The Health Reform Summit—Making Prevention Really Work

As we approach Thursday’s bipartisan health summit, no one has yet successfully challenged the comprehensive health reform proposal I describe in my book, speeches, media interviews, and this blog. It has withstood all technical, actuarial, financial, behavioral, and economic challenges to date. This would be gratifying if it weren’t for one annoying loose end—the political issue.

Almost everybody tells me that my approach’s lack of sound-bite simplicity renders it DOA as a workable legislative agenda. They have a point. As bad as our health care system is, it’s not yet bad enough to engender the kind of political will necessary to put American consumers fully in charge of buying their own health insurance and medical care. Until we get there, let me offer a simpler, interim proposal that will immediately offer relief from out-of-control medical costs: we should make everyone financially responsible for his own preventable illnesses.

According to the U.S. Centers for Disease Control and Prevention (CDC), 75% of all our medical expenditures are for treating chronic diseases. CDC has stated that “chronic diseases—such as cardiovascular disease (primarily heart disease and stroke), cancer, and diabetes—are among the most prevalent, costly, and preventable of all health problems.”

Both Democrats and Republicans seem to agree that, to achieve prevention savings, insurers must improve prevention coverage so that more people will seek early screenings and treatments from their doctors. Unfortunately, they’re wrong. The only thing more expensive than treating preventable chronic diseases is preventing them—at least at the medical level. It surprises most people to learn that a 2008 New England Journal of Medicine article revealed that, “although some preventive measures do save money, the vast majority reviewed in the health economics literature do not.” Similarly, Health Affairs concluded in 2009 that “Over the four decades since cost-effectiveness analysis was first applied to health and medicine, hundreds of studies have shown that prevention usually adds to medical costs instead of reducing them. Medications for hypertension and elevated cholesterol, diet and exercise to prevent diabetes, and screening and early treatment for cancer all add more to medical costs than they save.” In other words, forcing insurers to cover this stuff drives premiums up, not down.

The problem boils down to this. Although treating chronic illnesses may be a medical issue, preventing them is not. It’s a personal behavior issue. A doctor may tell an obese patient that she won’t live a long, healthy life unless she loses weight, but unless the patient actually engages in new, permanent, 24/7 habits that include exercise and calorie reduction, virtually nothing the doctor can say or do will prevent her diabetes, cardiovascular disease, or cancer. The primary caregiver for prevention is the individual, not a doctor who may see her a grand total of maybe two hours a year.

To get effective prevention—and lower medical costs—we must permit insurers to implement new, long-term, more effective incentives for people to stop smoking, drinking, eating, and couch-potatoing themselves to death. The most straightforward and effective way to do that is to allow—even encourage—insurers, employers, Medicare, and Medicaid to charge lower premiums (or to pay rebates) to people who demonstrate control of their risks of smoking, obesity, hypertension, cholesterol, blood sugar, and alcohol. All are objectively measurable and all are subject to reasonable individual control by almost everyone. Properly applied, such incentives could lower health costs and insurance premiums by more than half for anyone and everyone willing to measure and control these risks. Many will respond to such incentives and stop smoking, lose weight, avoid excessive alcohol, and get their blood pressure, sugar, and lipids under control. Others will undoubtedly continue to exercise their god-given right to let their risks continue unmanaged. It’s just that, now, that right will be accompanied by a countervailing responsibility to bear the financial burdens that result. They’ll have to pay higher premiums. But the option will always be open for them to change their behavior and pay lower premiums—not to mention to live longer, healthier, more productive lives.

Premium incentives would be calculated by each insurer’s actuaries to be equivalent to the average expected annual costs of treating the preventable diseases associated with the various risks. Thus, a smoker would pay the added statistically expected medical costs of his behavior over his (abbreviated) lifetime. It is critical that incentives offer ongoing rewards for ongoing results, not efforts. Just joining a gym or participating in smoking-cessation programs won’t do it. Maintaining healthy weight and refraining from smoking will.

Critics will argue that such incentives are unfair to those who, despite their best efforts, aren’t able to earn the rewards under medically appropriate conditions. But we can easily apply exceptions for such people based on individual circumstances and sound medical and behavioral evidence. The key point is that, for the vast majority of Americans, such health-risk goals are individually attainable and, once attained, yield massive annual medical cost savings without putting further burdens on insurers to cover things that only add to premiums.

A really powerful benefit of this proposal is that it gives everyone the immediate opportunity to pay lower health insurance premiums. And if enough at-risk people respond by eliminating the risks leading to preventable chronic diseases, our national health care bill could drop by half or more.

But somebody has to tell President Obama and the Democrats and the Republicans. That would be you, dear citizen.

This entry was posted in Health Costs, Health Insurance, Health Reform Goals, Prevention and tagged , , , , . Bookmark the permalink.

8 Responses to The Health Reform Summit—Making Prevention Really Work

  1. Randy Dipner says:

    Properly incentivized,most people will respond. One only has to be careful that the action incentivized is actually the action you want. I think in this case Steve has the incentive right.

  2. Richard Nehring says:

    Steve,
    Great post! You confront one of the biggest problems in the current system, namely, that of the healthy subsidizing the behavior of the unhealthy, whether it be by age rating or community rating. Obviously, those who live healthily feel that they are being screwed by the current system design.
    A few questions: (1) How will insurers verify that individuals are actually living healthily? How do you keep people from gaming the system?
    (2) Why continue discriminating in favor of using more expensive prescription drugs versus less expensive, and often equally if not more effective, non-prescription supplements? If a new system wants to control costs, reconsidering treatement options systematically and the way the current system is financially biased in favor of one class of options versus other classes of options is a crucial step toward a more economically efficient system.

    Steve responds:
    Re your questions: (1) For privacy reasons, I would suggest leaving it up to each individual to undergo whatever testing and measurement is necessary to show his insurer that he complies with specific health risk factors. That way, on one would ever need to reveal that he has issues with obesity or high cholesterol, only the extent to which he doesn’t. This may sound like hair-splitting to some, but if they think it through, it’s not. (2) Great question! A lot of people are able to control their cholesterol, blood sugar, and hypertension with diet and exercise alone–no medications at all. As long as insurers make it more advantageous for people to rely on drugs by incentivizing their use, however, we’re likely to maintain that unhealthy aspect of our culture in which people expect a pill to cure the woes brought on by less-than-attentive personal behavior. My full-blown proposal for health reform addresses this quite effectively, but it’s not inherent in my stand-alone prevention proposal.

  3. Gary Christy says:

    A very good point, Steve. But isn’t this still political? Rather than Congress or the Executive Branch, won’t the insurance companies have to initiate this? Are there any companies brave enough to start it? Seems to me (naively) that if a company said we will reduce your premiums by 25% (for example), Gary, when you have lost 20 pounds and 50% when you have lost 40 pounds that there is an immediate potential benefit to both of us. And wouldn’t that be a possible advertising bonanza!! Gary

    Steve responds:
    It is definitely political, as I’ve recently learned when testifying in favor of a weaker version of my proposal before a committee of the Colorado legislature. It is currently illegal for small employers in our state to base employee premium contributions on individual control of health risk factors, even though large employers are allowed to do it–go figure! Even so, federal law limits the amount of premium incentives to only 20%, even though obesity alone drives up medical costs by 40%.

    As for companies brave enough to try this, check out Safeway’s innovative program.

  4. John Sweeney says:

    You’re dead right on this one. The more direct the incentives, the more powerful. And they must be powerful to overcome the decades of bad habits people have developed.

  5. Charlie Crowder says:

    The rallying cry or ‘sound bite’ should be something like; people want to pick their own health plan. They want to take their employer contribution and pick the plan they want, not what the owner wants, not what their fellow employees want, not what their union wants, not what the government wants, they want the mix of benefits and cost that are right for them. (Admittedly they do want to do that with tax free dolars) You pick your own house, car, etc. anything important you pick your own, why not health plan. Moving everything towards that end and the rest follows.

    Lower cost, better benefits, more choice, you decide.

    Steve responds:
    Great stuff, gratefully received by a finance geek who wishes he knew more about marketing.

  6. Lindsay McManus says:

    I thoroughly enjoyed your article, “The Health Reform Summit—Making Prevention Really Work,” and its very simple and actionable proposal to base health insurance premiums in large part on those objectively measurable indicators of future medical costs that are largely under the control of the patient.

    However, I have some concerns about how such a policy could be implemented. You list as among these indicators, smoking, obesity, hypertension, cholesterol, blood sugar, and alcohol. Clearly obesity is easy to measure objectively if, for example, it is based on a person’s body mass index which is a function of the person’s weight and height. While the other indicators are all readily measurable through blood tests, many of those can be disguised by taking drugs that obscure the signs of abuse as substance abusers know all too well. It’s not unnatural for people to want to pay lower insurance premiums yet get the same coverage, so doesn’t that provide an incentive for lower the measurements of the bad indicators by means other than a good diet and healthy lifestyle? Hypertension can be lowered with a wide variety of medicines, cholesterol can likewise be lowered with drugs, and traces of smoking and alcohol can be disguised with drugs. As major sporting federations have found out, some drugs can totally elude detection currently and at best can only be detected years later from old blood samples. And don’t most people who are overweight insist that they have cut back on their caloric intake to no avail and blame their “metabolism” and so would want the exceptions that you propose being available for those get a doctor’s note that says they can’t help themselves? And what about advocacy groups who might argue, for example, that a diabetic who doesn’t take his medication regularly and doesn’t test his blood sugar levels regularly should be further punished with higher premiums?

    Basing a large part of the determination of the price of health insurance on factors that the insured can substantially affect makes so much sense, not only because it seems fair in concept but also because it provides a strong incentive for people to alter their behavior in a very beneficial way. But how do you stop the proliferation of advocacy groups from getting exceptions that eviscerate the very goals you are trying to achieve or stop the remaining people from trying to dupe the tests that are the backbone of your idea?

    Steve responds:
    As you suggest, people tend to game any system to their own advantage once they know the rules. Thus, insurers would have to be vigilant to make sure the risk factors they use are not subject to such gaming beyond some acceptable level. A significant related issue, as you suggest, could be that of outlaw doctors willing to certify anyone with any risk factor as medically unable to comply with appropriate individual control measures.
    A similar problem has existed for decades in the workers comp field. Again, insurers would need to be able to apply reasonable standards for allowing exceptions, including the ability to exclude certifying doctors who can be shown to offer bogus certifications.

    As for political objections to this approach, we’re seeing a raft of it coming out of the woodwork in Colorado, where a very mild version of my proposal is being opposed by consumer “representatives,” AARP, and even the American Heart Association. You read that right, the American Heart Association is opposing a bill that promotes prevention of heart disease. Is this a great country, or what?

  7. Lindsay McManus says:

    Great practical response, Steve! The analogy to workers comp is spot on.

    It’s sad to hear of the objections to that very sensible, if much scaled down, proposal you describe coming out of the great state of Colorado. I can only hope the legislators of that fine state ignore all those lobbyists and return to Colorado’s roots of common sense and pragmatism.

  8. Charlie Crowder says:

    Do we really care if someone gets his cholesterol in line with medication or diet or having the right genes? If it reduces his/her risk of expensive treatment for stroke and heart attack isn’t that what this is about. If you’re going to take this path, the goals has got to be proven, and easy to measure and easy to obtain without expensive treatments. (For instance would you provide expensive gastric bypass surgery for everyone who is obese so they could lower their insurance premium?) It’s also about finding the right balance. Otherwise it goes too far, i.e. we’ll end up with your genes setting premium.

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