What will it take to get Americans to adapt healthier behaviors?

Today, Sen. Ron Wyden, D-Ore., with support from Sen. Rob Portman, R-Ohio, is expected to introduce the bipartisan "Medicare Better Health Rewards Program Act of 2012." The bill would establish a program to award points for participation in a variety of wellness and prevention services and provide tax-exempt cash rewards to beneficiaries who achieve certain point levels.

In a 1998 analysis, The Health and Retirement Study (HRS), a 20-year nationwide survey of the health, economic and social status of older Americans, showed that wealth is tied directly to health. A major health shock, such as a heart attack or stroke can severely affect not only an older person's overall health, but also their long-term financial situation. Household income and wealth decline considerably after a health shock and income losses last for at least 10 years; most household wealth loss comes from lost earnings rather than from high out-of-pocket medical expenses.

On Tuesday, February 28, 2012, I wrote a blog titled “Our aversion to loss is greater than our desire for gain.” In that blog, I conveyed what I learned from Kevin Volpp, MD, PhD, a UPENN Professor in Behavioral Economics, which was that loss aversion is more powerful than gain motivation. The two pieces of information above raise a number of interesting questions.

1.    Will cash incentives motivate healthier behavior?

2.    Should cash penalties be used instead

3.    Instead of cash incentive, should the government publicize the financial effects of poor health and the benefits of good health?

4.    What would be the expected net economic effect of the "Medicare Better Health Rewards Program Act of 2012."

Before, answering these questions, for the sake of full disclosure, I am a provider of preventive services. The availability of cash incentive would theoretically make it easier for me to attract Medicare beneficiaries to take advantage of preventive benefits, thereby increasing my practice revenue.

Okay, now to the answers. In his book Drive, Daniel Pink argues that incentives ultimately do not work because without intrinsic motivation, the effects of incentives wane. Having run a service business for over 20 years, I can concur that incentives are a tricky lot.  I found that while incentives focus the mind on certain goals, they inadvertently distract from equally important goals. 

You may ask why not simply create a comprehensive list of goals? My experience is that the more goals involved, the less likely any of them are to be followed. Furthermore, when incentives are introduced, they can have negative consequences. For example, once one realizes that he may not be able to achieve the intended reward, he adapts the opposite tack and abandons any efforts whatsoever.  I’ve seen this happen repeatedly.

The other problem with incentives is called adverse selection.  This means that they may attract those likely to have been motivated to pursue the goals anyway and ignored by all others. The net effect is that you are providing rewards with no overall change in behavior and outcomes. Therefore, I am cynical that cash incentives will ultimately encourage seniors to improve their health by taking advantage of the smorgasbord of available preventive services. That said, utilization of such services as the Medicare Annual Wellness Visit are incredibly low today, in the 5% range, and therefore I think something must be done. 

The second question asks if penalties are more likely to work. Most politicians shy away from anything that may be deemed punitive but the facts remain as Dr. Volpp confirmed, risk aversion is a powerful motivator. That’s why I believe that people who engage in unhealthy behavior should be penalized by paying higher insurance premiums.  I think it is only fair to take accountability for one’s actions and suffer the consequences of one’s poor choices. There is precedence for such an approach. Car drivers with poor driving records pay higher insurance premiums and this approach is understood and accepted by society at large. We may not like it, but accept that there must be consequences to receiving moving violations and causing accidents. I think people will ultimately accept such reality in relationship to health insurance as well. That said, I am highly skeptical that such an approach would ever be adapted so I won’t argue its merits at length.

The third question focuses on public health messaging, which outside of the campaign to stop smoking is virtually non-existent.  Previous efforts like the Smokey the Bear and Don’t Litter campaigns achieved wide dissemination and although I don’t have hard data, I suspect were successful in decreasing wildfires and littering.  I think Medicare would be wise to gear up its marketing efforts to inform, encourage, and educate the senior population, as well as the population at large about both the availability of preventive befits and their value. My experience with patients demonstrates that most patients have a low health IQ, routinely follow misinformation, and generally need better guidance.  As Sy Syms the retailer would proclaim, “An educated consumer is our best buyer,” I believe that a better educated population will become a healthier one.

The final question regarding the net economic benefits is the hardest to answer. I believe that if the Act becomes law then utilization will go up. However, I fear the long term sustainability of such an approach, and as previously discussed the possibility for things to actually get worse.

There is no doubt that something needs to be done. For that reason alone, if the government is not prepared to start a marketing effort to educate the public, and will not adapt disincentives to encourage healthy behavior, then I meekly endorse the incentive plan. I do so with the caveat that close attention be paid to its effects with the ability to pull the plug if negative results begin to filter in. My final recommendation is that since this issue isof such economic significance, we try all three approaches immediately before more draconian measures are needed. Given a choice among the three, I choose in this order, premium penalties, educating the public, and paying rewards. How would you choose?