home email us! sindicaci;ón

Archive for Insurance

How runaway costs can undermine health reform in a hurry

by David Williams

From today’s Boston Globe (Blue Cross to scrap policy with low employer contribution):

In an about-face, Blue Cross and Blue Shield of Massachusetts said it is scrapping a new policy that would have allowed owners of small businesses to contribute just one-third of the cost of their employees’ health plan premiums… Prior to the new policy… the insurer required a minimum 50 percent contribution to premiums from employers with 50 or fewer workers…

[Governor] Patrick’s administration believed that if Blue Cross allowed lower employer contributions, other companies might follow suit, sparking a race to the bottom in which employers contributed as little as possible to their employees’ healthcare.

Governor Patrick is concerned because the state’s health care reform law, which requires almost everyone to have insurance, depends heavily on employer coverage. If employers don’t keep paying up, the law won’t work.

But framing the discussion in terms of percent contribution is highly misleading. The “race to the bottom” comment is a case in point. Here’s what I mean:

  • As I mentioned yesterday on the Health Business Blog, Blue Cross plans to raise my company’s premium by 26.3 percent next year. Let’s imagine they do the same thing again next year
  • Using approximate numbers, that means the family premium will go from $1000 to $1263 to $1595 over that time
  • If the company paid 50% now, that would be $500. If the company continued to pay $500 in two years, it would only be paying 31 percent of the much higher premium!
  • That’s not a race to the bottom, folks. It’s more like holding steady

I’m assuming our rate increase is unusually large, but we can’t be alone. If it happens like this to us in two years it will happen to everyone within five.

Cost issues have to be addressed, and quick.

Insurers Moving More into Health & Productivity Management

by Scott MacStravic

Commercial insurers devoted their initial investments in managing health, rather than just paying for sickness care, primarily in disease management.  Since roughly three-quarters of sickness care costs come from chronic disease, this makes sense when insurers aim for significant positive return on their investment (ROI), and as soon as possible.  For the same reason, most of the federal government’s investments have also been in disease management demonstrations.

But there are signs that commercial insurers, at least, are developing both a broader view of the problem of controlling sickness care costs, and a broader range of solutions to this challenge.  They are extending the scope of their investments to include the full range of health management (HM), including general wellness/fitness promotion, risk behavior and condition reduction, as well as disease management.  And they are offering a wide range of interventions, not merely the usual problem-specific interventions.

For example, Blue Cross and Blue Shield of Kansas City offers its “A Healthier You” initiative to almost 60 employers in its market.  The program includes onsite health fairs which assess employee health and identify problems, plus customized behavior change programs, such as smoking cessation and weight management.  Aetna offers a Healthy Living incentive/reward credit card that functions like retail loyalty cards, offering points that can be redeemed for rewards based on employees’ purchases of health promoting services and products.  [T. Worth “Insurers Remedy High Costs with Preventive Measures” Kansas City Business Journal June 15, 2007 (kansascity.bizjournals.com)]

The Blue Care Network’s “Healthy Blue Living Wellness” benefit plan is one of a number of new health insurance products that are being offered that emphasize wellness, rather than merely coverage for sickness care.  Blue Cross Blue Shield of Michigan has gained over 200 employer groups since initiating this product last October.  The program combines incentives to employees and support from their employers and primary physicians to commit to and achieve better health.  Employees can earn lower out-of-pocket healthcare expenditures, while their employers gain an average of roughly 10% savings over HMO products. [“Blue Care Network’s Healthy Blue Living Wellness Product Sees Surge in Enrollment” Blue Care Network Newsroom June 25, 2007 (www.miben.com)]

Some insurers, including both Aetna and CIGNA offer their own HM programs on a fee basis to employers, including those who are not even customers for their insurance products.  This not only generates added revenue, it also gives the insurers a cost-saving center business link with employers, in contrast to the cost-center of hospital/medical insurance benefits.  Humana recently began offering health coaches to employers, for example. [“Humana Launches Integrated Health-and-Wellness Program for Health Plan Members” BusinessWire.com June 6, 2007]

Health Net of California announced its new offering of a combination of traditional HMO coverage with a preventive/wellness emphasis as part of a new consumer-directed health plan, called the “Optimizer HMO with a Health Reimbursement Arrangement spending account.  It rewards healthy behaviors by employees, including a $100 reward for completing a health risk assessment (HRA) , and another $100 for using a health coach. [“Health Net of California Redefines Consumer-Directed Health Plans” Health Net News Release June 7, 2007 (investor.health.net)]

Wellpoint, the largest insurer in the US has created a web-based program to promote employees’ participation in its WebMD HRA, including a Spanish version.  Feedback from the HRA includes customized analysis of individuals’ risks and advice on managing them, along with access to resources for information and support.  It also offers a resource center for physicians to help them deal with the cultural and language diversity of patients they manage in markets serves by Wellpoint. [“Wellpoint Launches New Innovative Tools for Members and Health Care Professionals” Wellpoint News Article June 6, 2007 (phx.corporate-ir.net)]

CIGNA has gone beyond merely managing employee health in traditional ways. It has launched a new identity theft prevention and recovery program for employees, with 24/7/365 access to services and support.  Studies have indicated that people who are victims of identify theft spend an average of 175 hours, or roughly five weeks over a two year period trying to restore their financial integrity.  Much of this time is spent while people are at work, and their worry about the problem can impair their productivity and performance at work even when they are not devoting time to fixing the problem.  [“New CIGNA Program Helps ID Theft Victims Recover Identity; Helps Employers Avoid Lost Productivity” CIGNA Newsroom June 27, 2007 (cigna.mediaroom.com)]

The combination of employer and insurer collaboration in HM programs is likely to increase employee participation and response, and thereby increase the value that employers gain from HM investments.  When providers are also included, the “critical mass” achieved may prove even more successful, compared to any one HM provider by itself.  Employers generally prefer to outsource HM initiatives, given laws and regulations on the privacy and confidentiality of employee health information.  And insurers gain a stronger foundation for a continuing, long-term relationship with employer clients, rather than one based simply on annual premium levels.

Providers, including any primary physicians or hospitals that are willing and able to join the HM movement can also share in the benefits.  Employee participation in HM initiatives, for example, have been shown to improve dramatically when a trusted physician recommends such participation. [“Workplace Disease Management Program Participation Boosted Three-Fold by Patient Contact with Trusted On-site Clinician” i-Trax/CHD Meridian Feb 22, 2007 (www.i-trax.com)]  Provider support of HM participation may reduce the need for employee incentives, for example, and thereby save money for employers, and increase the chances for and amount of ROI on their investments.

As the number of stakeholders involved in HM efforts increases, the chances of success are likely to increase as well.  Lack of support by providers, for example, is usually a major handicap to HM participation and success.  By getting employers and insurers on the same page, along with employees and providers, the probability and extent of employee participation, health management and financial success are likely to be significantly greater than any effort that lacks one or more of these key stakeholders.  The increased involvement of insurers that is happening already will give us a chance to find out if this is the case.

Uninsured Will Overwhelm the U.S. Health System

by Nick Jacobs

The very essence of the definition of the word challenge can currently be observed manifesting itself within the U.S. health care system.  The Chinese have a saying, “May you live in interesting times,” and the degree of interesting for those of us in health care administration is multiplying exponentially as we see more and more uninsured citizens and illegal aliens bombarding our already over taxed network of public hospitals and care centers.

In a recent article in USA Today, the degree of overcrowding in the Texas system was spotlighted, and, even though it is only about 8% worse there than it is on average in the rest of the country, that percentage represents a very challenging number of people without options..  Nearly one in three people are now uninsured in Houston.   The article by Richard Wolf, went on to quote other challenges created by the laws of Texas, i.e., no subsidized health insurance program for childless adults, the highest percentage of uninsured children in the country and a surging population are all mentioned. The result is a crushing push on the State’s emergency rooms.  Nearly twice the increase in visits is occurring in Texas than is being experienced by the rest of the United States.

Even when a State does cover children, if it ranks near the bottom in Medicaid reimbursement, like Pennsylvania does, it’s not much help.  When your hospital provides compete coverage for less than half or sometimes a third of the hospital’s costs of treatment,  those losses can’t be reversed by adding more volume.

So, as the challenge continues, we in health care administration are busy re-arranging the deck chairs while our federal officials continue to mark time and avoid creation of a definitive health policy for our nation, the third rail of politics.  Finally, the uninsured wait hour after hour, day after day  and sometimes months to be seen and treated.

These people are our people, and they need to be treated as human beings, not as cost centers.  As we continue to squander one third of our medical budget on the last thirty days of life, as we pamper our elderly and deprive our youth, as we cheat our future, the system begins to look more and more like that in Texas  . . . where one leader interviewed for the article described their decision not to participate in the Federal CHIPS program for children’s health coverage as prudent.  Let’s look up the definition for prudent because the real definition might be challenged.

Workforce Wellness Needed for Competitiveness

by Scott MacStravic

US employers have been screaming about and occasionally investing money in efforts aimed at the competitiveness handicap they face in global competition due to their healthcare costs.  With most of their overseas competitors in countries whose costs for employee healthcare is less than half that in the U.S., and government insurance bearing much of the burden, the high costs of employee health care means U.S. made goods have to be priced higher, often meaning the loss of sales to such competitors.

It has reached the point where U.S. companies can “offshore” jobs to foreign workers in countries such as India and the Philippines, where total labor costs are only as much as are the healthcare costs of workers in at home.  This promotes the loss of jobs in the U.S., along with the loss of sales, both threatening the labor market here, though reducing the costs of goods to American consumers.

The one advantage America still enjoys, however, is in worker productivity, where our workers produce as much as half again as much per day as do workers in other countries.  This, together with the lower value of the American dollar in recent years somewhat mitigate the effects of higher healthcare costs, though reducing such costs and maintaining or improving our worker productivity advantage would make things much better.

Employee health has been a target for efforts to maintain and improve it for decades, though it received significantly more attention in recent years as employers recognize the potential for employee wellness efforts to improve productivity and performance, rather than just to save on employee, dependent and retiree sickness care costs.  Unfortunately, it is not just American employers who have caught on to this potential; global competitors, particularly in the more developed countries, have made the same discovery.

In fact, foreign employers, insulated as they are from direct costs of employee unhealth by government-paid insurance, have found even more value from their employee health/well-being efforts than American employers have even looked for.  While most U.S. employers still look only for reductions in healthcare costs, and a large minority of them are beginning to look at absence and presenteeism effects as well, foreign employers are finding even more positive effects, including improvements on the revenue as well as cost side of their ledgers.

European employers have been aware of the effects of health on overall performance, with suppliers such as VieLife.com built on a foundation of research into performance of airplane pilots and race car drivers, for example.  [M. Bartlett “Healthy Business” EuroBusiness 4:1 Sep ‘02  57-58]  A British railroad company achieved a 69% reduction in accidents, thanks to its employee health efforts, for example. [“Birse Rail (Case Study)” The Business of Health (UK)]

Another British firm, Standard Life Healthcare was able to reduce its worker turnover by 13%. [“Costs vs. Investment?” Business in the Community (UK) June 2005]  It also reported new business up 26%, and customer retention up 2.2%, while crediting its employee health efforts as being a “big contributory factor” therein. .  Also reported “Employer Health Management” Complinet (UK) Mar 4, 2004 (www.vlelife.com)  Another UK firm reduced its annual turnover rate from 62% to 33%. [“Edmund Nuttall Ltd (Case Study)” The Business of Health (UK)]

Meantime, the focus of efforts is too often on disease, rather than health, and on savings in sickness care costs rather than total labor costs and positive revenue impact.  And critics keep stressing doubts about whether managing disease saves enough in sickness care costs, compared to disease management costs, to generate positive ROI. [S. Sullivan & L. Meyer “Determining the Economic Value of Disease Management Programs for Employers” Managed Care Interface 18:10 Oct 2005 27-31]

This myopic approach to looking for positive impact also results in  myopic selections of problems and opportunities to work on.  Research has shown, for example, that a wide range of unhealthy conditions — inadequate sleep, poor diet, inadequate physical activity, unmanaged stress, musculoskeletal pain, chronic fatigue, emotional disorders, etc. – have far more negative impact on worker productivity and performance than do traditional diseases.  By not even selecting such performance impairment factors for measurement, much less management, employers are missing out on the best opportunities to improve their competitive position.

There are some positive signs in this regard, at least.  More employers and the suppliers that serve them, are beginning to look at both a broader range of performance/productivity-affecting problems, as well as on a broader range of valuable results.  They are also beginning to look at less expensive approaches to managing employee health, further increasing the potential for and realization of positive ROI on their investments.  We are just beginning to recognize and tap the potential to improve the competitiveness of U.S. firms, while improving the health of our population at the same time.

Hedgehog vs. Fox Solutions to the “Health Care Cost Crisis”

by Scott MacStravic

I still recall from college days reading about “hedgehogs vs. foxes”, a distinction going back as far as the Greek philosopher Archioculus, the Russian writer Tolstoy, and an American writer whose name I have forgotten.  All cited the difference as:

  •     Hedgehogs know “one big thing” that serves as the solution to most if not all their problems (curling up in a ball when threatened in the case of the actual hedgehog)
  •     Foxes know “many little things” that come to mind to be tested as possible solutions to the variety of problems they face

Tolstoy used the distinction to differentiate countries like Germany and Russia from Great Britain and America.  The former were hedgehogs, relying on tyrannical leaders and uniform principles to govern their daily lives and national strategies, while the latter were foxes, trying out, adjusting and adapting a host of complex ideas, precedents, and leaders to see what works.  While Tolstoy did not predict them, he clearly showed how Fascism and Hitler, or Communism and Stalin, could characterize Germany and Russia.

While favoring foxes, in most circumstances, the writers who have used this “model” have always recognized the great advantages of hedgehogs.  They live low-stress lives, absolutely convinced that their one big thing is correct and protects them against enemies or assures their success.  By contrast, foxes have to “make it up as they go along”, with confidence only in their personal ability to do so, rather than any “solution”.  But because they can “customize their solutions to each situation, and even change them in mid-stream if they aren’t working, they often survive better than hedgehogs.

The risk to hedgehogs, of course, is that their one big thing won’t work in all circumstances, and they may be so committed to it, that they don’t even consider anything else until it is too late.  France before WWII and their “Maginot Line” were a good example, while the US has deserted its “foxy” Constitution occasionally, such as when it interned citizens of Japanese descent in WWII and forgot to bother with trials for people during the McCarthy/Communist “war” just a decade later.

The same advantages and risks apply to policy makers and individual health care organizations.  Recently, policy makers have come up with to different, though related “one big thing”s as solutions to the health care cost crisis.  Many favor the simple idea of shifting most of the costs and responsibility for health care to consumers, via a wide range of methods, including consumer-purchased but tax-forgiven health insurance, and Health Savings Accounts.  The other favored solution is for payers to join forces with providers in shifting the focus of hospital and medical care from reactive sickness to proactive health.


The trouble with the cost-shifting solution is that merely shifting the costs to consumers seems unlikely to have the dramatic impacts suggested by its champions.  Consumers have always paid the costs of health care, though their payments have been disguised and diverted through tax-paying, the added costs of their purchases, accepting lower wages to get health insurance benefits, charitable donations, etc. in addition to their direct out-of-pocket payment.  HSAs and self-purchased insurance merely put more of the burden in the out-of-pocket category.

Shifting of costs to the more direct OoP side would make them far more visible and enable individuals to “feel the pain” of their personal burden.  While this might arguably be necessary to a cost solution, there is little hope that it would be sufficient.  Smokers know perfectly well how their nasty habit undermines their health and longevity, and even how much it costs them, often thousands of dollars a year, while depriving them of “freedom”, since most are truly addicted.  Yet they continue to smoke, in spite of this, even after they have been diagnosed with lung cancer, had a heart attack, etc. likely caused or at least made far more likely because of their habit.

Turning our largely overweight/obese, sedentary, fast-food eating, overstressed population into a mob of healthy, svelte and happy individuals merely by charging them for the consequences of their bad habits is unlikely to work.  It is a great hedgehog solution, and so attractively simple.  Moreover, it automatically reduces the costs to current payers, so they’ll be happy.  But since someone will have to pay the full bill for all the reactive sickness care that will continue to be demanded in record levels, the costs won’t disappear.

Consumers will simply be unable to pay the bill if they get stuck with the whole thing.  Moreover, they are likely to demonstrate the same levels of absenteeism, presenteeism, and other health-related “quality/cost” levels of performance, despite, perhaps because of having to pay the bill.  What better reason to leave their current employers than prospects of another who will offer them health insurance – or turning out one party/administration because another promises not to take health care costs directly and immediately out of their pockets!

As long as we have a market economy, there are likely to be employers who will prove they can offer health insurance while remaining competitive to both customers and employees, leaving rivals who expect to get off scott-free in the lurch.  And as long as we are a democracy, the fact that employers favor getting out of the health insurance benefit business, and will contribute to politicians who favor shifting all costs to consumers, means that parties or candidates who only please employers won’t get nearly enough votes.

Unless cost-shifting is combined with a lot of consumer empowerment, support, incentives, etc. — including a national “culture shift” toward being healthier – there is unlikely to be the kind of nirvana many foresee.  People are simply far too complicated, i.e. they are mostly foxes, to let one simple solution alter their behavior as desired or expected by policy wonks.  Perhaps a few, even a modest minority might react and respond as wished, but getting most or all is a pretty far-fetched wish.

Behavior Shifting

The second hedgehog solution speaks directly to this problem.  It argues for a host of payer-sponsored proactive health programs to turn the current batch of unhealthy, heavy users of reactive care into rare and brief users, thereby saving everybody, including consumers, lots of money.  It at least “shares the wealth” by enabling everyone — except those whose lives and fortunes depend on high levels of reactive care use and expenditures – to end up winning, where cost-shifting will harm consumers as well as providers.

The full range of behavior shifting arrangements would cover proactively:

  •     managing current chronic diseases, to prevent crises, complications and worsening therof
  •     preventing, correcting or at least controlling current “pre-diseases” and risk conditions such as overweight/obesity, high levels of blood pressure, sugar and cholesterol, etc.
  •     preventing or reversing unhealthy behaviors such as smoking, substance abuse, unsafe behaviors, etc. or reforming them to become healthy behaviors such as physical activity, healthy eating, effective stress management, etc.
  •     promoting positive health, for its added effect in either reducing risks of disease/injury, or promoting quicker and cheaper recovery therefrom

If really significant changes could be made at population levels in unhealthy or risky behaviors, there could be dramatic decreases in the incidence and prevalence of diseases, and in the costs of caring for them.  Estimates are that as much as 30-50% of total health care expenditures could be prevented.  Of course, preventing them will cost money, on its own, so the net ROI will be substantially less than the total reduction in reactive sickness care expenditures.

But an even more troubling reality is that proactive health interventions may merely delay the onset of chronic conditions, not eliminate them, while adding to the average longevity of Americans.  And added longevity will tend to have two negative consequences, at least as far as costs are concerned.  First, it will increase the number of years that the average American is getting Social Security benefits, thereby threatening a system that is arguably in almost as bad a shape as is Medicare.

Adding say five more years to average longevity, without a corresponding delay in the initiation of Social Security benefits, would easily bankrupt the system, and fairly quickly.  The fundamental problem with our entire health/welfare system is that the number of younger people paying into retirement and health insurance funds is increasingly small, compared to the numbers drawing out.  The hedgehogs who designed both Social Security and Medicare simply did not foresee and prepare for the changing demographics that are creating dilemmas for most developed countries, not merely the US.

And there is a great risk that if proactive health simply delays the onset of chronic conditions, since, after all, the risk is much higher as people get older, this delay will simply become another kind of cost-shifting.  Younger people will have far fewer chronic conditions, and perhaps even fewer acute diseases or injuries as well.  But when they get older, especially during their extra years of longevity, they will start getting all the usual diabetes, heart disease, stroke, cancers, etc., which were merely delayed.

And what that will mean is that Medicare will get to pay for all this delayed morbidity, while employers and insurers are happy as clams.  So not merely the Social Security system, but the Medicare program will be pushed into bankruptcy.  And since employers have to support the Social Security system, while consumers will not be able to pay for the costs of their health care when they are old, the eventual result will be a similar game of re-arranging the deck chairs on the Titanic.

It is unclear whether proactive health shifts would merely delay the incidence and prevalence of disease and injury, but it is certainly clear that it would increase longevity.  The only way we can keep the Medicare system viable is by ensuring that people live a longer but also healthier old age.  We need the population as a whole to model their health history on the “one-horse shay” of Oliver Wendell Holmes’ poem, living in perfect or at least great health until the very end, or very near the end, then going all at once.

This will not solve the Social Security crisis, however, since people would still be living and drawing benefits for far longer.  In the long run, it seems likely that the only solution to this crisis would be a “foxy” approach that tied the Social Security outflow to its inflow, with decreasing benefits paid out as long as the numbers and amounts paid in decrease.  This would mean having to “privatize” our own retirement, whereby what people are willing to pay into tax-delayed retirement accounts, plus what they would be willing to tax themselves to support those who don’t invest enough in such accounts, would determine how much each of us gets when retired, not the current hopeless dream of Social Security as is.

We have to recognize that complex problems do not have single or even simple causes, hence are unlikely to have single or simple solutions.  Our many “systems” are involved in complex “systems dynamics” where they not only affect each other, but what we do in one affects what happens in others.  We may never be able to accurately describe and predict how such systems behave, but we are unlikely to come close if we prefer the more attractive hedgehog approach to the more difficult challenge of the fox.

Common Interests in Managing Diseases and Risks

by Scott MacStravic

Arguably, it is in the best interests of practically everyone that acute and chronic diseases be prevented by providers and avoided by consumers wherever possible.  Most providers, of course, have somewhat mixed feelings on the subject, since their very existence depends on there being enough acute and chronic sickness to drive enough demand and payment for their huge investments in sickcare capabilities.  But hospitals and physicians share missions that emphasize making their communities healthier in general, which is clearly best done via proactive health investments.

There has always been one special class of healthcare provider – the prepaid group practice/hospital system.  Kaiser Permanente is by far the largest and best known, though there are others with long histories and success, such as the Group Health Cooperative of Puget Sound.  What makes them special is that because they are prepaid for the sickcare their members might need, they have a built in incentive to minimize such need.  Both Kaiser and Group Health have long histories of emphasizing prevention and risk avoidance or management, in order to minimize the need for sickcare.

But recently, Kaiser has taken this motivation one step further, reflecting its apparent recognition that it is in their own as well as the community at large’s best interests to prevent sickness and manage chronic disease to minimize the crises, complications and worsening thereof.  As a result, Kaiser in Northern California has offered its proven “Healthy Heart” risk/disease management program to the community at large, including free tools to help others achieve the kinds of benefits it has noted, as well as consultations to organizations wishing to do the same.

The program combines health risk assessment (HRA) with disease management specific to heart disease.  Kaiser offers information and tools, such as its HRA and DM tools and information, through website access, grants to community clinics and public hospitals, and free consultations from Kaiser physicians to healthcare organizations interested in employing the same program.  Since Kaiser believes the program is responsible for its members having a heart disease death rate 30% lower than the U.S. average, it is willing to share what it has worked to the community at large. [“Kaiser Offers Heart Program to Others”, June 2007]

Additional information on the program and Kaiser’s willingness to share information, make grants or provide consultation can be found on its website: www.kp.org. A strong argument can be made that it is in the interests of all third-party payers, including governments, to be equally generous with proactive health technology.

Because people do not remain members of the same insurance plan, even Kaiser and Group Health, for their entire “patient lifetime”, it must always occur to all payers that any investments they make in proactive health risk or disease management will partly at least end up benefiting other payers, often before it benefits the payer making the investment.  On the other hand, because people can also come in as new members “trailing clouds of glory” rather than risk because of their participation in another payers’ proactive efforts.

Since everyone who lives to age 65, plus any who are eligible as disabled by illness will eventually become Medicare beneficiaries, it makes equally good sense for the federal government to invest in proactive health for all.  Eventually the level of sickness that has not been prevented will become the reasons for the levels of sickcare that Medicare is already paying and trying to manage after the fact.  Medicaid already contributes to wellness for Medicaid beneficiaries, even though tenure in the program is often very short, because so many of its beneficiaries return to coverage again.

It might be interesting if insurers could see this “advantage of the commons” as something that could counter the “hazard of the commons” they already face with respect to consumers’ willingness to be unhealthy because they pay such a small portion of the costs thereof.  And as health spending accounts grow, even consumers may begin seeing the same advantage.  If consumers, employers, insurers and governments all saw advantages in acting for the general interests of all, as Kaiser is doing, there might be some interesting changes in the health of the community and the costs of future sickcare.
Moreover, if all these stakeholders see enough advantages in preventing acute and chronic sickness, they might be willing to pay enough to providers to entice them to join in the effort, as well as share information and tools proven to work.  If so, then we might see essentially all healthcare stakeholders working in the same cause.

Obama on Healthcare

by Tony Chen

Today, Obama unveiled his stance on healthcare. Politically, this is significant because (1) it’s really the first time he’s provided a detailed glimpse into his policy mentality on anything; (2) healthcare has been Clinton’s pet issue up to this point; (3) healthcare has been deemed by some as the “theme of the Democratic primary.” While still fuzzy on total numbers, his strategy would mandate employers to provide (or fund) health insurance, create a new system for uninsured coverage, and establish a new “National Health Insurance Exchange” aimed at regulating insurers. It’ll be funded by eliminating tax cuts (capital gains and inheritance) for the wealthy. Under this plan, big pharma, managed care, big business, and the wealthy are the losers. By 2012, Obama promises a truly universal healthcare solution.

What’s missing in all the candidates’ policies are exactly the issues that we’ve been discussing here at World Health Care Blog. It’s not sexy (unless you are at a healthcare policy analyst party) to talk about investing in preventive health or managing the chronic diseases that will ravage our country for the next 50 years. It’s not appropriate or relevant to talk about personal responsibility and good lifestyle decisions in healthcare on the campaign trail. Is there a candidate out there who is willing to take on healthcare politics AND health politics?

By the way, here’s an excellent rundown of every candidate’s voting record regarding healthcare. And here’s AAFP’s summary of every candidate’s stance on healthcare.

Will Employers Be Leaders or Spectators in Health Reform?

by Scott MacStravic

While roaming the halls at last week’s World Healthcare Congress, I ran in to an old colleague and former CEO of mine, and discussed old times and different ideas we had over ten years ago.  Among these was the direction that employers would take in their already major efforts to reduce their healthcare costs.  He is still convinced that they will be on the sidelines in efforts by governments and healthcare organizations to address this challenge.  I think he’s half right.

Employers seem to be dividing themselves into two camps, or at least arraying themselves along a bipolar continuum.  At one end are those treating their employees, who generate all those healthcare costs, after all, as the problem, to be grudgingly paid and deprived of benefits where possible, while the employer reduces its investment in their health as much as it can.  This may mean dropping coverage entirely, offering mini-insurance with low annual maximums, or catastrophic coverage with high deductibles, or otherwise shifting as much of the burden as possible to employees.  This automatically saves such employers a lot of money.

At the other end, however, and there were representatives of many such employers at the Congress, are those who see their employees as essential “human capital” assets whose performance and value to their firms can be dramatically improved by enabling them to become healthier.  This means using “Value-Based Benefit Design”, where all employee benefits are planned, managed, and evaluated for the value the employer and employees gain thereby.

In effect, while one set of employers focus on reducing or eliminating their obligations relative to sickness care, by shifting it to anyone else who will take it on, the other set is investing in increasing their obligations relative to health care.  In this latter approach, they are creating worksite wellness programs, onsite clinics, and partnering with their employees to not only reduce the productivity and performance impairments that are related to “unhealth”, but to promote productivity and performance improvements that can emerge from surpassing the normal levels of impairment in even healthy employees.

When HealthMedia, Inc., Ann Arbor, Michigan, analyzed data from roughly 175,000 employees on their self-reported productivity impairment, for example, it found a level of between 6% and 7% impairment among those with no reported health issues at all.  This was almost half the total overall impairment discovered relative to chronic diseases, risk conditions and behaviors across all employees, mainly because it applied to all employees.

Up to now, the main drivers of productivity and performance among employees have been new technologies and systems invested in by employers, giving the US about the world’s highest productivity per employee.  But the drivers of employees’ voluntary productivity, that not forced by their fear of losing their jobs and need for the necessities of life, have barely been scratched.   And while health improvements can make significant, even dramatic differences to worker performance, their commitment, morale, and empowerment to do the best possible job has largely been ignored.

While the theme of “pay-for-performance” (P4P) was also a common topic of discussion at the Congress, it related to paying providers more for doing what they are supposed to do a little better.  If more motivating and satisfying P4P systems were applied to employees, along with effective health improvement efforts, who knows what heights of productivity and performance might be reached by employers willing to make the investment.

Best Buy, for example, was able to increase its corporate office workers’ productivity by 35%, in one year, with the relatively simple step of empowering them to work whenever and wherever they pleased – while decreasing turnover from over 16% to zero. [M. Conlin “Smashing the Clock” Business Week Dec 11, 2006]  A windshield repair firm improved its worker productivity by 44% in one year by switching to a P4P system, while reducing turnover among high-performers by 21%. [E. Lazar “Performance Pay and Productivity” American Economic Review 190:5 Dec 2000 1346-1361]

If employers were to adopt an overall “Value-Based Human Capital Management” policy and practices, they might find that similar gains in productivity and performance can be achieved, by combining health with motivation and talent improvements.  If that happens, the real “competitive solution” to the health care crisis might be led by employers who can prove they are on the right end of the continuum in terms of the value of human capital assets, and the ways to get the most value from them.

Employee Health Management: Perk or Policy?

by Scott MacStravic

There seems to remain a division of opinion over whether maintaining and improving employees’ health should be a perk reserved for a few, or a policy applying to all.  There are financial grounds for both opinions, depending on which financial consequences employers look at.  In general, the more carefully employers look when considering such consequences, with the possible exception of employers who do not view employees as anything but costs, the more the policy view seems justified.

The Perk Approach

It has long been and continues to be the case in many organizations that special health-related perks are reviewed for executives and key professionals, rather than made available to the workforce as a whole.  Executive health programs, for example, where organizations’ MVEs (Most Valuable Employees) receive from a day to a week of health assessment and counseling, at costs to the employer of from a few to ten thousand dollars or more, have long been offered by prestigious hospitals and academic medical centers.

Such investments by employers may also be justified on direct financial grounds.  Assuming that MVEs are truly worth the kinds of compensation they typically command, making or keeping them healthier can increase the number of days they spend on the job, and their performance while at work.  One study, for example, found that executives participating in such programs had 45% fewer absence days compared to those not participating. [N. Santelmann “How The Wealthy Get Healthy” Forbes.com July 21, 2004]

Gradually, the executive health idea has moved beyond an annual “spa” visit and begun to include ongoing health coaching.  Duke University Medical School, for example, is one of the academic medical centers that includes packages of ongoing phone coaching for up to six months after visits to one of its many health center programs.  St. Helena (CA) Hospital offers a one-day program, but also a one-year follow-up monitoring and coaching program for added payment.

Perhaps the most continuous executive health program is that offered by the MDVIP organization through its roughly 150 physicians in 16 states.   It offers what it calls “The 365 Day Executive Physical”, which is based on a personalized wellness plan for each MVE participating.  By reducing hospitalizations and sickness-related absences by as little as ten days a year, employers can recover their full investment in this continuous approach to health management.

The Policy Option

For employers who feel that all their full-time employees are valuable enough, employee health management (EHM) for all can make sense.  The costs of such programs will rarely if ever approach the investments usually made in executive health, but there are grounds to invest a fair amount of money, given the potential returns.  The key, however, is to address the full scope of “health” that affects employees, and the full scope of the effects of managing it well.

When health is defined to include not just the management of high-cost chronic diseases, which may warrant targeting only a small portion of the workforce, but risky behaviors and conditions, along with the stress and negative health effects of working conditions themselves, employers are finding plenty of effects.  These include reducing medical/hospital costs, but go on to encompass workers compensation and disability costs, absences and reduced performance at work.  Many employers have found reduced turnover and improved revenue effects as well.

In the UK, for example, since the government’s National Health Service covers care for all employees, employers often used private medical insurance as a perk to help in recruiting and retaining MVEs only.  But when they realized how much EHM can affect both their labor costs and overall revenue, they began adding programs for all workers.  The Standard Healthcare Insurance Co. for example, credited its EHM efforts at least partly with increasing its revenue by 51% over three years, along with cutting its staff turnover by half.  [“Standard Life Healthcare” Vielife Case Study 2006]

It is pretty much a matter of economics as to whether it makes financial sense for employers to offer some kind of EHM program to all employees, rather than a select few.  Depending on the risk-reward potential of each employee, given each’s health status and risks, along with each’s current levels of productivity and performance, i.e. of each’s value to the firm, and depending on the cost of EHM interventions that can work with each it is likely that employers or the providers they hire to operate the EHM program, can match the costs to the return potential for practically all employees.

This fact is also being recognized by EHM providers. Where many had only one “solution” and one cost for employers, most have either merged or contracted with other providers to expand their range of solutions, both regarding which problems will be solved, and what kinds and costs of interventions will be applied in which cases.  By tailoring the type and costs of interventions to the type and value of returns expected from each employee, a full range of options can become good investments, with almost all employees enjoying some health benefits, along with incentives and rewards, themselves.

Employees Are Health Investors, Too

by Scott MacStravic

Businesses are taking diverse positions on the subject of investing in employee health.  Many are dropping health insurance coverage or cutting benefits, since these directly and immediately cut their labor costs.  But many think of health benefits as investments, with measurable and significant payoff in terms of employee productivity and performance, and thereby improved balanced scorecard performance for the firm.

The challenge for business is often one of timing.  Will the investments they make this year pay off in this year?  Will it take years for proactive health initiatives to affect workers’ health, and thereby productivity and performance?  Will the employees still be working for the same employer by the time investments pay off?  Will the return on investment (ROI) ratios and overall economic impact be great enough to make the decisions (and deciders) look good to boards and shareholders?

While workers, themselves, don’t worry too much about their “profitability”, they are also investors when health maintenance or improvement efforts are made.  They always have to invest their time and effort in any proactive health initiative.  They may also have to invest their cash, to pay for medications that control risks or diseases, to join health/fitness centers, to eat healthy food, for example.  And they are likely to have a similar attitude to that of employers when deciding whether to make and continue investing in such initiatives.

Proactive health may pay off almost immediately.  Getting a flu shot should prevent being smitten by influenza in the same flu season as the shot is given, though the payoff amounts to something that does not happen, so is harder to detect and realize its value.  Taking the medications that help control an existing chronic disease can save patients their own money and time getting care, to say nothing of the intrusiveness into their daily lives that many diseases impose – and these benefits can occur in the same year as patients “invest” in improving their compliance with medications regimens.

But when it comes to managing risk conditions — such as overweight/obesity, high levels of blood sugar, pressure and cholesterol, low bone density, etc. – it is unusual for any significant reduction in illness to occur in the same year that the investments are made.  It may take years, even decades for measurable results, which are also things that don’t happen, so are not very noticeable.

Risk behaviors, when ended, modified, or replaced by healthy alternatives, can produce immediate and noticeable benefits in some cases.  Quitting smoking, for example, can make it easier to get work done, thanks to not having to take smoking breaks all day.  It can save hundreds, even thousands of dollars a year in “discretionary income”, and make it possible to enjoy another use of the money.  Of course, it can also produce “withdrawal” symptoms, increase stress, lead to weight gain, or have other significant “costs” as well.

Most risk behaviors, however, have a long-term payoff, and since by definition “risk” is a statistical probability rather than a certainty, it is difficult for any individual to be certain a given behavior change has had any effect at all.  Some, fortunately, pay off in weight loss, energy gains, feeling better about oneself, or other benefits that may be considered well worth it by individuals, even if they are not certain about the health benefits.

Many employers and policy gurus may feel that the intrinsic benefits of reforming one’s health behaviors — whether to manage a chronic disease, reduce an existing risk condition, or reduce general risk of disease or injury – should be enough to motivate individuals.  But since the benefits thereof often take a while to occur and be noticed, and many may never be recognized, while the investments will always be noticed, the use of extrinsic incentives and rewards may be necessary to achieve a high enough level of motivation to make a difference.

There is also an issue of fairness involved.  If employers and insurers gain measurable financial benefits from changes in behavior made by employees, dependents, or health plan members – is it not fair that those who invest their time and effort to achieve such benefits should share in the results thereof?  The practice of “gainsharing” is already well-established in employee suggestion programs, for example, as well as in capitation and other risk/reward arrangements between payers and providers.

When and because employees or health plan members have to make their personal investments upfront, it is logical for payers to entice them to do so via incentives and rewards, to make the investment both significantly and immediately rewarding.  The intrinsic benefits of changing behavior may be too uncertain or take too long to make them effective justifications or rewards for such change.

On the other hand, extrinsic benefits notoriously lose their impact with time.  Continuous rewards for the same behavior become perceived as “entitlements” after a while, and may have little effect as a result.  Fortunately, at the point where extrinsic rewards lose their luster, it is that much more likely that the intrinsic rewards will be perceived and appreciated by individuals who change to healthier behaviors.  It may turn out that by enabling such people to monitor the improvements in health and quality of life they gain,  by reminding them periodically and encouraging their peers, family and friends to do the same, sponsors of proactive health initiatives can supplement or supplant their extrinsic rewards without reducing individual’s commitments and investments.

Next entries »