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Managing Medicare's Costs

Medicare's wellness visit as a cost-reduction tool

In 1979 when Johnson & Johnson started the Live for Life wellness program for its employees, James Burke was in his fourth year as the company’s chief executive officer. Burke went on to become a widely admired business executive who would be named by Fortune magazine as one of the ten greatest CEO’s of all time. He said that Live for Life had two goals: 1) to encourage Johnson & Johnson employees to become the healthiest in the world, and 2) to reduce the cost of healthcare for the corporation.

Because it is now more than 30 years old, Live for Life offers a rich trove of data for researchers trying to gauge its success. Last month an article published in Health Affairs addressed the question of whether Live for Life is cost-effective. The same question is often asked of wellness programs in general: “Do they really save money?”

As it turns out, the Health Affairs study validates one of Health Reform’s approaches to controlling healthcare costs – the annual wellness visit. In late February, Medicare reported that since January 1 more than 150,000 beneficiaries had already completed free wellness visits, a provision of Health Reform that went into effect this year.

Medicare enrollees can schedule free wellness visits with their physicians every 12 months, although they must have had Medicare for at least a year before their initial wellness visit (or if they had a “Welcome to Medicare” physical, 12 months after that).

Wellness visits are different than physical exams, although they provide the same opportunities for people to discuss their personal health with their doctors. Much of a wellness visit is spent gathering data — taking routine measurements (height, weight, blood pressure), reviewing medications, asking about the types of care currently being given by other physicians.

A Medicare-approved wellness visit requires doctors to develop schedules for preventive tests and screenings that patients will need over the next five to ten years. For retirees who want better to understand wellness visits, Families USA has published a helpful fact sheet explaining how they work.

An effective employer program such as Live for Life uses the equivalent of a wellness visit as a first step. Employees are asked to complete health risk assessment surveys, answering questions about their personal health habits and family health histories. And as with Medicare’s wellness visit, routine measurements for height, weight, and blood pressure are taken. Based on this information, employees are then given personalized programs that may include fitness classes and individual coaching in specific topics such as nutrition, weight control, and cholesterol management.

Johnson & Johnson has said that Live for Life more than pays for itself. Begun as a pilot, the program was soon expanded companywide and staffed by a fulltime team of healthcare professionals as it became apparent that it reduced corporate costs significantly. The Health Affairs study indicated that Live for Life reduces medical and prescription drug expenses for participating employees by an average of $565 a year (in 2009 dollars) compared to the medical costs of employees chosen from 16 other companies’ wellness programs. Presumably the savings would have been greater when compared with employees who were not taking part in wellness programs.

The program’s costs were harder to pin down, and the study’s authors used a range from $144 to $300 per employee each year based on previous studies of wellness programs. So even at the high end of this range, Live for Life’s savings were $265 a year per employee after subtracting program costs.

The study was based on a sample of more than 32,000 Johnson & Johnson employees and a similar number of employees selected from among 470,000 participants in wellness programs at the 16 other companies. In choosing which people would be included in the other companies’ comparison group, the study’s authors were able to match each Live for Life participant with a “twin” who was of the same gender, of similar age, and who lived in the same geographic region.

As a result, the medical costs of 32,000+ Johnson & Johnson workers were compared with the costs of 32,000+ workers from other companies who not only were participating in wellness programs but who were chosen because their gender, age, and geographic region matched those of a “twin” in Live for Life.

In the last year, there have been at least three well-designed studies that support the cost effectiveness of wellness programs. Unfortunately for retirees, there is no single entity like Johnson & Johnson that aggressively promotes Medicare’s wellness benefits to retirees. And to be fair, the challenge of communicating and promoting wellness is much more difficult to explain to Medicare’s population of 47 million people, a diverse group in which relatively few know what a wellness visit or wellness program is.

By comparison, Johnson & Johnson has 114,000 employees, who are offered financial incentives to participate in Live for Life. Retirees, of course, have financial incentives as well to use Medicare’s wellness visits and free preventive tests, which over time can lower their medical costs.

The Health Affairs study is abstracted here.

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