In tEWn

I’ve had to eat so much crow since I started posting on this blog, you’d think I would’ve acquired a taste for it by now. My latest sampling was served up courtesy of  behavioral economists and their connection, or lack thereof, to outcomes-based employee health incentives.

In one of my least popular posts ever, Be Afraid: Behavioral Economics and Outcomes-Based Wellness (May 2011), I criticized corporate benefits managers who, I argued, relied on the research of behavioral economists to…well, do just about anything they wanted. (I specifically targeted my criticism to the authors and readers of behavioral economics manifesto, Nudge.) I wrote:

“In employee wellness, this is most readily visible in schemes that offer financial rewards (often in the form of cheaper health insurance) to employees who reduce their body mass index, lower their cholesterol and blood pressure, quit smoking, or excel in the employer’s notoriously flawed disease management programs….There is scant evidence that paying employees to achieve healthy outcomes, or penalizing them for unhealthy outcomes, is an effective strategy for improving health or controlling health care costs.”

Imagine my surprise, while researching yesterday’s post about a study showing intrinsic motivational strategies to be more effective than outcomes-based incentives, to learn that the research was co-authored by prominent behavioral economists Kevin Volpp, MD and George Loewenstein. Volpp is Director of the Center for Health Incentives and Behavioral Economics at the University of Pennsylvania, and is one of of the most frequently cited researchers studying health incentives. Loewenstein is Professor of Economics and Psychology at Carnegie Mellon University and director of the Center for Behavioral Decision Research.

Further investigation led to an intriguing article Volpp and Loewenstein (and others) published in the New England Journal of Medicine in August 2011. In the article, Redesigning Employee Health Incentives — Lessons from Behavioral Economics (a must read if you have any interest in health incentives) — the authors advise caution in applying their pro-incentive research to the employer environment.

They wrote:

“Although it may seem obvious that charging higher premiums for smoking (or high body-mass index, cholesterol, or blood pressure) would encourage people to modify their habits to lower their premiums, evidence that differential premiums change health-related behavior is scant. Indeed, we’re unaware of any health insurance data that have convincingly demonstrated such effects.”

Volpp, Loewenstein and their co-authors describe tenets of behavioral economics — for example, that incentives need to follow desired behaviors as immediately as possible and that their effects are diminished when they are bundled (like premium discounts or cash rewards bundled in paychecks) — that lead them to hold little hope for the type of health incentive strategies many employers currently have in place.

The authors conclude:

“The effectiveness of outcome-based wellness incentives is uncertain, and their use raises concerns about distributional equity; nevertheless, these approaches are gaining momentum because of rising health care costs and payers’ belief that incentives should work in health care as they do in other spheres.”

I couldn’t agree more. Outcomes-based programs are based on belief. It is a house of cards purportedly built on a foundation of research. But the researchers are saying, “Not so fast.” Ultimately, Volpp and Loewenstein suggest that the momentum of the outcomes-based bandwagon may be unstoppable, and sensibly advocate testing a variety of designs to identify what works.

In my “Be Afraid” post, I criticized outcomes-based incentive proponents, and the behavioral economists they invoked, for imposing on employees an intrusive and unproven incentive system. Turns out, I prematurely judged the behavioral economists, whose work was being used to defend a practice about which, as it turns out, they are skeptical.

In the employee wellness arena, we need to cultivate healthy, constructive skepticism to counter the complacency that risks hindering our innovation, our evolution and — especially as it relates to our desperate strategies to contain health care costs — our wisdom.