Health care costs account for 17% of US GDP and many programs and policies seek to reduce these costs. This paper focuses on exercise as preventive care due to its immense physiological benefits. I model the profit-maximizing choice of health insurance companies to subsidize exercise and the utility-maximizing choice of individuals to engage in exercise using a traditional principal-agent framework. I then use principles from behavioral economics and psychology to critique these models and provide further insight into understanding our underconsumption of such preventive services. I end with an evaluation of current programs and suggestions for improvement using empirical findings.
Frean, Molly E., "What is the optimal subsidy for exercise? Informing health insurance companies' fitness reimbursement programs" (2012). Economics Honors Projects. 43.
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