I never got paid for grades; this was one of the great injustices of my childhood. Every grading period other students talked about getting paid for each A and B. I got nothing. For many, high school graduation was about elaborate parties and gifts; again, I got nothing.
My parents made it clear: meeting their expectations was not cause for great fanfare. I was expected to make good grades and graduate from high school, and failure to meet expectations would have almost certainly resulted in punishment. Perhaps this was a case of a bigger stick than carrot, but the fact was my parents did not create incentives for what I was expected to do.
Perhaps I learned the lesson too well.
In recent years, the new fad in health care has been to create incentives encouraging healthy living. Stop smoking, lose weight, go to the gym, eat healthier, go to the doctor for annual checkups…the list goes on. There is no doubt a healthy lifestyle is important. The almost daily reminder from the media that Americans are gaining in girth is but one example of how unhealthy the country is becoming.
This doesn’t just mean bigger people, it means bigger costs.
Many employers see wellness programs as a way to increase employee health and productivity, while hoping to save on the cost of employee health benefits. Even Medicaid is getting into the action by encouraging a modicum of personal responsibility in exchange for a prize. Some state Medicaid programs, like many private employers, have encouraged this attention to personal health through small contributions to special savings accounts or lower co-payments, while others consider such lavish rewards as color televisions and similar gifts.
Incentives work. At first glance, the rush to create incentives for healthy living makes sense. State governments and private employers buckling under the cost of health care are desperate for the silver bullet to bring expenses under control. They theorize they can create incentives for people to make better decisions, and they may well be right.
But are big government rewards programs the solution to big government problems?
There is no lack of incentives; the incentives are just in the wrong place. The health care system today is generally devoid of incentives to do the right thing, and ripe with incentives to spend more, spending unwisely, while neglecting important aspects of health care. In fact, for many the effects of an unhealthy lifestyle are masked by an insurance structure that shelters the patient from much of the cost, along with medical innovations that minimize the personal burden created by unhealthy choices.
If patients made decisions with perfect knowledge and heightened personal responsibility, the clear incentive would be on doing the right thing at the beginning. This means revealing prices and expecting patients to take greater responsibility for first-dollar coverage, creating an environment where the patient must be a well informed consumer in complete control of their health care decisions.
This is the foundation of consumer directed care, and it ought to the foundation for health care reform, whether in Medicaid or private health insurance. Many critics of consumer directed care suggest people are either incapable of making decisions, or will make the wrong decisions. They wrongly predict people will not want to spend money on an inhaler, for instance, if they must bear the upfront costs. Yet this scenario does not make sense. While some people may choose wrongly, we know people will make the rational decisions to purchase the inhaler, rather than pay for a more expensive trip to the emergency room during an asthma attack. In this case, it isn’t necessary to give this person a television for using their inhaler regularly – the incentive will be to avoid the more costly consequences.
The solution isn’t to create another program to encourage better behavior, but to instead remove the incentives that make it so easy to choose bad behavior. Unless incentives are placed correctly across the entire system at the outset, this focus on wellness and healthy lifestyles will join the ash heap of failed programs and leave the health care system continuing to struggle under the weight of an aging and unhealthy population.
Mary Katherine Stout is the health care policy analyst for the Texas Public Policy Foundation, a non-profit, non-partisan research institute based in Austin.