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Wellness Programs – New Study Confirms Cautioned Approach

During the past seven years, I have written a fair number of posts regarding wellness programs offered by employers. The core message of all blogs suggests that employers must have realistic expectations about what wellness initiatives will or will not do within the workplace.

A recent randomized clinical study published in JAMA is yet another reminder for employers to have tepid expectations when trying to keep their employees happy, healthy and less likely to incur more health costs. The study found that workplace wellness programs do not cut healthcare costs for employers, reduce absenteeism or improve the health of employees.

From the University of Chicago and Harvard, researchers used a large-scale approach that was peer-reviewed and included a more sophisticated design when analyzing BJ’s Wholesale Clubs. BJ’s has about 33,000 employees across 160 clubs. This analysis compared 20 randomly-assigned clubs that offered wellness programs with 140 BJ’s clubs that did not.

After 18 months of timeline analysis, this study revealed that wellness programs did not result in health measure differences, such as: improved blood sugar or glucose levels, reduced healthcare costs or absenteeism, or impacted job performance in a positive manner. In other words, employees with a wellness program did not experience reduced healthcare costs and other desired affects. I suppose one could argue that a year and one half was not enough comparison time to develop these conclusions.

One of the authors of this study, Katherine Baicker, dean of the Harris School of Public Policy at the University of Chicago, put it quite succinctly in a Kaiser Health News article: “[But] if employers are offering these programs in hopes that health spending and absenteeism will go down, this study should give them pause.”

What are your expectations about workplace wellness? Do you believe such programs, when appropriately and thoughtfully implemented, will greatly mitigate your healthcare costs, improve workforce productivity and reduce absenteeism? Maybe you feel these programs are a waste. From our 2012 Iowa Employer Benefits Study, employers shared their perceived ‘return on investment’ on the programs they currently had in place.

According to a 2013 “Workplace Wellness Programs Study” by researchers at the RAND Corporation, these programs only have a modest effect. This runs contrary to claims made by wellness firms that sell workplace wellness programs to employers. The report found that people who participate in wellness initiatives lose an average of only one pound a year for three years. Another finding is that employee participation in such plans “was not associated with significant reductions in total cholesterol level.” Smoking-cessation programs show some potential, but only “in the short term.”

Most likely, both skeptics and supporters of wellness initiatives will find ammunition to support their cause. Workplace wellness programs have grown to an $8 billion industry in the U.S., primarily as a direct result of rising employer health insurance costs.

This latest report may help stabilize any pre-conceived lofty expectations each of us may have about the benefits of workplace wellness programs. However, it must be noted that some employers have found value in these programs.

To stay abreast of employee benefits and healthcare issues, we invite you to subscribe to our blog.

20th Iowa Employer Benefits Survey Now Underway!

At Haystack Rock in Cannon Beach, Oregon (2002).

This year marks the 20th year that we have been performing the Iowa Employer Benefits Study©. When this study began in 1999, I had two toddler daughters, one of which is now two years post-college and working in the Twin Cities, while the other is about to graduate from St. Olaf College. Between my daughters and this survey, it’s easy to measure just how fast the years have flown by!

With the 2019 survey, as in the past, we plan to randomly survey at least 1,000 Iowa employers from a variety of sizes and industries. We have found this number of respondents to be extremely beneficial when comparing various industries and size categories to one another.

However, contrary to the past, this year’s survey is being conducted three months earlier in the year, allowing the study to become available in July. By doing so, many employers will have access to these results while strategizing potential changes to their benefit plans during the fall renewal season. Because of this, we are excited about performing this survey process earlier.

If you happen to be an employer who is randomly-selected to participate in this year’s survey, we would greatly appreciate you taking the time to share your confidential data with us. By doing so, you will receive, via email, the Iowa Employer Benefits Study© report that summarizes key findings. Please know that your information will only be used on an aggregate basis and combined with data from other participating employers. Most importantly, we will protect your anonymity and the confidentiality of your responses to the fullest extent.

Twenty years is a milestone for us. As mentioned, much has changed over these two decades, but during this time, I have always been very grateful to all Iowa employers who have taken the time to share their information with us. We take our work seriously and will always value your trust in our survey.

To stay abreast of employee benefits and healthcare issues, we invite you to subscribe to our blog.

Eliminating Unnecessary and Inappropriate Care – Could Health Premiums Drop to 2010 Levels?

Here’s a quiz regarding the estimated annual cost of inappropriate and unnecessary healthcare in the U.S.  Please select the answer you believe reflects the best cost estimate:

a. $210 billionInstitute of Medicine (2013)
b. $265 billionOliver Wyman (2017)
c. $393 – $958 billionGoodman, et al. (2011)
d. $1 trillion + – Various sources
e. No one really knows

The correct answer is, “e,” as measurements vary widely based on different methodologies – such as the year it was performed, and just how broad the term, ‘inappropriate,’ was used in each analysis. However, as new reports become published, unnecessary care is typically considered between 20 and 30 percent of overall needed care. In fact, based on a 2017 study of surveyed physicians regarding unnecessary care, physicians reported that more than 20 percent of overall care was not needed. Yes, even physicians acknowledge that at least one-fifth of care is not appropriate!

Despite the ABIM Foundation’sChoosing Wisely” campaign, which began in 2010 and has been widely adopted by at least 80 specialty societies, 75 percent of physicians believe unnecessary care is still a serious problem. Additionally, 69 percent said the average practitioner ordered useless tests and procedures at least once a week. Noted physician, Marty Makary of Johns Hopkins University, theorized that “Ninety percent of C-sections are unnecessary; 80 percent of stents are inappropriate; and 30 percent of people with cancer get the wrong treatment.”

But our broken healthcare ‘system’ allows for defective and unsuitable care to be paid out anyway. In a $3.5 trillion healthcare industry, inappropriate costs can account for as much as 30 percent of the total healthcare economy, or over $1 trillion annually. To put this number into perspective, the Congressional Budget Office reported that U.S. defense spending during fiscal year 2017 was $590 billion.

The above estimates do not specifically include another form of ‘waste’ as it relates to the fragmentation of care – the complexity of administering healthcare. This complexity leads to additional indirect costs and duplication of effort because there are so many different health plan payers with a myriad of administration functions. Functions which cause providers to hire additional staff to meet health plan requirements, like pre-authorization, administering various billing methods, etc. This is yet another problem with add-on costs that provide little-to-no value in a system already wrought with excessive waste of unnecessary care. I will not be addressing waste due to indirect costs in this blog.

Unnecessary and Inappropriate Care

Unnecessary and inappropriate care commonly consists of wasted spending due to ‘defensive medicine,’ whereby physicians order more (than necessary) tests and procedures to avoid potential malpractice lawsuits. Some studies suggest this amount of waste is not as great than commonly thought, perhaps less than three percent of overall costs. Another reason for inappropriate care is due to patients wanting unnecessary care. Misdiagnosis (overdiagnosis or no-diagnosis) also impacts the overall cost of healthcare. Of course, medical mistakes, both preventable and otherwise, also greatly impact healthcare costs, in addition to societal costs for patients and our communities.

Put another way, if inappropriate care could somehow be scrubbed from the healthcare system, it would make sense that our costs (premiums and, consequently, out-of-pocket expenditures for care) would correspondingly drop by a commensurate amount. According to the Kaiser Family Foundation, employer-sponsored health coverage continues to cover more American workers than earlier this century. Employer-sponsored plans in 2017 covered 156 million people, dwarfing the next largest form of health coverage, Medicaid (74 million).

Employer plan costs would be greatly impacted by eliminating inappropriate and unnecessary care. Another big takeaway: Employee takehome pay would increase, providing an economic boost.

Paying 2010 Premiums

In 2018, the 19th Iowa Employer Benefits Study© reported that the average monthly single and family health premiums were approximately $573 and $1,454, respectively. If about one-third of inappropriate care was eliminated, these rates would also be reduced, presumably by the same ratio (if we assume waste is across the board in all medical settings and procedures – and it appears to be). The newly-adjusted (unscientific) rates would now become $401 (single) and $1,017 (family) – rates that we have not seen in Iowa since our 2010 Iowa Employer Benefits Study©.

If we could eliminate ineffective, harmful and wasted care, we could revert to paying insurance premiums we paid eight years ago – even without eliminating bloated administrative costs. In the past, medical cost trends have historically exceeded the consumer price index, but by eliminating this excessive waste, and assuming the waste is continuously ‘engineered out’ of the delivery system, the medical-cost trend should be more favorable in the future. The problem, however, is not a small one. This problem comes from the idiom, “One man’s loss is another man’s gain.”

No organization or practitioner desires to lose revenue, because their income would be adversely impacted. Yet, obfuscating the cost by using chargemasters, backroom discount pricing methods and other unorthodox means to keep costs opaque serve no one other than those who allow our system to be ‘gamed’ for profitable purposes. Smarter regulation, appropriate technology and quality improvements can all reduce waste. Additionally, we must find the antithesis of greed.

As a country, think about how such ‘savings’ could be diverted to fund other programs that would proactively impact population health. We live in a world of trade offs, and trading wasted care (and its’ associated cost) with preventive health-related programs seems to make a lot of sense.

Market-Based Healthcare?

Let’s be honest. Our healthcare ‘system’ is not a true market-based model. It is different from any other part of our economy. True market-based models are characterized by three things not currently found in U.S. healthcare:

  1. Transparency in cost and quality.
  2. Accountability for care across the continuum (payment would be connected to outcomes that really matter).
  3. Information that allows for consumer choice and competition – patients need to be treated as consumers when appropriate.

All three allow us to get to the value of care, and ultimately, a market-based model that would theoretically provide checks and balances to keep the system ‘honest.’

Overall, a market-based model has more clarity around the producer, the seller and the buyer.  Historically in healthcare, the buyer (consumer) has not been part of the equation.  It is not yet clear the role in which the buyer will play as the healthcare system evolves. Currently, healthcare services are paid by somebody else – such as employers (offsetting employee pay), insurance companies or the government. This disconnect between the seller and producer from the ultimate consumer allows for perverse behaviors which are not commonly found in other market-based systems.

Payments Must Incent Appropriate Outcomes

Until we have payment systems that reward appropriately-determined outcomes, a market-driven system in healthcare will be merely a dream, not reality. In fact, if our hodge-podge system continues without much needed disruption, a true market-based system may not have a chance to see daylight. Market systems may wring out the unnecessary additive costs over time, but this cannot be done without having the three components in place as mentioned earlier.

The simple question is this: How can we turn back the clock to eight years ago and pay what we really should be paying today? Eric Coldwell, an analyst with Baird Equity Research put it quite succinctly when describing the push for transparency and value-based care: “The U.S. healthcare system is a sandcastle and the tide is coming in.”

To stay abreast of employee benefits and healthcare issues, we invite you to subscribe to our blog.