HCI3 Update from the Field: Take Note – The Stick is Effective

Submitted by francois.debrantes@hci3.org on Friday, October 11, 2013 - 11:15

Newtown, CT – October 11, 2013

Much like for provider incentives, consumer incentives must be directed at reducing the penchant for bad behaviors – that's basically the conclusion from the current experiments that are under way in value-based insurance design and were presented earlier this week at the University of Michigan's VBID Center. From Oregon to Connecticut, Rhode Island to California, public and private sector employers are successfully changing behaviors by, yes, punishing bad behaviors – non-compliance. Public employee benefit plans in Oregon have instituted comprehensive employee engagement programs which, at first, were met with the usual mix of consumer push-back (keep your hands off my love handles) and ivory tower concern (that's not the way to do an experiment). But it's working because penalizing someone for not doing something is more effective than rewarding them for "good behavior". Compliance rates in Connecticut with self-reported participation in wellness programs is above 90%, and the audits are confirming that there are few, if any, cheats. That's because the penalties for cheating are quite significant, as are those for not participating. Plan members have also responded to CalPERS' reference pricing for total knee replacements, and CVS-Caremark's requirement for submission of health risk assessments. VBID works folks, and none too soon.

What this means to you – We note again this week to which extent States are leading the way in market transformation. There are several reasons for that. First, the implementation of the ACA is going to increase Medicaid rolls and associated state expenses. Second, state employee benefit plans continue to increase far faster than other parts of state budgets and squeezing out important investments. Third, the new light that shines on health care prices has awakened policy makers to the distortions in the current market. All of these effects combine to force the hands of state leaders to take on what was, until now, a sacred cow. The experiments are varied and range the gamut from aggressive payment reform to just as aggressive benefit design reform. And each program yields lessons learned that, collectively, we must collect and disseminate, replicating what works and tweaking what doesn't. While the ACA has certainly created the impetus for these changes, it's mostly the realization that residents in states can't be taxed ever more, that raising revenues is not the solution to controlling expenses, and that there's no reason every resident in a state should bear the price of dilapidated infrastructure while paying the cost of state employees' generous health benefits. Of course, that realization has not dawned on everyone. In a recent meeting Jim Knickman of the NY Health Foundation highlighted how his state has, so far, failed to act. But for those who have embarked on needed changes, the important lesson emerging is that the stick is effective. Others should take note.