Final Contract Report (continued)
Consumer Financial Incentive
Checklist: 21 Questions for Purchasers to Consider
Introduction to Consumer Financial Incentives
Question 1. What
are consumer financial incentives?
Question 2. What
consumer decisions can be influenced by financial incentives?
Question 3. Do
consumer financial incentives work?
Incentives to Select a High Value Health Plan, Provider Network,
or Provider
Question 4. What
is a "tiered" health plan?
Question 5. How
do tiering and other benefit design options fit into the framework
of consumer financial incentives?
Question 6. What
quality and cost measurement criteria should be used to define tiers?
Question 7. What
do consumers want to know about the quality and cost measures used
to create tiers?
Incentives to Select a High Value Treatment Option
Question 8. In
the special case of incentives for choosing among treatment options,
what information or decisionmaking tools, if any, should
be offered as accompaniments to consumer financial incentives?
Implementing Consumer Financial Incentive Programs
Question 9. Should
consumer financial incentives be structured as rewards, penalties,
or a combination of these two approaches?
Question 10. What
are the options for phasing in consumer incentives?
Question 11. How
much money should be put into consumer incentives? How
big does the incentive need to be to effect a change, and does
the level of incentive necessary vary by the specific behavior that
is the object of the incentive?
Question 12. How
should we think about consumer financial incentives and their relationship to public reporting
of quality scores and provider incentives such as pay‑for‑performance?
Consumers' and Providers' Acceptance of Consumer Incentive Programs
Question 13. Are
consumers in our community ready for financial incentives?
Question 14. Will
consumers believe that the incentives are designed to improve quality,
or will they suspect the only goal is to cut costs?
Question 15. When
and how should we engage consumers in discussions about financial incentives?
Question 16. How
do consumer financial incentives fit within the broader construct of
consumers' engagement?
Special Populations
Question 17. Are
certain types of consumers more responsive to financial incentives
than others?
Question 18. What
special accommodations, if any, should be made for lower income, underserved,
or sicker consumers?
Question 19. Is
there a role for consumer financial incentives in an overarching disparities-reduction
strategy?
Evaluating a Consumer Financial Incentive Program
Question 20. What
unintended consequences should we seek to avoid?
Question 21. How
can we tell if consumer financial incentives are working?
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Introduction to Consumer Financial Incentives
Private and public purchasers are acutely aware of persistent evidence
of poor quality of care and ongoing increases in health care costs. Consumers'
decisions can have an important impact on the quality and cost of care. This
effect has led many policymakers and purchasers to consider providing financial
incentives to consumers as a method to address health care quality, cost,
or both.1-2
Question 1. What are consumer financial incentives?
In health care, a consumer financial incentive is either a reward offered
to influence patients to behave in a particular way or, less often, a penalty
for failing to do so. By using financial incentives, employers, public purchasers,
or health plans hope to encourage patients to engage in behaviors that either
may improve clinical outcomes (e.g., select a high quality health care provider
or adhere to care guidelines for chronic disease) or reduce cost (e.g.,
eliminate unnecessary emergency room visits or decrease preventable hospitalizations).
If either of these occurs, the value of health care—the quality of
care received and amount of clinical improvement expected per dollar
expended—improves.
The rationale for using incentives is to motivate the consumer in a way
that the traditional health care system does not. For instance, most patients
have had little basis on which to choose a primary care provider other than
the recommendations of friends and family and the provider's proximity
to their home or workplace. However, some employers have begun asking their
employees to select value from among provider networks of affiliated physicians
and hospitals during an open enrollment period. Provider networks are stratified
into tiers based on both quality and cost.
Employees are rewarded for choosing
a higher value provider network through a lower premium—this is referred
to as a "premium-tiered health plan." The goal of the premium
incentive is to lead consumers to choose higher quality, lower cost providers
and to stimulate providers to improve the value of the care they give. Other
employers or plans use a similar approach to defining tiers, but ask the
consumer to make their decisions about choice of provider and tier at the
time that care is needed—this is referred to as a "point-of-service
tiered health plan." The incentive is usually in the form of a lower
copayment per visit.
Financial incentives also can be offered to encourage compliance with care
plans. For example, in the traditional system a patient with diabetes
might choose not to get blood sugar testing because she finds the trip to
the laboratory inconvenient or she simply forgets. Offering the patient
a small payment might make her more likely to get the test she knows she
needs, and so the incentive improves clinical care relative to the traditional
system.
Other incentives can be set up as penalties. For instance, an otherwise
healthy patient in the traditional system may be willing to pay a $10 copayment
for an office visit when he has a cold. If, instead, he is in a high-deductible
health plan with a health savings account (HSA) from which he would pay
the entire cost of the office visit, he may choose simply to use over-the-counter
remedies without consulting a physician. If he makes this choice, the incentive
inherent in a high-deductible health plan has reduced health service utilization
relative to the traditional system without decreasing quality of care—at
least in the case of a cold.
Question 2. Which consumer decisions can be influenced by financial
incentives?
Many approaches to creating incentives have been taken, each addressing
different aspects of consumer choice and behavior. These include:
- Creating tiers of providers (or drugs) based on quality and cost measures
and varying consumer payments based on the tier chosen.
- Combining high-deductible health plans with savings or reimbursement
accounts over which the consumer has discretion about spending.
- Offering cash or other gifts to consumers to encourage compliance with
recommended care, such as movie tickets for attending a weight loss clinic.
Distinctions among these approaches can be made along two lines: the timing
of the decision, i.e., either during the annual enrollment period or when
care is needed; and the health status of the patient at the time of the
decision, whether healthy, chronically ill, or having an acute problem (go
to Table 1).
A growing number of programs incorporate more than one incentive strategy
at the same time. For example, Colorado Springs School District Number 11
offers several consumer
incentives.3 Some
target provider selection, including a "centers of excellence" program
for some complex surgeries. In this program, if employees choose the designated
hospitals, they have lower copayments, and their family members may stay
in nearby hotels at no charge.
Other incentives target control of chronic
diseases or health risk behaviors. To improve quality and reduce cost among
patients with chronic diseases, the district's benefit design includes
free blood sugar meters to encourage patients with diabetes to monitor their
disease and offers lower copayments for use of generic drugs and supplies.
The District also offers $15,000 in annual prizes related to diet and exercise—from
bicycles, to coffee cups, to discounted health club memberships.
Question 3. Do consumer financial incentives work?
Many of the specific incentive strategies cited in Table 1 are relatively
new, and there has not yet been sufficient research to know what their impact
on clinical outcomes will be. Although their details vary, these strategies
have two elements in common: an information component (which involves giving
consumers data about the quality or cost of providers or about what constitutes
good health care) and a financial component (the incentive itself, such as
a lower copayment for using a higher value provider). There is not sufficient
research on consumer financial incentive programs to know how well these
two components work together, but there is literature about how consumers
respond to the informational or financial signals when they are used separately.
Informational signals. It has been shown that in the right
circumstances, consumers respond appropriately to information about quality;
that is, they choose higher quality health plans or providers. For instance,
Federal employees select health plans with better quality
ratings;4 and,
after the release of report cards about surgical mortality rates in New
York State, patients were found to be more likely to select cardiac surgeons
whose records showed lower mortality
rates.5
In a variety of other situations, as well, consumer choices seem to reflect
appropriate use of information about quality of care, although the response
to information about quality is usually
small.4-14 In fact,
in some situations, there is no detectable consumer response to information
about quality of
care,15 although
this lack may reflect reports about quality that are too confusing or are
not marketed well to
consumers.16-17
Financial signals. Although many consumers respond appropriately
to financial incentives, such as differences in health plan premiums or
the price they have to pay to see a provider, consumer responses to price
signals can be complex, and unintended consequences are common. At least
two problems have been documented regarding consumer response to financial
incentives.
One is that consumers sometimes cannot distinguish between necessary and
unnecessary care, especially if financial incentives are offered without
accompanying information about what constitutes high quality care. In the
RAND Health Insurance Experiment, consumers were randomized to one of two
groups: either free care or care with increasing levels of copayment. Patients
who had to pay used care less often, but they tended to forego appropriate
care as well as inappropriate
care.18 For
example, patients with a low income who had high blood pressure were less
likely to take their medications or see a doctor to adjust their medications
based on their blood pressure
readings.19
Worst of all, this led to an increased risk of
death.20 However,
none of these patients was offered any information or assistance in deciding
what care was necessary, and it is conceivable—but has never been
explicitly studied—that having access to such information would have
improved their choices and their clinical outcomes.
The other problem is that when consumers do not have good information about
the quality of providers, they might assume (rightly or wrongly) that the
employer is constructing the tiers largely on the basis of price rather
than quality. In fact, consumers sometimes interpret higher prices to mean higher
quality.4-5 To minimize
this effect, a premium-tiered provider network could be combined with credible
and persuasive information showing that the quality of the lower cost network
is at least as good as that of the high cost network.
Otherwise, the retirees—extrapolating
from other industries in which higher price suggests higher quality, such
as restaurants—may conclude that the higher cost network is of higher
quality. Because quality is most important to people who are sick, and price
is less important to these same people, an employer inadvertently could
end up sending a price signal that results in the sickest retirees—those
who utilize care the most—using the least efficient network.
These problems should not discourage the use of consumer financial incentives.
They simply imply certain strategies that should be followed, depending
on the type of financial incentive used.
Consumer financial incentives can be categorized into at least three groups:
those that encourage selection of a high value provider, provider network,
or health plan; those that promote selection of high value treatment options;
and those designed to reduce health risks.
Financial incentives to select a high value provider, provider
network, or health plan. These strategies involve financial
incentives that encourage and reinforce consumers' decisions to
choose high value providers or health plans. When consumers use price
as a proxy for quality, both in choosing a health plan and in choosing a
physician,4-5 the assumption
that "price equals quality" can be redressed by providing data
about the quality of plans or providers in addition to the information
about price.
In the case of New York State, after a year in which cardiac surgeon-specific
mortality rates were reported publicly, consumers began to use the report card
information rather than price to identify high quality surgeons, and the
impression that high price equaled high quality seemed to
decrease.5
Financial incentives to select a high value treatment option. For
some high cost clinical services, such as hip and knee replacements, there
may be several alternative but equally good clinical options. For these
situations, introducing incentives for patients to choose high value treatment
options could stimulate a patient-physician dialogue about the real value
of the alternatives.
For example, there has been a substantial increase
in the number of consumer-directed ads related to new hip and knee replacement
technologies and a plethora of medical device industry-sponsored, non-peer
reviewed Web sites and chat rooms. As a result, patients with hip and
knee arthritis often come to their orthopedic surgeon with a preconceived
notion regarding which technology—in this case, which prosthesis—is
most appropriate for
them.21
Despite the fact that many of the new versions of these prostheses have
not been proved superior to existing
products,22-24 either
in terms of clinical efficacy or safety, manufacturers charge much higher
prices for the newer prostheses than for the older versions. In the current
environment, these price differentials are borne by the hospital and/or
the payer, with no financial accountability bearing on the patient or
the surgeon.25
In response, some health plans and employers are exploring innovative benefit
designs that would offer patients gold standard technology with the best
long-term data regarding clinical efficacy and safety but would allow patients
to "upgrade" to "premium" technologies—most
of which are newer and have no long-term track record—for a higher
copayment.
These plans may give patients an incentive:
to discuss their purchasing decisions with their surgeons; to learn about
differences in outcome—or lack thereof—among the treatment options;
and at least to consider the associated costs. This also would be a situation
in which using a relatively larger incentive—in this case, a penalty—might
be considered because of the large difference in cost among the options
and the absence of data suggesting a difference in quality among the options.
Although high-deductible health plans paired with health savings accounts
(HSAs) or health resources accounts (HRAs) also create incentives to reduce
utilization, these plans risk causing the behavior observed in the RAND
Health Insurance Experiment, where consumers made bad decisions, foregoing
both appropriate and inappropriate
care.19 In
implementing this approach, then, an important step would be to structure
the incentives so that patients make as many optimal decisions as possible,
at least when the preferred clinical protocol is clear.
For example, Aetna offers HealthFund high-deductible health plans in which
preventive care and drugs for chronic diseases have first dollar coverage.
This approach ensures that patients in the HealthFund program do not, for
example, stop important hypertension medications because of
cost.26 This
strategy could reasonably be extended to other situations in which the preferred
clinical option is to undergo treatment because there is nearly universal
agreement that such care is warranted, such as when a patient has a new
diagnosis of surgically removable colon cancer.
Financial incentives to reduce health risks by seeking care.
Incentives can be applied to decisions about whether to seek preventive
care (e.g., flu shots) and whether to invest the time and effort needed
to control a wide array of increasingly prevalent chronic diseases (e.g.,
participating in an asthma disease management program). Fortunately, the
available evidence suggests that consumers usually respond well to a variety
of incentive strategies that target preventive or chronic
care.27
The goal of the Asheville Project, run by the City of Asheville, NC, is
to get Asheville employees with diabetes to use more services, such as blood
sugar testing, to control their diabetes. With goals like these, one can
be reasonably confident that consumers will not object, and that their physicians
will express support for the program, which makes success likely. In fact,
in the Asheville Project, in which patients are given free diabetes supplies
and other assistance and incentives, blood sugar control improved, sick
days declined, hospitalization costs fell dramatically, and the total annual
cost per patient fell by more than
$1,200.28
Financial incentives to reduce health risks through lifestyle
changes. Many employers and Medicaid programs nationwide have introduced
incentives to encourage healthy behavior. These incentives have taken many forms,
including: gifts, such as free dinners; lotteries among participants for gifts or cash;
direct cash payments or penalties; and free health services or supplies,
such as free nicotine patches.
29-43
Of the programs of this type, by far the most widely studied are
programs related to incentives to quit smoking or lose weight. In most cases,
these incentives have been offered in conjunction with other programs targeting
the desired behavior—for example, incentives to stop smoking are offered
to one group together with a smoking cessation program, whereas a control
group gets only the smoking cessation program. Thus, the impact of the incentives
would only be that expected over and above the effect of participation in
the educational program or support group.
In studies of such programs, the impact of smoking cessation and weight
loss incentives has been small.
29,32-43
Although they do boost participation in smoking cessation or weight
loss programs, they generally have little lasting effect on actual smoking
cessation rates or weight loss. This result came about, in part, because
the control groups generally had the desired response as well. In the example
of a smoking cessation incentive, both the control and incentive groups
often had high quit rates as compared to groups participating in no program
at all, but ultimately participants in incentive groups usually did not
quit smoking more often than those in control groups.
It may be that the incentives induced people to join programs, but those
people were not otherwise ready to make lifestyle changes and so did not
stick with the behavior change. The more effective approach may be to facilitate
lifestyle changes for those people who are ready for them—that is,
people who would enroll in the program even without the incentives. If that
is the case, it is more cost effective simply to offer smoking cessation
and weight loss programs—or at least to reduce barriers to them—than
it is to add incentives over and above better access to the programs.
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