Behavioral Economists Challenge Outcomes-Based Wellness Incentives
Posted by Bob M. in Behavioral Economics, Employee Wellness Programs, Incentives, Uncategorized on March 27, 2012
I’ve had to eat so much crow since I started posting on this blog, you’d think I would’ve acquired a taste for it by now. My latest sampling was served up courtesy of behavioral economists and their connection, or lack thereof, to outcomes-based employee health incentives.
In one of my least popular posts ever, Be Afraid: Behavioral Economics and Outcomes-Based Wellness (May 2011), I criticized corporate benefits managers who, I argued, relied on the research of behavioral economists to…well, do just about anything they wanted. (I specifically targeted my criticism to the authors and readers of behavioral economics manifesto, Nudge.) I wrote:
“In employee wellness, this is most readily visible in schemes that offer financial rewards (often in the form of cheaper health insurance) to employees who reduce their body mass index, lower their cholesterol and blood pressure, quit smoking, or excel in the employer’s notoriously flawed disease management programs….There is scant evidence that paying employees to achieve healthy outcomes, or penalizing them for unhealthy outcomes, is an effective strategy for improving health or controlling health care costs.”
Imagine my surprise, while researching yesterday’s post about a study showing intrinsic motivational strategies to be more effective than outcomes-based incentives, to learn that the research was co-authored by prominent behavioral economists Kevin Volpp, MD and George Loewenstein. Volpp is Director of the Center for Health Incentives and Behavioral Economics at the University of Pennsylvania, and is one of of the most frequently cited researchers studying health incentives. Loewenstein is Professor of Economics and Psychology at Carnegie Mellon University and director of the Center for Behavioral Decision Research.
Further investigation led to an intriguing article Volpp and Loewenstein (and others) published in the New England Journal of Medicine in August 2011. In the article, Redesigning Employee Health Incentives — Lessons from Behavioral Economics (a must read if you have any interest in health incentives) — the authors advise caution in applying their pro-incentive research to the employer environment.
They wrote:
“Although it may seem obvious that charging higher premiums for smoking (or high body-mass index, cholesterol, or blood pressure) would encourage people to modify their habits to lower their premiums, evidence that differential premiums change health-related behavior is scant. Indeed, we’re unaware of any health insurance data that have convincingly demonstrated such effects.”
Volpp, Loewenstein and their co-authors describe tenets of behavioral economics — for example, that incentives need to follow desired behaviors as immediately as possible and that their effects are diminished when they are bundled (like premium discounts or cash rewards bundled in paychecks) — that lead them to hold little hope for the type of health incentive strategies many employers currently have in place.
The authors conclude:
“The effectiveness of outcome-based wellness incentives is uncertain, and their use raises concerns about distributional equity; nevertheless, these approaches are gaining momentum because of rising health care costs and payers’ belief that incentives should work in health care as they do in other spheres.”
I couldn’t agree more. Outcomes-based programs are based on belief. It is a house of cards purportedly built on a foundation of research. But the researchers are saying, “Not so fast.” Ultimately, Volpp and Loewenstein suggest that the momentum of the outcomes-based bandwagon may be unstoppable, and sensibly advocate testing a variety of designs to identify what works.
In my “Be Afraid” post, I criticized outcomes-based incentive proponents, and the behavioral economists they invoked, for imposing on employees an intrusive and unproven incentive system. Turns out, I prematurely judged the behavioral economists, whose work was being used to defend a practice about which, as it turns out, they are skeptical.
In the employee wellness arena, we need to cultivate healthy, constructive skepticism to counter the complacency that risks hindering our innovation, our evolution and — especially as it relates to our desperate strategies to contain health care costs — our wisdom.
Buddy System Trumps Incentives in New Study
Posted by Bob M. in Behavioral Economics, Incentives, Uncategorized on March 27, 2012
A new study that flew under the radar of most wellness professionals may have major implications for our understanding of how to influence it health behavior and the role of outcomes-based incentives.
The study, published in the Annals of Internal Medicine, compared HbA1c improvements in three groups of diabetic patients:
- A group provided with telephonic coaching (a “buddy system”) delivered by a peer who received training in motivational interviewing.
- A second group offered a $100 incentive reward if their HbA1c dropped by one point after six months and $200 if their HbA1c dropped by two points or to 6.5%.
- A control group.
All three groups received their usual medical care.
The study subjects were not typical workforce members. In fact, some may not have been workers at all. The study included 118 African Americans ages 50-70, with poor glucose control, being treated by the Veterans Administration. They were randomly assigned to one of three study groups and had their HbA1c drawn at enrollment and at the end of the six month study period.
For more specific information about the protocols and findings, see the reader-friendly Issue Brief or try this link for a pdf of the full Annals article.
This was not an employee wellness study, per se, but it is relevant because one of the interventions tested — an “outcomes-based” incentive in which participants earn an incentive for achieving a specific biometric value — is fast growing in popularity among employers, despite the scarcity of evidence to support it. And the main intervention offered, peer coaching, may prove to have benefit for employee populations.
It would be ideal to have more worksite-specific research, but we are better off paying attention to non-worksite evidence compared to the usual wellness approach: flying by the seat of our pants.
In this study, the peer-mentoring approach was more effective than the incentive-based approach. As stated in a patient summary developed by the Annals of Internal Medicine:
“Patients with diabetes who talked with a peer mentor on a regular basis achieved the greatest decreases in HbA1c level. Patients with diabetes who received a small monetary incentive for good control had smaller decreases in HbA1c level that were not considered clinically important.”
This can’t be considered a breakthrough study for benefits and wellness managers, but we should certainly sit up and take notice that, in one of the few studies of its kind, the intervention that honored the individual, fostered social connection, and elicited intrinsic motivation trumped the intervention that relied on cold hard cash.
In an upcoming blog post: More about this study’s co-authors, George Loewenstein and Kevin Volpp, MD, leading behavioral economists upon whose work many employers’ have premised their so-called outcomes-based approach.
Deconstructing the ShapeUp Survey’s Findings about Incentives
Posted by Bob M. in Commentary, ShapeUp, Uncategorized on March 14, 2012
According to the ShapeUp Employer Wellness Survey, the average per employee per year incentive is $375.
I’ll take a pass, for now, on discussing the role of incentives in motivating behavior change. That topic is being well covered in all corners of the wellness world.
Let’s take a look at this number, $375. While ShapeUp wrote in its blog, and its webinar debate, that this is the average per employee per year (PEPY) incentive, I suspect that they were being more precise when they stated in their survey results that $375 was Read the rest of this entry »
Engagement vs Participation: Shaping Up or Just Showing Up?
Posted by Bob M. in Commentary, Employee Wellness Programs, ShapeUp, Uncategorized on March 12, 2012
Employers cited increased “engagement” as their number one priority when designing wellness offerings, according to ShapeUp’s Employer Wellness Survey. And in their webinar, “Debating the Results of Our Wellness Survey,” ShapeUp noted that respondents had used the terms “engagement” and “participation” interchangeably. Throughout the webinar, ShapeUp chose to follow suit.
For me, this part of the webinar was a roller-coaster ride. I was disappointed Read the rest of this entry »
Do Annual Physical Exams Improve Health Outcomes?
Posted by Bob M. in Commentary, Screenings, Uncategorized on March 10, 2012
In case you missed it, the most recent issue of the Annals of Internal Medicine included an important but disturbing editorial “What We Don’t Know Can Hurt Our Patients” (excerpt here). The editorial piggy-backed on an article describing a study showing that most physicians don’t understand screening statistics.
The discussion got me to thinking about an ongoing LinkedIn forum, to which I’ve previously referred, in which wellness managers are falling in lock-step in support of requiring annual physical exams.
Here, for what it’s worth, is another one of my contributions to that discussion:
According to the US Office of Disease Prevention and Health Promotion, “the US Preventive Services Task Force [in the 2nd edition of its preventive guidelines] has rejected the traditional emphasis on a standardized annual physical examination as an effective tool for improving the health of patients. Instead, they emphasized that the content and the frequency of the periodic health exam needs to be tailored to the age, health risks and preferences of each patient.”
A good overview of the topic, representing both sides, is available on the website of the American College of Physicians.
It’s important to identify how best to motivate employees to be fully engaged in their health and wellness. But first we must, as clearly as possible, identify those behaviors that are truly helpful. As for “annual” preventive exams, the most positive thing you can say is that the jury is still out.
Zero in on a ShapeUp Obesity Study
Posted by Bob M. in Commentary, ShapeUp, Uncategorized on March 9, 2012
I’m stepping aside from the series about the ShapeUp Employer Wellness Survey results to take a knee-deep dive into the obesity study published in the journal Obesity in 2009.
Bottom line: ShapeUp met a standard for excellence by publishing, in a peer-reviewed journal, the positive outcomes generated by it’s social-based wellness platform. The study should be a key consideration for any prospective purchaser who seeks evidence-based solutions (and that should be all of us). But…while the study, despite some limitations, gives ShapeUp the grounds on which to argue, “Anyone serious about controlling behavior-driven health care costs in America would be wise to zero in on weight loss interventions,” those of us in the field should take pause before Read the rest of this entry »
Zeroing in on Weight Loss May Be a Bad Idea — The ShapeUp Survey, Pt 3
Posted by Bob M. in Commentary, Employee Wellness Programs, Reporting, ROI, ShapeUp, Uncategorized on March 8, 2012
In one of ShapeUp’s initial posts following the release of the results of its Annual Survey Large Employer Wellness Survey, they emphasized that obesity is a key driver of employer health care costs, and the survey results found that employers view addressing obesity as an important goal.
ShapeUp concluded:
Anyone serious about controlling behavior-driven health care costs in America would be wise to zero in on weight loss interventions aimed at large, self-insured companies.
Anyone?
In fact, employers who invest in weight management are likely to be doing so to excess. Read the rest of this entry »
Intent-to-Treat: It Counts
Posted by Bob M. in Employee Wellness Programs, smoking, Uncategorized on March 6, 2012
If you’ve ever conducted an evaluation of your tobacco cessation program, you may be familiar with the distinction between intent-to-treat and responder quit rates. In case you’re not familiar with these terms, read on. Not only will knowledge of these methodologies inform your future evaluations of all your health promotion programs, but it will help you:
- Identify the interventions that are best to offer your employees.
- Present outcome data on your program’s interventions — not just tobacco cessation, but interventions for any health risk — in a more credible manner.
- More readily identify “spin,” when it is applied to the success rate of treatments — for example, weight loss programs — in the lay press and in peer-reviewed journals. Read the rest of this entry »
Blogging about the ShapeUp Employer Wellness Survey: Why and How
Posted by Bob M. in Commentary, Employee Wellness Programs, ShapeUp, Uncategorized on March 5, 2012
(This post is second in a series. For the full series, click here).
I don’t want to use this series of blog posts to simply restate what ShapeUp has published on their own blog. If you are interested in the survey — and you should be — I direct your attention to Read the rest of this entry »
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Wellness Budgets: ShapeUp Spotlights the One Percent
Posted by Bob M. in Commentary, Employee Wellness Programs, ROI, ShapeUp, Uncategorized on March 25, 2012
I nitpicked with ShapeUp for the way they used the term “per employee per year.” It’s only fair that I give them props for introducing a lot of people to one of the best ways to express total employee wellness budget: as a percentage of total health care expense.
In their survey results, ShapeUp reported, “Wellness budgets are typically 1-3% of total health care spend.” Elsewhere, employee wellness expense commonly is expressed as cost per employee per year (PEPY). For example, experts often state that a benchmark for employers’ success with wellness is an expenditure of $100 to $125 PEPY (more recently, some have advocated up to $500 per employee per year). PEPY is a valid metric, expressing the expense in the context of the size of the population. Less helpful is a simple expression of the absolute annual expense — say, $50,000 or one million dollars… whatever it may be.
I don’t know exactly why ShapeUp chose to express wellness expense as a percent of overall health care spend — perhaps it’s more common or more standard than I’ve observed — but the wellness industry would be well-advised to latch on to this metric.
Expressing employee wellness budget as a percentage of total health care spend accurately represents wellness as a component of the health continuum, rather than something extra. Further, this context spotlights the relatively restricted resources employers with self-funded medical coverage allocate to keeping employees and their families healthy, compared to the mind-boggling spend on their medical care.
ShapeUp quoted one of their survey respondents as stating:
This employer’s spend on wellness is approximately one percent of their total health care spend. If this employer was simply to say they spend one million dollars on wellness, many people — shareholders, the public, the media — would be aghast. A million bucks on wellness?! Might seem like a lot. An expense of $125 PEPY also would seem like a lot to anyone who knew the size of the employee population and chose to do the math.
But most people can’t begin to imagine how much an employer spends on health care. When this employer reveals that they spend $110 million on health care, their one million dollars for wellness doesn’t seem like so much.
In fact, if it’s true that 50% to 70% of health care costs are due to lifestyle, as many health economists claim, then is it so unreasonable to spend one percent of health care costs on helping people lead healthier lifestyles?
In the context of overall health care expense, committing one percent (in the case of the employer cited, one million dollars) to wellness doesn’t seem like nearly enough.
What’s more, this comparative metric — percent of health care spend — reveals employers’ single-minded focus on wellness return-on-investment (ROI) to be misguided. The the other 99% — which includes money spent on things like back surgery, “lifestyle” drugs like Viagra and Rogaine, and unnecessary tests — stand no chance of a positive ROI. An organization that truly fancies itself data-driven would be wiser to direct channel its resources toward understanding the ROI of the 97%-99% of their health care budget, rather than the 1%-3% spent on wellness.
Those of us charged with stewardship for the 1%-3% still must take seriously the responsibility of managing what, in absolute terms, is no small sum. We should focus on investing in what works, what employees need, and what employees want, in a manner consistent with the business objectives of our organizations. Identifying the most meaningful metrics — like percent of health care spend — is a step in the right direction.
(This post is seventh in a series. For the full series, click here).
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