The Value of Health Incentives

Incentives have become the #1 tool to achieve healthcare cost reductions.

Most costs are preventable:

  • 75% of costs from chronic conditions preventable by modifying risk factors (HHS)
  • 34 - 50% of $2.2 trillion in costs preventable without sacrificing quality (PwC)
  • $80B preventable through adoption of Health IT (Rand)
  • $77 - 144B preventable by investments in incentives (Deloitte)
  • $17- 29B preventable through eliminating medical errors (Institute of Medicine)
  • $100-300B preventable due to lack of drug adherence  (Ovation Research Group)

There is widespread agreement on the actions consumers and providers need to take to reduce cost. Incentives have become the leading technique to drive these actions:

  • 84% of CEOs see incentives as most important tool (PwC)
  • 50 to 74% increase in health incentive use from 2008 to 2009 (Towers Watson)
  • 73% of employers offer at least one incentive program (Towers Watson)
  • 3x effectiveness of programs using incentives vs. not (Towers Watson)
  • $192 average value of incentives per employee in 2008 (ERIC/NAM)
  • 75% of employers view incentives as top government reform plan (Hewitt)

Why?

Incentives possess unique characteristics:
  • Incentives are simple and easily understood. In a confusing healthcare world, people understand messages such as "Be Healthy And Be RewardedTM" This cuts through a healthcare system that can be confusing to consumers and providers.
  • Incentives produce a "Built in ROI." The cost of the incentive is not incurred until the consumer or provider acts.
  • Incentives are aligned to the actions widely accepted to impact cost. This further enhances the built-in ROI nature of incentives.
  • Incentives are positive. Incentives positively engage consumers and providers - especially at a time when consumers and providers face mistrust, shrinking healthcare dollars and life challenges.
Incentives work:
  • Employers realized a 15.1% average cost decrease ($1,165 per employee) (SHPS)
  • Employees are two to four times more likely to enroll in wellness programs (PwC)
  • Participation in biometric screening programs increased three to four times (PwC)
  • Health-risk questionnaire participation rose from an average of 22% to 60% (PwC)
Programs without incentives fail:
  • 5% of employees participated in weight and smoking programs (Hewitt)
  • Less than 15% of eligible individuals enroll in wellness programs (PwC)
  • 60% of employers have under 25% participation in programs (Deloitte)
  • 2/3 of patients not compliant with prescribed drug therapies (Datamonitor)
  • 12% of physicians used e-prescribing in 2007 (New York Times)
  • 87% of hospitals do not follow infection control guidelines (Leapfrog Group)
  • 7% of employees participated in employer nurseline programs (Hewitt)