Thursday, June 13, 2013

Carrot or Stick

The carrot or the stick is often the way we see motivating people to respond. The ACA appears to allow carrots but not sticks, except perhaps in some insurance pricing schemes when the carrot has failed. In a JAMA article the authors examine the ACA and the concept of incentives. They state: 

But HIPAA did not render health factors completely irrelevant, and neither does the ACA. In fact, the ACA could be considered to strengthen the link between health status and insurance coverage terms in one respect. Under the HIPAA exception for “programs of health promotion and disease prevention,” employers are permitted to tie premiums or co-payments to tobacco use, body mass index (BMI), or other health factors as long as certain requirements are met. The ACA continues and expands on this policy, supporting the use of outcome-based health incentives within both public and private insurance.

The HIPPA issue related to privacy. On the other hand ACA relates to "incentives", positive motivations to have the person do the right thing. The counter would be punishment for doing the wrong thing, say being taxed at ever increasing rates if your BMI exceeds 25.0. 

However the do relate the ACA double edged sword approach where they state:  

Programs' health-contingent incentives could not in aggregate exceed 20% of insurance coverage costs. For example, if the cost of coverage were $5000, which is close to the average cost of employer-sponsored individual coverage, a plan could give a reward equal to $1000 to nonsmokers or, alternatively, impose a $1000 surcharge on smokers. Programs were also required to offer a “reasonable alternative standard” or waiver for those for whom it was “unreasonably difficult due to a medical condition” to meet a program standard
They continue to discuss the two sides of motivation. They conclude:

If incentive programs are poorly designed, however, they may do little to change health outcomes. A reward based on achieving a BMI of 25 might lead to weight loss among individuals with BMIs of 26 or 27 but not among those with BMIs of 36 or 37. 

Research on recurring errors in individual decision making suggests that premium adjustments may be less effective motivators than incentive programs that incorporate immediate and frequent feedback as well as highly visible and salient rewards and that harness behavioral motivators such as anticipated regret.

If incentives fail to change behavior, higher-risk individuals may be left in a worse financial position, undermining the ACA's efforts to weaken the link between health status and insurance costs and potentially threatening distributional equity. 

 This is a bit confusing. What is meant by a "worse financial position". Clearly if one has a BMI of 37 then one subjects oneself to very high risk for various diseases and that we then all must bear the ongoing burden of the costs of handling these. If however we actually considered the cost per incremental 0.1 in BMI and then applied it to each person then that would be an efficient cost recovery mechanism. After all we have the IRS into every other corner of our lives why not doing our annual physicals as well. Just imagine some morbidly obese GS9 with an attitude telling you to get up on a scale and then yelling out to her associate what you weigh and your BMI while hundreds of others wait in line. Not too far fetched from where we seem to be going.