Financial Incentives Touted As Health Care Cost Fix

Businesses should invest more in financial incentives to urge workers to adopt healthier lifestyles, because medical cost containment depends on changing people's habits, experts told employers attending a recent International Foundation of Employee Benefit Plans conference in Washington, D.C.

Promoting healthy habits and consumerism is the most effective way to lower medical costs, asserts Lewis Devendorf, a principal at Mercer Human Resource Consulting. "Individual behavior drives 50% of the health care spending in this country today," he says. "There are ways to provide incentives that lead to better behavior that don't have to punitive."

Financial incentives include straight bonuses, contributions to an employee's HSA or HRA, or reductions in an employee's monthly contribution to the health premium. These incentives can be given in exchange for meeting specific goals, like taking a health risk assessment, entering a disease management program, exercising for a certain amount of time per week, participating in a smoking cessation program or not smoking.

In a 2004 survey by the Society for Human Resource Management, 67% of HR professionals said their organization provides incentives to encourage healthy behavior, and 46% indicated their organization gives health care quality information to workers.

In a recent EBN QuickPoll, 22% of respondents said their company offers financial incentives for employees to practice healthy habits, 37% said they were considering doing so, and 41% said their company does not provide such incentives.

Dr. Michael Parkinson, chief medical officer for Lumenos, a provider of consumer-driven health plans, supports financial incentives and maintains that consumerism entails a corporate culture transformation.
"The CEO of the company is going to change the behavior. If you've got a CEO who doesn't walk the talk, it doesn't matter if you put $50 or $250 in an incentive fund," he declares.

Health care information can facilitate behavior change, but without incentives, it doesn't alter behavior, he adds. "If it does, all of us would have lived to be 110. Information is just an enabler."

Nevertheless, experts recommend communicating about health care in terms that lay people can understand, remember and relate to on a personal level. "People want to know about information that is relevant to them," such as what happened to other patients with the same disease and circumstances, says Ann Mond Johnson, president of Subimo, a Chicago-based firm that sells health care decision support systems recommends.

Many employers have dealt with budget-breaking health care inflation by passing additional costs to workers during the last several years, a move that Devendorf says is not likely to bring success (see related story, page 54). He comments, "The cost-shift [by employers] is not going to solve the longer-term issues. Maybe those who use less should pay less."

Margaret Lemkin, president of Med-Care Management, a utilization management firm in West Palm Beach, Fla., agrees: "It can take longer, but [consumerism] is certainly a better alternative to continuing to cost-shift to members."

Patient perceptions
Health care decisions are mainly shaped by patients' trust in the system and their perception of risk, according to Johnson. "The notion of convenience is driving a lot of this, as well," she adds.
Patients don't do what's best for their health because they feel too busy, can't afford it, feel confused, or don't understand what to do. For example, those factors may cause someone to delay medical tests, miss doctor appointments, not take medication at the right time or not complete prescribed exercise regimens. Lemkin remarks, "Most people with health conditions don't do what they're supposed to do. It's really hard."
Employers may be better positioned than doctors to alter workers' unhealthy habits, given the amount of time employees spend at the office. "It's unrealistic" to expect a doctor to transform a patient's lifestyle during a 12-minute visit, Parkinson comments. "Individuals act in the context of a community, a society, a workplace. I think we've empowered, rather than punished, those who have made bad decisions."

Wrong Rx
Some patients demand specific drugs and treatments that are advertised on Web sites and television, even when those might not be the best medical option.

"Up to 30% of health care treatments are viewed as unnecessary," Lemkin states. "Our love of medical technology and our feeling of entitlement leads us to misuse and overuse, and neither is quality care."

Moreover, Parkinson suggests that doctors and hospitals have a financial reason to allow the unnecessary treatments. "Overuse and misuse is often their [profit] margin. We're the most overbuilt hospital system in the world," he explains. "Redundant lab tests with a lot of false positives drive unnecessary procedures."

That has cost and productivity implications for employers and workers. Businesses are increasingly relying on disease management programs to steer employees toward appropriate care for chronic conditions, reducing the risk of overuse and underuse of medical services.