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Tag: Employers

Are Employers to Blame For Our High Medical Prices?

In a recent New York Times blog, Uwe Reinhardt places much of the blame for high and rising medical prices on passive employers. He argues that employers should work just as hard to reduce healthcare benefit costs as they work to reduce other input costs. But he then observes:

“One reason for the employers’ passivity in paying health care bills may be that they know, or should know, that the fringe benefits they purchase for their employees ultimately come out of the employees’ total pay package. In a sense, employers behave like pickpockets who take from their employees’ wallets and with the money lifted purchase goodies for their employees.”

I think that Reinhardt gets the economics wrong here and, in the process, he puts too much of the blame on employers. Reinhardt is right in one respect – employees care about their entire wage/benefit packages. If benefits deteriorate, employers will have to increase wages to retain workers. Thus, it seems that if an employer reduces benefit costs, it must increase wages by an equal amount. If that is true, we can understand why employers are passive.

The correct economic argument is a bit more nuanced. Employees do not care about the cost of their benefits; they care about the benefits. If an employer can procure the same benefits at a lower cost, the employer need not increase wages one iota. In this regard, there is nothing special about health benefits. Suppose an employer offers employees the use of company cars. Workers don’t care what the employer paid for the cars, and if the employer can purchase cars at a deep discount, it will pocket the savings.

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The Wellness Game: The Employer As the New Parent

Eat your vegetables.  Turn off the TV.  Go outside and play.  Go to bed on time.  These four imperatives were once amongst the core messages delivered to children by their parents and neighbors, a setting of behavioral parameters that people intuitively expected would help to produce healthy, well-balanced kids.  We’re not so good at this anymore.  Like so many other behaviors that animate the phrase “personal responsibility”, in the face of economic and demographic tumult we have decided to pass the buck on them in our homes, neighborhoods, schools, and churches.  We now want employers to handle them, and health-contingent wellness is the final step in the ascendancy of the employer as the new parent.

Employers find themselves teaching employees how to read and write effectively, do math, be polite, how to eat in the presence of others, and even how to sleep better.  Why not throw at their feet the notion that employers should coerce workers into intrusive and dubious health-contingent workplace wellness strategies that are easy as pie for the healthiest, but far more difficult for the less fortunate who are, ostensibly, the ones who need the most help?  This is not why most people start businesses (unless, of course, you’re a wellness vendor).  It certainly is not why people devote themselves to work, which is supposed to be for securing (hopefully) individual and familial prosperity and experiencing the unique contribution to personal dignity that comes from purposeful endeavors.

US employers are not responsible for the chronic disease crisis; truth be told, their sufferance of the costs of many wellness-sensitive events is limited because the majority of the medical catastrophes that health-contingent wellness programs promise to prevent (such as heart attacks, strokes, and many cancers) happen predominantly in older people who have mostly left the work force. Employers have been caught up in the maelstrom of demographic, industrial, and technological changes just like the rest of us.  Yet,  not only do we actively seek their participation in fishing expeditions such as health-contingent workplace wellness programs, some of them jump in with both feet.  This should help to remind you that your CEO might just be the one who graduated at the bottom of his class.

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Will “Too Big to Fail” Come to Health Care?

Purchasers of health care, long-time supporters of organized systems of care, are watching with growing alarm as horizontal and vertical mergers between providers accelerate.  Buyers with experience in other sectors understand that consolidation can improve efficiency, quality, and the generation of capital, especially where there is excess capacity and abundant waste. They are equally aware, however, that ‘over’-consolidation can lead to pricing power, the absence of competition, and the crowding out of disruptive innovations.

Catalyst for Payment Reform(CPR), a non-profit working on behalf of large employers and public health care purchasers to improve the quality and affordability of health care through payment innovation, convened a National Summit on Provider Market Power on June 11th in Washington D.C.

There, the nation’s leading experts discussed and debated how to maintain enough competition among health care providers to stimulate improvements in the delivery and affordability of care.

Participating experts stated that by as early as 2006, over 75% of U.S. metropolitan statistical areas (MSAs) had experienced enough hospital mergers to be considered ‘highly consolidated’ – a trend that continues. Economists agreed that the evidence demonstrates that highly-consolidated providers can raise prices considerably. Provider leaders offered their views on why consolidation is occurring, including to meet the demands for integration and efficiency, to counterbalance a highly-consolidated health insurance market, and to have enough income to invest in IT systems and other infrastructure necessary for population management.

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GE’s Wellness Program: Bright Shining Light or Dim Bulb?

Health-contingent workplace wellness, the two-time darling of federal legislation codified in both the Health Insurance Portability and Affordability Act (HIPAA) and the Affordable Care Act (ACA), is now plagued by doubts about effectiveness and validity that are inexorably grinding away its legitimacy.  This puts employers, particularly large employers who have committed to it so vocally and visibly, in an awkward spot.  In the style of politicians nervously trying to change the terms of debate, wellness advocates are now walking back the assertions that have undergirded their entire construct for more than a decade.  While some business leaders are apparently either unwilling or unable to back away from this self-inflicted wound, staying the present course is neither inevitable nor required.  A course correction might actually prove quite liberating, especially for leaders of smaller and mid-sized businesses who must scratch their heads wondering how they’re supposed to reproduce a big-company style workplace wellness program or even why they should, given the dearth of data on effectiveness.

As a case in point, we offer GE, an iconic American multinational with 305,000 employees, $147BN in revenues, and $16.1BN in earnings worldwide in 2012.  The company offers its employees a much-lauded wellness program, saluted by the National Business Group on Health (NBGH) in a fawning 2009 case study. GE’s wellness program has several things to recommend it:

  • A top line focus on environmental change
  • An emphasis on strong and consistent positive health messaging to employees
  • The “Health By The Numbers” strategy that asks employees to commit to essential behavior changes (don’t smoke, eat more produce, walk more, and maintain a healthy body mass index [BMI]; there is wisdom in these choices, as they are the baseline activities for good health)

Beyond these obviously beneficial wellness program components, the GE wellness program veers off into a compendium of wellness convention, with encouragement for employees to take HRAs and get screenings, in particular, mammography, colonoscopy, cholesterol, and blood pressure.  Some of the affection for diagnostics springs, of course, from GE’s corporate commitment to health care, which includes selling a broad variety of diagnostic devices to medical care providers who must, in turn, induce demand in order to pay for their contribution to GE Healthcare’s $18.2BN revenue stream.

As far as is discernible from publicly available documents, the wellness program targets GE worksites with over 100 employees, and GE claims in the NBGH case report that over 90% of employees worldwide participate.  Beyond these data, however, it is remarkably difficult to understand what results GE gets and at what cost.  The only publicly available insight on expense comes from GE wellness leader Rachel Becker in an essay published online by EHS Journal, in which she reports $100,000 per site as the wellness startup cost.   Extrapolating this figure to GE’s more than 600 global worksites produces a wellness capitalization expense of about $60M, which presumably does not include annual wellness program operating costs.  This might be why GE makes absolutely no mention of the cost or results of its wellness program in either its annual report or its 10K filing, although the NBGH quotes GE as saying the implementation was “inexpensive”.  Even though $60M is equal to only 0.38% of GE’s 2012 earnings, it nonetheless might seem an untidy sum to skeptical shareholders.

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Caution: Wellness Programs May Be Hazardous to Your Health

The exponential growth in wellness programs indicates that Corporate America believes that medicalizing the workplace, through paying employees to participate in health risk assessments (“HRAs”) and biometric screens, will reduce healthcare spending.

It won’t. As shown in my book Why Nobody Believes the Numbers and subsequent analyses, the publicly reported outcomes data of these programs are made up—often to a laughable degree, starting with the fictional Safeway wellness success story that inspired the original Affordable Care Act wellness emphasis.  None of this should be a surprise:  in addition to HRAs and blood draws, wellness programs urge employees to go to the doctor, even though most preventive care costs more than it saves.  So workplace medicalization saves no money – indeed, it probably increases direct costs with these extra doctor visits – but all this medicalization at least should make a company’s workforce healthier.

Except when it doesn’t — and harms employees instead, which happens altogether too often.

Yes, you read that right.  While some health risk assessments just nag/remind employees to do the obvious — quit smoking, exercise more, avoid junk food and buckle their seat belts — many other HRAs and screens, from well-known vendors, provide blatantly incorrect advice that can potentially cause serious harm if followed.

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The HRA Hustle

Suppose one day you sit in front of your work computer, click on a link supplied by your employer, and set about the task of answering a hundred or more highly intrusive health questions.  Setting aside the issue of financial penalties or rewards for doing the survey, you would trust that the instrument itself, called a health risk appraisal (HRA), would actually have a sound scientific basis, especially since its ultimate goal is to give you purportedly accurate health guidance.

Unfortunately, your trust in the validity of the tool would be quite misplaced.

HRAs are an essential screening tool in workplace wellness programs despite the fact that no body of evidence clearly demonstrates either their fiscal or clinical value and that no health services research has determined which HRA is the optimal tool.  Indeed, a recent review of HRAs concluded that they increase spending, not reduce it, and that no one has any idea whatsoever whether taking an HRA has anything to do with the delivery of health value.

By masking essential methodological truths about HRAs, wellness vendors have essentially hustled their employer clients into believing that HRAs, which frequently ask clinical questions best left to primary care clinicians or restate platitudes (gosh, I didn’t know it’s safer to drive while not under the influence), are both probative and predictive of a person’s health future.  This is just simply wrong.

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The Salad Bar That Turned Around a Fortune 500 Company …

The Effect of Price Reduction on Salad Bar Purchases at a Corporate Cafeteria.” An excellent peek at the kind of steps that employers ought to take to improve eating habits in their work forces: subsidize the purchase of healthy foods. In this CDC study, reducing the price of salads drove up consumption by 300%.  If this was a stock, we would all rush out to buy it.

Influencing behavior through both choice architecture and pricing differentials challenges many employers, however. There is a fear factor in play (“some of my people will be unhappy”), as well as financial issues, because the corporate managers responsible for food services often have their compensation linked to the division’s profitability.  You make a lot more money selling soda than you do selling romaine.  The same perverse financial conundrum appears when corporate food service companies run cafeterias.  The on-site chef and managers typically operate on a tightly managed budget that leaves them little flexibility to seek out and provide healthier options.

A chef employed by one of the largest corporate food service providers in the country told me last year that he could not substitute higher protein Greek yogurt for the sugar-soaked, low-protein yogurt in his breakfast bar. When I asked why, he told me that Greek yogurt was not on his ordering guide, and he was not allowed to buy it from a local club warehouse and bring it in.  In this same company, beverage coolers were stuffed to overflowing with sugar-sweetened drinks, all of which were front and center (and cheap), while waters and low-fat milk were shunted to the side coolers.  In another scenario, health system leaders I met with last year all raised their hands when I asked if they had wellness programs and kept them up when I asked if they also sold sugar-sweetened beverages in their cafeterias at highly profitable prices.  The irony was completely lost on them.  They had to be walked through the inconsistency of telling their employees to take (worthless) HRAs and biometrics, but then facilitating access to $0.69 22 oz fountain sodas.

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Wellness Programs Aren’t Working. Three Ideas That Could Help.

You’d be forgiven if, after reading last month’s Health Affairs, you came to the conclusion that all manner of wellness programs simply will not work; in it, a spate of articles documented myriad failures to make patients healthier, save money, or both.

Which is a shame, because – let’s face it – we need wellness programs to work and, in theory, they should. So I’d rather we figure out how to make wellness work. It seems that a combination of behavioral economics, technology, and networking theory provide a framework for creating, implementing, and sustaining programs to do just that.

Let’s define what we’re talking about. “Wellness program” is an umbrella term for a wide variety of initiatives – from paying for smoking cessation, to smartphone apps to track how much you walk or how well you comply with your plan of care, and everything in between. The term is almost too broad to be useful, but let’s go with it for now.

When we say “Wellness programs don’t work,” the word work does a lot of, well, work. If a wellness program makes people healthier but doesn’t save lives, is it “working”? What if it saves money but doesn’t make people healthier?

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How the Media Portrayed the CVS Wellness Program-and Got It Wrong

On March 20, 2013, the media picked up a story about CVS Caremark’s latest wellness program. In summary, CVS will be requiring all of its employees to complete a health screening in order to qualify for a reduction in their health insurance premium. For those employees who participate, the employee’s screening data goes to a third party, and CVS never sees it.

Such wellness financial incentives are commonplace and have been around a long time. And if that is how the media had described the CVS program, it’s doubtful anyone would have even paid any attention to it. Unfortunately, that’s not how the media ran with the story. Let’s look at how the media sent the wrong message – using ABC News as an example – and why it matters to get the message right.

Sending the Wrong Message

ABC’s Good Morning America segment was emblazoned with the headline, “Who’s Watching Your Weight – CVS Employees Required to Disclose Weight.” Their website ran a similar headline, “CVS Pharmacy Wants Workers’ Health Information, or They’ll Pay a Fine.”

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Employee Benefits Gone Wild

Say “employee benefits” and pensions and health care will jump to most people’s minds. Maybe life and disability insurance will pop up as well. But employers in Silicon Valley are going way beyond that. They’re providing housekeeping, cooking, babysitting and a host of other services as perks for their employees. According to The New York Times, here is what some California companies are doing:

At Evernote, a software company, 250 employees — every full-time worker, from receptionist to top executive — have their homes cleaned twice a month, free.
Stanford School of Medicine is piloting a project to provide doctors with housecleaning and in-home dinner delivery.
Genentech offers take-home dinners and helps employees find last-minute babysitters when a child is too sick to go to school.

To hear the employer representatives tell it, companies are providing their workers with services that make it easier to balance home and family life in an age when there are few stay-at-home spouses and work is stressful.

But a more likely explanation is economics.

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