A few weeks ago, the media announced that several large companies (including AT&T, Verizon and John Deere) are considering the implications of dropping healthcare benefits altogether and “paying the penalty” that government plans to impose as a result of healthcare reform (1).
On the surface, it seems like a great deal.
A friend of mine, Sam, has worked for a very large, Fortune 100 company for over 15 years. Recently he commented that there had been some changes to their health plan options that were not popular among employees. “You wouldn’t believe what the company did!” He then recounted how the company had issued an apology to employees for taking “too big a step, too fast.” Sitting in a small group of friends, we asked him what happened.
First, something you should know about Sam: he is a trained technology professional, known for doing his homework. In our circle of friends, we all “ask Sam” when we plan to make any significant purchase related to cars, travel, computers, sound systems, televisions, printers, you name it. Chances are, Sam is up on the latest brands, vendors, where to get a good price, and who to avoid. Sam is the definition of the smart, informed consumer.
Why do work bonuses influence exercise and smoking?
In this blog space, we have written many times about the connection between performance-based pay and positive outcomes, including higher productivity (1) and fewer absences (2). We’ve also seen examples where the structure of compensation seems to influence healthy behaviors (3). We often get questions about why or how pay and health might be connected.
Connecting a few more dots.
The standard answer: when good health translates into a greater opportunity for personal gain (incentive), workers value their health more. While our research shows this to be true from an economic perspective, I’ve always wondered: what is the psychological explanation? So, for those readers with a curious mind, a recent study connects the dots a little better.
A belated thank-you note
Thirty or forty years after the fact, I’d like to thank teachers who made learning fun, coaches who converted lessons into games I wanted to play, and school officials who kept us safe and engaged. I was one of the lucky ones who learned a lot, came home both mentally and physically tired, and suffered mostly from typical stresses (like pop quizzes) and not fears of bodily harm. Best of all, I was surrounded by people who believed – and convinced me – that hard work would result in a rewarding life and career when I grew up.
In other words, without knowing it, my learning environment at school allowed me to develop strong human capital assets that continue to serve me well today.
Lots of kids aren’t so lucky.
According to a recent report called “Healthier Students are Better Learners” (1), many children in the U.S. face circumstances that limit their opportunity to develop and build human capital assets, be it skills, health, or motivation.
Three years ago, in January 2007, we wrote a blog (1) about a new “blockbuster” study, the findings of which should have revolutionized cardiology. Results showed that the common procedure of placing “stents” inside heart vessels (at a cost of $15,000 or more each) was no more effective for stable patients, and sometimes more harmful, than taking medication (2). In fact, death rates and repeat heart attacks were even higher in the stent alternative.
What a wonderful discovery for managing medical costs: spend less, get equal or better results, and cause less harm. A trifecta of benefits!
To see wonderful illustrations of why the “good health = lower cost” equation is an oversimplification of reality, take a peek at the contents of the past two issues of the Journal of Occupational and Environment Medicine.
First, there are several articles reinforcing the widely-accepted direct link between health status and the cost of healthcare.
Four studies show that people WITH a health condition have higher costs than those WITHOUT the condition. Patients with diabetes, fibromyalgia, low back pain and poor sleep, have higher costs and/or absences than patients and workers without those conditions (1, 2, 3, 4).
But that’s just the tip of the iceberg. A potpourri of other studies reminds us how complex the topic really is:
Now I see!
Globally, 150 million people have treatable vision problems that remain uncorrected. Researchers estimate a loss of productive effort amounting to $269 billion per year from education and work these individuals are prevented from achieving (1). That number of people is equivalent to half of our nation’s population being prevented from reading in school, seeing the buttons on a calculator, or having the ability to safely drive a vehicle; a huge and avoidable loss.
In our last blog, we discussed what health innovation might look like in a consumer-oriented market. Most of the examples we used were hypothetical, comparing technological advances in consumer goods to what has not happened in delivery of healthcare. Today, we look at a remarkable example of innovation—an inexpensive solution to recovering human capital in the developing world through access to corrective eyewear.
When it comes to health, rarely are we able to carefully quantify the degree of physical dysfunction and then fix it in a direct, measurable way. But there is an unusual exception: sight.
Fixing vision seems easy enough.
On the surface, it seems straightforward to simply send lots of good eyewear to developing countries. However, because each set of imperfect eyes has unique flaws and needs a slightly different type of adjustment, one quickly learns that our U.S. approach to hi-tech equipment, trained medical personnel, and a wall display of fashionable eyewear isn’t economically feasible (or available) in remote villages in places like Bangladesh.
Let’s say you are hiring someone to fill a high-level position in one of your offices across town. You find a great candidate and offer him a job. He says “Sure, and I expect a large salary. But I will not communicate with you by email or voice mail. You have to come and see me in person if you need anything. ” Sound reasonable? Of course not.
But this is what usually happens in healthcare. Although exceptions are becoming more common, as of last year only 36% of doctors had ever used email to communicate with patients (1), and some ask patients to pay a monthly fee for the privilege (2).
Today’s blog is a response to benefits managers and corporate medical directors who have (and will in the future) exclaimed “these programs were supposed to save us money, so why are your data saying they don’t? Is there something wrong with your analysis?”
While I am formally trained in Evaluation Methodology, I recognize that only a few kindred spirits share my passion for this field. This blog doesn’t require that you LOVE evaluation, but it is a little more detailed than usual, because it seems important to explain why our direct evaluations so infrequently show (expected) measurable savings from health improvement programs. There are three overarching reasons, each of which I will highlight briefly.
You could say this is a story of a group of underdogs who become company heroes. Or you could say it is a story of a smart business manager. Either way, it is a success story where a once-disappointing department improved productivity by over 35% and dropped absenteeism by an amazing 70%. How? Aligned incentives. And it all started with a dinner conversation…
Let’s start at the beginning.
Over their evening meal, one of my colleagues was talking with her husband, “Chris,” about work. His company sells medical supplies, and he had recently been assigned new responsibility for several departments including accounts receivable (AR). Chris soon learned that AR was considered the “problem” department, often blamed for less-than-adequate collection rates and perceived as poor performers overall. Unplanned absences were all too common. Chris saw that AR team members received very little feedback, and what they did hear was uniformly negative and critical. Chris worried that the few high performers he had would not last long in such a difficult environment.
It is not hard to learn more. What is hard is to unlearn when you discover yourself wrong (1). ~Martin H. Fischer
In the frightening time of the Black Plague, many held strong beliefs about how the disease spread. Clergy claimed it was a punishment directly from God; Hippocratic physicians said it was an imbalance of the body’s four humors; Astrologers attributed it to the proximity of Jupiter, Saturn and Mars; the public was told that bathing and exercise were risky because they opened one’s pores; some even said it could be passed through an evil stare (2, 3). We can only imagine the pervasive panic, fear and misunderstanding that drove people to all sorts of ineffective “preventive” behaviors.
Even when the true cause of the Plague was discovered, I wonder how long it took for people to actually believe the real scientific explanation, or begin bathing and making eye-contact once hearing that their previous beliefs were incorrect.
At the Health as Human Capital Foundation, we often witness scenarios where employees, when given the choice and proper incentives, actually spend company time and money MORE wisely than they would under a strict set of rules or governing policies.
This is just that sort of example.
Most every company we work with has an extensive paid-time-off policy, detailing what days are allowed, for what purposes, and at what times during the year. There are extensive rules governing its use and tracking their frequency. But it’s worth asking: even when companies spend time and energy defining a thoughtful policy and system, is there an exact amount of time off from work that suits each of us perfectly? What if we allow workers some discretion in how much time off they want?
Do you honestly believe that individuals deserve the right and responsibility to make their own choices about health care? Before you answer, remember, the ultimate decision-maker is the one who spends the money. So, giving individual patients control also means putting them in charge of healthcare dollars.
When it comes right down to it, most people say they support patient rights, but only in the context of someone else paying the bill. Here’s why those two issues cannot be separated:
In the previous blog, we covered three out of the four drivers of healthcare costs:
1) Basic costs & bad luck;
2) Demographics and labor market; and
3) Health status.
We learned that #1 and #2 account for a portion of healthcare costs that are non-modifiable, and that health status is a less influential driver than one might expect.
We move to the final driver of healthcare costs, which is both modifiable and significant, but unfortunately too often overlooked: business practices. What do we mean? Business practices are the entire set of employee policies and practices captured in everyone’s workplace environment and employment contract—such as how compensation works, how health benefits are structured, how time off is allotted, how employees are trained and managed, etc. In combination, these practices have amazing influence over employee behavior. (This topic has been touched in previous blogs and will not be surprising to regular readers.) However, the magnitude of business practices’ influence on employee behavior catches most people off-guard.
When medical and disability costs are high, conventional wisdom assumes there must be more illness driving up costs, right? But how much of total cost can we actually attribute to health status versus other things?
Four Parts
There are actually four driving components of health and absence cost, the first three of which we’ll cover here, and the fourth in the next blog. To give away just a little of the secret in advance, it may surprise some readers to learn that health status is not as powerful a predictor of cost as one might expect.
If those who have the money are the ones with decision-making power, why not let patients have both? As government and insurers debate over who should grant permission to doctors about which treatments and care regimens are acceptable, why not award ultimate control to the person in the best position to decide—i.e., the person receiving the care?
Consider this story:
In a radio interview last month, I heard two doctors (specifically, both called “interventional cardiologists”) debating the merits of their preferred approach to unclogging heart arteries. One followed guidelines based on evidence that when patients are stable, medications are as effective—and often safer in the long term—than placing a stent in the artery. The other has a “bias” toward stents, and places an average of seven a day. He says that when he sees the blood flow increase immediately, he knows it helps the patient immediately. Both doctors insist that money has no influence on how they practice, and if it influences some doctors it only happens at a “subconscious” level.
Imagine being a benefits manager for a large corporation boasting three straight years of flat medical and absence costs in 2005, 2006 and 2007 (1). Like many benefits managers, you might be proud and vocal about the many programs you’ve purchased to encourage health and disease management. We have all seen such flat trends attributed to health interventions provided by employers. This example was no different.
…..we cannot afford (nor should we strive) to provide unlimited medical services to every person in our nation.
Almost everyone agrees: healthcare reform is needed, and the call is loud and clear. Silently, decision makers have also agreed NOT to tackle the hard questions that must be answered before any of the debate can be settled.
Ultimately, the healthcare crisis is a simple case of limited resources and unconstrained demand. We might wish healthcare reform could simply be about caring for our fellow citizens, or developing superior science, or implementing uniform efficiencies. But it’s not.
We have limited time, money, personnel and equipment that can be assigned to this one part of life. And what we spend on healthcare will not be spent on education, housing, food, infrastructure, public safety, and a multitude of other very important priorities. But it is not popular to say that everyone cannot have everything.
I know someone, Jane, who goes to the doctor all the time. She has every ache, bump, rash or other symptom seen by a physician, usually a specialist. Jane often starts a statement with “my (insert a specialist type like orthopedic surgeon) says….” She is vigilant about regular check-ups and timely screening tests, which in her mind means she is practicing prudent prevention.
The media (and discussions of healthcare reform), often limit their discussions of prevention to activities like check-ups and screening tests. A recent White House stakeholder’s meeting included suggestions from physicians such as: “the best prevention is providing people with health insurance,” and that “employers allot a certain number of hours for regular preventative check-ups” (1). So, it’s no surprise that Jane feels this way. She checks and monitors everything (a lot), so that means she is health-conscious.
But, there is more to the story. Jane eats a high-fat, high-sugar diet, does not exercise regularly, she is quite overweight, and takes several medications to manage several chronic issues.
Rule: a prescribed guide for conduct or action; a regulation or bylaw governing procedure or controlling conduct (1).
Coincidentally, this was the same day the news began reporting on a new regulatory framework for financial institutions: trying to avoid a repeat of factors that contributed to the current recession. It got me thinking about how the need for more rules is a clear and early sign that ANY system that is missing a natural balance of incentives will require excessive guidelines to KEEP PEOPLE from doing exactly what the system encourages them to do.
