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Managing Medicare's Costs

Prevention, wellness programs and long-term retirement healthcare costs (2 of 2)

When retirees follow disciplined approaches to wellness, they typically extend their lives, prevent or delay the onset of serious chronic diseases, and may even reduce their total retirement healthcare costs. That’s the consensus, at least, of more than a dozen studies published over the past decade that show the long-term benefits of healthy lifestyles. But the evidence is that relatively few retirees participate in wellness programs.

How do you motivate people to take part in wellness efforts that are beneficial to them and to society? After all, wellness efforts usually don’t require high-tech coaching or sophisticated programs. Most of them require people to adhere to a few basic principles: exercise regularly, practice good nutrition and weight control, and avoid tobacco and excessive use of alchohol.

An entire industry – health promotion – has emerged to try to get people to take part in wellness programs. And in fact, for-profit companies that run wellness programs for corporations also take part in wellness research and advocacy. That’s a valid reason to be skeptical of some of their research efforts and their industry-friendly studies.

But most health promotion efforts and research come from academia, government and a few large non-profit foundations. Now in its 25th year, the bi-monthly American Journal of Health Promotion publishes peer-reviewed scholarly articles and has well regarded policy experts as its editors. And last spring the non-profit Robert Wood Johnson Foundation gathered some 50 academics and behavioral scientists to discuss ways to get people to engage in healthy behavior.

Employers also struggle with questions of how to get individuals to take part in activities that benefit them. As companies have become convinced that wellness programs reduce both absenteeism and health insurance premiums, they have tried to find the proper mix of incentives. While they cannot legally single out unhealthy workers and charge them higher penalties because they smoke or are obese, they can (for example) offer payments to every employee who attends a monthly health education seminar or reimburse workers for their health club dues. Despite financial incentives, though, workers’ involvement in corporate wellness programs has remained low.

Many corporations have doubled down by offering richer rewards. A Fidelity Investments survey of 147 mid- to large-size companies found that the financial incentives provided by employers averaged a total of $430 per employee in 2010, a 65% increase from the prior year. But those more generous awards did not encourage a large number of workers to take part.

An analysis of wellness program data from 450 companies indicated that the firms whose financial rewards were in the top one-third had an average participation rate of only 37%, while those in the bottom one-third saw a meager 24% of their workers participate.

The reason for low participation may be that following a wellness regimen is difficult. A recent review of several studies about retiree wellness programs found two common themes. The first is that cost savings are often insignificant in the first year of program participation. One study analyzed the medical claims records of 4,700 Medicare Advantage plan members who used a health club benefit that was paid for by the plan. The study compared these claims to those of a larger, slightly younger control group who were not in wellness programs.

Disappointingly, in the first year of the study the two groups’ adjusted total healthcare costs were not significantly different. In year two, though, people in the health club group averaged spending $500 less per person than those in the control group. This second-year payoff effect has also been seen in other studies of wellness programs.

In addition – and this is the second theme — the cost savings were greatest for those in the health club group who exercised two or more times a week over the two-year period. In the second year, they spent $1,252 less than did those in the health club group who exercised less than once a week. So, more frequent participation reduced healthcare costs further. Both themes – persistence and frequency – help to explain why many people shy away from wellness efforts.

Government faces the same dilemma as employers – how to get people to participate. Because they believe that tens of billions of dollars could be saved if wellness programs (formal and informal) were widely adopted, Congress and the Administration have offered numerous encouragements. Four months ago the government announced its first-ever national prevention and health promotion strategy. And the new Health Reform law contains several wellness provisions, including a free annual wellness visit and free preventive tests for Medicare beneficiaries.

Like many other wellness initiatives, Medicare’s free annual wellness visit has so far drawn a tepid response. A recent Department of Health and Human Services press release said that only 1.3 million people in original Medicare had used their free wellness visit as of end of August, which is less than four percent of the original Medicare population. If people continue using their wellness visits at the same rate, by the end of this year fewer than two million people will have had a Medicare-funded wellness visit – or less than six percent of those who have original Medicare.

For its part, Medicare has been trying to raise awareness of the wellness visit and other free preventive benefits with a national campaign that includes television and radio public service announcements.

Also, as is the case with almost any new program, some have been critical of Medicare’s rules for wellness visits. Doctors have complained that they cannot actually treat patients during the visits, which are intended primarily to gather information and to develop wellness plans. Others don’t like the lengthy checklists and risk assessments they must complete.

While they may need bureaucratic tweaks, Medicare’s wellness visits can reduce healthcare costs if enough people use them. Because Medicare is marching toward a fiscal cliff with its current practices, Congress may well create further incentives and requirements to encourage people to take part in wellness programs and also to use Medicare’s free preventive tests.

The savings that Medicare might realize from wellness programs are speculative, of course. Some back-of-the-envelope estimates put them at tens of billions of dollars. As one example, an article last month in the policy journal Health Affairs projected a $7 billion Medicare savings if people with pre-diabetes who are ages 60-64 are enrolled in weight-loss programs.

Few wellness efforts and preventive services require the services of physicians, and so they are relatively inexpensive ways to prevent or delay costly chronic diseases. Yet by and large Americans continue to avoid wellness regimens. And they use other preventive services at about one-half the recommended rate.

Some believe that the government will increasingly need to use financial carrots and sticks to encourage people to adopt healthy lifestyles, which is seen as a lower-cost and less disruptive way of reducing Medicare’s costs than are healthcare rationing, mandating prior approvals for expensive diagnostic tests, and raising annual Part B premiums at double-digit rates.

Here is Medicare’s explanation of the annual wellness visit.

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