the case of Slovenia, where the government has proposed positive financial incentives to achieve two goals: to reward excellence, but also to "shape-up" the least successful institutions, and, thus, instigated institutional diversification in Slovenian higher education.

Economic analysis of participation in physical activity in England: implications for health policy.

BackgroundChanging the relative price of (in) activity is an important tool for health policies. Nonetheless, to date, analyses of correlates of physical activity (PA) have excluded the notion of price. Using the first nationwide dataset on prices of PA for England, we explore for the first time how money and time prices are associated with PA (in general) and specific activities.MethodsA nationally representative telephone follow-up survey to Health Survey for England (HSE) 2008 was undertaken in 2010. The sample covered individuals who reported to have undertaken some PA in the HSE 2008. Questions focussed on: ex-post money and time prices; type and quantity of PA; perceived benefits of PA and socio-economic details. Count regression models (all activities together, and swimming, workout, walking separately) were fitted to investigate the variation in quantity of PA.ResultsOf 1683 respondents, 83% participated in PA (one or more activities), and spent an average of £2.40 per occasion of participation in PA and 23 minutes travelling. Participation in PA was negatively associated with money prices per occasion (i.e. family member/child care fees, parking fees, and facility charges) and travel time price. Participation in PA was more sensitive to travel time price than money price. Among the specific activities, the money price effect was highest for swimming with a 10% higher price associated with 29% fewer occasions of swimming; followed by workout (3% fewer occasions) and walking (2% fewer occasions). Only swimming and workout were sensitive to travel time price. People who felt doing PA could help them ‘get outdoors’, ‘have fun’, or ‘lose weight’ were likely to do more PA.ConclusionsTwo main policy implications emerge from the findings. First, the results support the notion that positive financial incentives, e.g. subsidising price of participation, could generally lead to an increase in quantity of PA among those already exercising. Second, such policies could lead to desired policy goals if implemented at an individual activity level (e.g. 50% subsidy on swimming entrance charges) rather than a blanket implementation (e.g. subsidising average entrance charges across all activities by 50%).

Reward and Coarse Toll in Competitive System with Two Modes

The morning congestion problem has been an important society issue. It is necessary to alleviate traffic congestion on rush hours. Dynamic tolls have been proposed to solve the congestion problem on a road with bottleneck. Compared fine toll and uniform toll, a coarse toll is easier to implement and operate in rush hours. In this paper, a congestion problem between a residential area and the CBD has been considered. There have two transport modes including automobile and railroad. Automobile users have to suffer the queue when the road has a bottleneck. Some commuters prefer to travel by railroad because of its convenience and lower cost. It users do not have to pay the schedule delay cost. However, congestion pricing is a negative incentive and travellers’ public acceptability of such a measure is typically low. Giving positive incentives is likely to have little resistance, while similar results may be expected. Reward can be regarded as a potential of positive financial incentives to solve traffic congestion. We mainly talk about two different policies on road and railroad. Coarse toll has been levied on the road with bottleneck. A reward has been implemented on the railroad. The reward comes from the coarse toll revenue which has been levied on the road, and it is allocated towards the commuters who travel by railroad. Two types of railroad fare have been considered: when it is set equal to the marginal cost and when it is set equal to average cost. These models allow us to show that toll policy to be more efficient as long as toll revenue is directed towards public transport when the railroad fare is equal to average cost.

UnitedHealthcare Experience Illustrates How Payers Can Enable Patient Engagement

Patient engagement is crucial to better outcomes and a high-performing health system, but efforts to support it often focus narrowly on the role of physicians and other care providers. Such efforts miss payers' unique capabilities to help patients achieve better health. Using the experience of UnitedHealthcare, a large national payer, this article demonstrates how health plans can analyze and present information to both patients and providers to help close gaps in care; share detailed quality and cost information to inform patients' choice of providers; and offer treatment decision support and value-based benefit designs to help guide choices of diagnostic tests and therapies. As an employer, UnitedHealth Group has used these strategies along with an "earn-back" program that provides positive financial incentives through reduced premiums to employees who adopt healthful habits. UnitedHealth's experience provides lessons for other payers and for Medicare and Medicaid, which have had minimal involvement with demand-side strategies and could benefit from efforts to promote activated beneficiaries.

Channeling Consumers to Preferred Providers and the Impact of Status Quo Bias: Does Type of Provider Matter?

To effectively bargain about the price and quality of health services, health insurers need to successfully channel their enrollees. Little is known about consumer sensitivity to different channeling incentives. In particular, the impact of status quo bias, which is expected to differ between different provider types, can play a large role in insurers' channeling ability. To examine consumer sensitivity to channeling strategies and to analyze the impact of status quo bias for different provider types. With a large-scale discrete choice experiment, we investigate the impact of channeling incentives on choices for pharmacies and general practitioners (GPs). Survey data were obtained among a representative Dutch household panel (n = 2,500). Negative financial incentives have a two to three times larger impact on provider choice than positive ones. Positive financial incentives have a relatively small impact on GP choice, while the impact of qualitative incentives is relatively large. Status quo bias has a large impact on provider choice, which is more prominent in the case of GPs than in the case of pharmacies. The large impact of the status quo bias makes channeling consumers away from their current providers a daunting task, particularly in the case of GPs.

Which preferred providers are really preferred? Effectiveness of insurers’ channeling incentives on pharmacy choice

Efficient contracting of health care requires effective consumer channeling. Little is known about the effectiveness of channeling strategies. We study channeling incentives on pharmacy choice using a large scale discrete choice experiment. Financial incentives prove to be effective. Positive financial incentives are less effective than negative financial incentives. Channeling through qualitative incentives also leads to a significant impact on provider choice. While incentives help to channel, a strong status quo bias needs to be overcome before consumers change pharmacies. Focusing on consumers who are forced to choose a new pharmacy seems to be the most effective strategy.

Reducing Medicaid Expenditures Through Family Responsibility: Critique of a Recent Proposal

The Massachusetts Department of Public Welfare recently proposed a "Family Responsibility Plan" which would impose a financial obligation upon adult children in the state for the nursing-home care of their parents who receive Medicaid. By examining the Massachusetts plan, this Note seeks to evaluate the viability of a concept of family responsibility, under which adult children contribute to the state Medicaid expenses of their medically indigent parents in nursing homes, as a means of combating the increase in state Medicaid expenditures. The Note examines the legal and policy issues raised by the Massachusetts welfare department's plan in particular, and by the concept of family responsibility in general. The author concludes that alternative methods of cost containment, such as positive financial incentives, would be more appropriate mechanisms for reducing state Medicaid expenditures than family--that is, adult child--responsibility plans.