Pareto Principle and effectiveness, efficiency and equity

Most medium to large companies have some type of wellness program.  That wellness program is part of the major medical group health insurance.  It ranges from the annoying reminders to take the stairs and team weight loss events to significant disease and condition management.  The more aggressive wellness programs will often tie money to participation.  Some will charge smokers an extra $50 a month in premiums, others will offer a much lower deductible to individuals who have gone for a primacy care/obgyn well visit in the past year, and others will have a complex reward matrix. 

The evidence as to whether they work in either saving costs or improving health has been mixed.

Aaron Carroll at JAMA Forum has a nice article on wellness programs that highlights an important policy point:

Many companies believe that these programs have the potential to improve health and by doing so, reduce spending in such a way as to make them cost effective.

Whether they actually accomplish these goals is not well understood. A review of randomized controlled trials found that they had no significant effect on blood pressure, blood sugar, or cholesterol. Another such review found that lifestyle programs that seek to improve weight and activity saved little, if any, money. But this has not slowed enthusiasm for wellness programs in the private sector: they account for about $6 billion a year in spending….

The overall result, which will please proponents of wellness programs, is that the program reduced health care spending by $30 per member per month, or $360 per year. For every dollar spent, $1.46 was returned in savings. This, of course, sounds great. Who wouldn’t want such a program? But a further analysis showed that things were not so simple. The disease management component accounted for almost all of the savings. Those who participated in that part of the program saw a reduction in health care costs of about $136 a month, or more than $1600 a year. This was driven largely by a 29% decrease in hospital admissions.

In fact, for each dollar spent on disease management, the company saw a return of $3.78. For each dollar spent on lifestyle management, they only saw a return of $0.48. In other words, lifestyle management cost more than they saw in return. [bold and italics mine]

This is not surprising, it is the Pareto Principle or the 80/20 rule in action.  Most costs, and most benefits are attributed to a small portion of a population. 

Now let’s ask the interesting questions, can a targeted disease management program for employer sponsored health insurance be created that is effective, efficient and perceived to be equitable?

We know that disease management is effective.  Disease management wellness models are intended to reduce medical spending. They do this by reducing admissions.  They pass the effectiveness test of doing what they say they want to do.  This is a fairly easy hurdle to clear.

Now can they do what they want to do with resources that don’t have any higher or better uses.  Right now, the risk free rate of return in the United States ranges from a few hundredths of a point for an overnight loan to 3.88% for a thirty year loan last week.  The study in question showed a 378% return on investment for disease management.  In most situations where the return on investment is that good, it is either from a Nigerian e-mail or requires committing major felonies.  Disease management is neither a scam nor a felony.  So it passes the low bar of being an efficient use of resources in almost all mature companies.

The big hurdle is equity and the perception that a disease management program is fair to both the people who would benefit from the disease management program and the people who do not.  If everyone is required to enter a disease management program, the 55 year triathelete who is training for her 7th Ironman is laughing at being placed in the same healthcare pool as the 33 year old hypertensive diabetic guy.  It is a waste of time, resources and credibility to include the 55 year old triathelete who does not need the additional intervention.  The other extreme would be to make the program voluntary and see quite a few people who would benefit from disease management not enroll.  It would be a medical ghetto.

This leads to the temptation of incentives to enroll the right population into the disease management program.  Right now most wellness programs use a stick approach.  If a person is a smoker and is not in a cessation program, or is overweight as measured by BMI (which has its own problems) and is not in a weight loss program or whatever, the person pays more.  These are behavioral modification strategies which may or may not have direct health correlates (smoking does, weight not so much) and it provokes a big backlash if the lifestyle attributes incentives also apply to pre-exisiting disease management.  Most people will consider a program that penalizes a diabetic for being a diabetic to be inherently unfair and inequitable as a person does not have control over whether or not they’ll be diabetic during the open enrollment period — they can control and minimize the impacts of the disease if they choose to do so and have the appropriate structure that enables control but they can’t just decide to quit diabetes. 

A shared savings model is economically attractive, but also has equity concerns.  A shared savings model would identify the people who have managable diseases and bring them into the program with the promise that the company would split some of the savings.  The Pepsi data set discussed above had medical management savings of $136 per managed person per month, so a shared savings model might have the company pocket $86 and the managed people pocket $50 per month.  This aligns incentives for the managed members to improve their health and to get the marginally medical managegement eligible person into the managed po0l.  But the equity concern is that the healthy people are griping that they are paying higher net health insurance premiums than the fat slob in accounting who is getting a deal beacuse he is becoming a slightly healthier fat slob in accounting. 

A targeted system that has a flat premium for everyone and then an incentive of $25 or $50 per month premium reduction per person who either does not have any of the diseases that can be effectively and efficiently managed or the same premium reduction for disease management enrollment would probably be seen by most if not all people as a reasonable and equitable system.  This system is giving up significant efficiency gains if the original premium is close to actuarially fair for the entire group as most of the gains are being paid out as premium reductions but it will be perceived to be fair and voluntary.

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33 replies
  1. 1
    Cervantes says:

    Richard, can you say anything about the professionals hired by and into these insurer-based disease-management programs? Thanks.

  2. 2
    Richard Mayhew says:

    @Cervantes: Not really as the scope is too wide for me to comment intelligently about anything

  3. 3
    Cervantes says:

    @Richard Mayhew: OK. Thanks, anyway. And for the post as well.

  4. 4
    Richard Mayhew says:

    Actually here is a link to a best in class health management group:

    http://www.washingtonpost.com/.....to-get-it/

  5. 5
    greennotGreen says:

    Part of my employer’s wellness program is a free gym for employees which, efficacy of disease reduction aside, may be seen as a useful recruiting tool.

    However, for me the contrast of the diabetic fat slob in accounting and the triathlete is exactly the reason I don’t use the gym. When I was coming back to health from chemo, the idea of lifting weights so I could regain enough strength to lift groceries next to the guy who was thiry years my junior and working to get just a little more definition in his pecs was too off-putting. My problem, I know, but that’s why I don’t go to the gym.

  6. 6
    Lee says:

    @greennotGreen:

    No to belittle your problem, but have you actually gone to your company gym?

    I work out regularly at ours (I work for a telecom company). Yes you do have the exceedingly fit guys and girls working out. But you also have the broad spectrum of individuals in our company. We have a overweight elderly guy that works out in the morning that works out while using his walker (he has the personal trainer help him with his workout). The woman that sits next to me is 63 and works out after work.

    Find a friend at work that goes and have them take you for a quick tour. You might be pleasantly surprised.

  7. 7
    mai naem says:

    I remember hearing about a union based program in the Midwest where they looked at the people who had cost them the most and placed them in a program where they were called and reminded to go to the doctor/labs folllow diet/exercise/advice etc etc. and they ended up saving a ton of money on these people because they ended doing better medically.

  8. 8
    raven says:

    I ran a “President Council on Physical Fitness Challenge” at work for a year. We had decent participation for a while but, like the folks at the Y in January, it didn’t last too long.

  9. 9
    Cassidy says:

    @greennotGreen: Go check out your company’s gym. Odds are the people you’re concerned about being near are either a) not their or b) would love nothing more than to pass on what they know to another person. The stereotypical gymrat meathead exists, but they all tend to congregate in a few limited places, i.e. gyms that cater to bodybuilding, not noob friendly and where they can get “supplements” from their “trainer”. They don’t go to places that typically have a marketing budget: Planet Fitness, Anytime Fitness, etc. Secondly, younger males tend to be in the power lifting camp or Crossfit and there is a good chance they don’t attend your company’s gym as it doesn’t have the equipment to support those endeavors. If they do, then your company has put some money into its gym and you should support it. Lastly, the younger males that go there will probably be a pair; one is in good shape and helping another in not as good shape. They will probably be more than happy to help.

    TL;DR, use the free gym when you can.

    Wellness Programs work best as incentive only: everyone pays this much, if you do this and this, you pay less.

  10. 10
    slippytoad says:

    Huh, I view the wellness program as yet another opportunity for my insurer (who is also my employer, hate that) to make some extra dough off of me by hoping I don’t actually take the time to jump through their little loopholes.

    I can’t help but contemplate that if the big bad federal government were asking me to sign up for a wellness program the wingnutosphere would be going right berserk. Tell me again how private industry is so much better-er?

    @greennotGreen, dude, if you’re worried about what other tortured souls you are seeing at the gym, ur doing it rong.

  11. 11
    catclub says:

    @Richard Mayhew: wow. Worth reading again.

  12. 12

    We have a “health management” program at the Giant Evil Corporation that they seem to tweak a little every year, presumably to try and get more people to participate. Right now, you can get $100 each for filling out a (confidential) online health profile, being under a BMI of 27, and having normal blood pressure.  Even if you end up not meeting the BMI or blood pressure criteria at the time of the test, you have a chance to try and improve the number and get a retest a few months later to get your $100.  I like that they split out the BMI and blood pressure so at least people who are overweight but have otherwise normal numbers for BP can benefit as well. You can also get a doctor’s note for BMI if there’s a medical reason you can’t meet the number and still get your money — one of my coworkers who’s a very in shape crossfitter was able to do that.

    As far as I can tell, the GEC regards these health screenings as a gateway drug to get you involved in the other (optional) health programs — health coach, dietician, Couch to 5K groups etc. This year, they also introduced a “health advocate” who’s supposed to be able to guide you when you have complicated medical bills and/or procedures that need to be done, but I haven’t had to use that yet.

  13. 13
    Fuzzy says:

    This whole problem could be solved by putting parking lots a half mile from work plus no elevators until the fifth floor. The only cost being a covered or enclosed walkway. That way everyone gets a ten minute workout twice a day. Wear deodorant and suck it up.

  14. 14
    Sister Rail Gun of Warm Humanitarianism says:

    @Fuzzy: Don’t think that would pass muster under the ADA.

    In fact, I know it wouldn’t.

    From someone who two years ago would have had to make that hour+ parking lot to workplace walk using a walker, fuck off.

  15. 15
    🎂 Martin says:

    Well, I know of one lifestyle management program that worked quite well. But it worked at the group level, at an organization with a strong staff community, and where they made improving the group the goal, rather than the individual. So individuals had stronger participation rates because they didn’t want to let the group down.

    But that really only works at select employers and depends on a lot of other factors working as well – staff need to be happy with their job, they need to not feel that the lifestyle program is happening in lieu of raises and other more tangible benefits, etc. It was at a large employer that understood that, and I think that’s why it worked.

    But I suppose that’s less of a critique of lifestyle programs and more of a critique of how treating employees well leads to good outcomes.

  16. 16
    Trabb's Boy says:

    “… the equity concern is that the healthy people are griping that they are paying higher net health insurance premiums than the fat slob in accounting who is getting a deal beacuse he is becoming a slightly healthier fat slob in accounting”

    Come on, Richard. You just said that wellness programs that aren’t based on disease management are a waste of money and you’re talking about a targeted disease management program — for people who have been diagnosed as having a disease. Why do you have to bring the old “fat slob” stereotype into it? An insurer provides a person with the disease with support that is proven to reduce the risks involved in the disease and to save money. Money is provided as an incentive to the people the program would make sense for. Where exactly is the equity issue here?

    If the guy who runs marathons gets to not have a fucking disease.

  17. 17
    Shinobi (@shinobi42) says:

    That 55 year old triathalon guy could still have a heart attack.

    My point is that these wellness programs seem to be based in some way on the idea that we actually have any actual control over our health. And the truth is, what control we have is fairly limited. Health articles that tell you how to save yourself from cancer and old age and diabetes are very popular, but ultimately, all you can do is reduce those risks slightly.

    The for profit model of health care encourages this idea, that if you were just thin enough (but not too thin) athletic enough (But don’t hurt your knees) you’d be able to avoid all possible health outcomes.

    There are some things we no for sure are bad for you, smoking, not getting any exercise. However even those things are no guarantee of health complications. The fact that an individuals health complications are essentially random events governed by risk factors means that our health system cannot truly be fair. Life isn’t fair.

  18. 18
    Fuzzy says:

    @Sister Rail Gun of Warm Humanitarianism: Of course there would be exceptions. I am an amputee and in a wheel chair but I could make the half mile stroll. Just walk a half mile in my SHOE you arrogant foul mouth bitch.

  19. 19
    Fuzzy says:

    @Sister Rail Gun of Warm Humanitarianism: I ‘ll take your walker and raise you two legs or a wheelchair for life. Your “warm humanitarianism” is awesome.

  20. 20
    raven says:

    Or you could be a gym rat like me and then figure out if you want to have shoulder surgery at 64.

  21. 21
    greennotGreen says:

    @Lee: @Cassidy:

    I said it was my problem, as in, it’s not the fault of the buff guys that I find their presence discomforting.

    And yes, I have been to the company gym, and the buff guys are why I don’t want to go. OTOH, I found the physical therapy gym to be a much more pleasant environment, but I’m not currently in physical therapy, so I can’t use it.

  22. 22
    Anna in PDX says:

    @greennotGreen: I have issues about comparing myself to younger more fit people too. I think the best way to get myself to the gym, based on my past behavior, was when I had a gym buddy. She was fitter than me but it was still a shared activity, and she really motivated me. I always struggle with the motivation for working out.

  23. 23
    Mnemosyne says:

    @Trabb’s Boy:
    @Shinobi (@shinobi42):

    As with so many of these kinds of things, the devil is always in the details. One of the ways the GEC I work for seems to structure it is to use the $100 incentive for filling out the health profile to steer people into disease management programs who might otherwise not know those programs exist — so the computer goes, Oh, I see you have type 2 diabetes. Would you like to receive an email newsletter? Calls from a health coach? More information about disease management? Otherwise, it’s difficult to identify which employees would benefit from those programs short of the company having access to their personal health information (which may actually be illegal here in California).

  24. 24
    Richard Mayhew says:

    @Trabb’s Boy: Because that is how people will perceive things —equity is both an objective and subjective measure and an objectively fair program that people perceive to be unfair will fail to get good buy-in.

  25. 25
    Mnemosyne says:

    @greennotGreen:
    @Anna in PDX:

    If you can afford it, sometimes a ladies-only gym can feel less intimidating than a co-ed one when you’re first starting out. The only major drawback I’ve found here in Los Angeles is that old Russian ladies like to go into the hot tub naked, which can be a little disconcerting the first couple of times. ;-)

  26. 26
    Anna in PDX says:

    My workplace has a variety of programs. I believe from what I have heard from others that our smoking cessation program is pretty good (being a nonsmoker myself I have to rely on hearsay). We offer fitness programs (gym facilities) and brown bags about wellness about once a month. Our gyms also offer group classes like Zumba. I have taken very limited advantage of these programs by attending a couple of their events and reading the emails they send out. It’s all totally voluntary and positive. There are no rate punishments for those who don’t participate or anything like that. I do not know how my place of employment decided this was a cost effective thing, probably in terms of just money it is not. However I think it makes me feel more appreciated at work to know these things are provided, and you can’t really quantify that sort of thing.

  27. 27
    John M. Burt says:

    @Mnemosyne: “[O]ld Russian ladies like to go into the hot tub naked, which can be a little disconcerting the first couple of times. ;-) ”

    Take it as a learning opportunity. Get comfortable with saggy old bodies, so you will be more comfortable with having / dating one.

  28. 28
    Herbal Infusion Bagger says:

    When I was coming back to health from chemo, the idea of lifting weights so I could regain enough strength to lift groceries next to the guy who was thiry years my junior and working to get just a little more definition in his pecs was too off-putting. My problem, I know, but that’s why I don’t go to the gym.

    Your body needs to move otherwise your muscloskeletal system will hit problems from poor lubrication of joints and tendons shortening.

    I f**king hate lifting weights, so I do stretching and yoga to keep the synovial fluid moving the joints, crunches to keep the core strength so lessen the risk of f**king up the back, and some cardio so I’m not complete aerobically unfit. I’m not looking to do “insect pose” or “upward wheel” or run a triathalton, I’m just looking to avoid getting butchered by an orthopedic surgeon later in life.

  29. 29
    Herbal Infusion Bagger says:

    When I was coming back to health from chemo, the idea of lifting weights so I could regain enough strength to lift groceries next to the guy who was thiry years my junior and working to get just a little more definition in his pecs was too off-putting. My problem, I know, but that’s why I don’t go to the gym.

    Your body needs to move otherwise your muscloskeletal system will hit problems from poor lubrication of joints and tendons shortening.

    I f**king hate lifting weights, so I do stretching and yoga to keep the synovial fluid moving the joints, crunches to keep the core strength so lessen the risk of f**king up the back, and some cardio so I’m not complete aerobically unfit. I’m not looking to do “insect pose” or “upward wheel” or run a triathalton, I’m just looking to avoid getting butchered by an orthopedic surgeon later in life.

  30. 30
    Karen in GA says:

    I have a slightly different take on this. The corporation I quit earlier this year had self-funded insurance through United (a cheap insurance company that absolutely sucks). The corporation had annual health fairs, where we could get assorted numbers checked (blood pressure, BMI, etc.). Nice as a perk the first couple of years — but then the corporation started moving towards having employees meet certain numbers, otherwise we’d pay higher premiums. We could either be checked at the health fair (where a fit 6’4″ 210-pound employee was called obese — seriously), or have our own doctors do it.

    I felt like they were bringing in a vet to check on the livestock.

    I know it’s all about costs. But isn’t it enough that they drug-tested me, did an employment and criminal background check, and checked my credit for a secretarial job? How intrusive should our employers be? I quit smoking on my own, I have a gym membership that I realize I should use more to get rid of the weight I put on when I quit smoking. For the most part, I avoid fast (and generally unhealthy) food. I don’t do drugs, I hardly drink — in fact, according to some researchers, I should probably be drinking more. I get my annual physicals and assorted scans that middle-aged women are supposed to get. You know how I already know to do this? By being a functional adult. I don’t need a mommy, and I sure as hell don’t want my employer thinking it can play that role.

    Besides, if I have a heart attack, it doesn’t affect the company’s stock price. If the CEO has full-blown AIDS, on the other hand, Wall Street and the shareholders go nuts, the stock price plummets, the company loses money, the corporation cuts costs, and hundreds or thousands of people possibly including me get laid off. So if they want to know the blood pressure and BMI of a secretary, I think the rest of us have a right to know whether the CEO is having unprotected sex.

    Of course, the real problem is employer-provided health coverage. But until we do away with that, can we please draw a line somewhere? With corporate profits at record highs, they can afford to pick up the damned costs of having human employees.

  31. 31
    Cassidy says:

    @greennotGreen: I know what you meant. I was trying to say that the people you envision and are worried about meeting, don’t typically go to the kinds of gyms the rest of us would go to and the buff, in shape guys/ gals who are at your gym will probably be more than willing to be helpful.

  32. 32
    Sister Rail Gun of Warm Humanitarianism says:

    @Fuzzy: I have heard that particular bit of condescension almost exclusively from people I won’t dignify with the name “gym rat”, people I primarily associate with the local CrossFit. You know, Paul Ryan types. Talks like a judgmental ass, etc., etc.

    (I like gym rats. I aspired to be one, years ago. Which probably explains how I’ve kept up physical therapy long enough that that half mile is, now, closer to a stroll than it is to torture. Still got a long way to go. Stairs are still a major obstacle. Can’t undo the effects of 15+ years of crippling fatigue overnight.)

    The only other group: a particular practice of doctors who pushed bariatric surgery really, really hard while making shit up to explain my odd bloodwork resuts. Explanations that made the second opinion doctor’s eyes cross, trying to make sense of it.

  33. 33
    JoyfulA says:

    I once had a business acquaintance recruit me. “We have this great gym that really helps people get healthy and stay healthy. It’s so great that most employees skip lunch and go to the gym and exercise instead.”

    I got the vibe that gym attendance was semi-compulsory, and I was grossed out. YMMV

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