Here’s a health care reform strategy that I have not heard anywhere else. Think about this:
Why aren’t health plans more aggressive in promoting the long-term health of their members, like getting them to eat better, stop smoking, get a little exercise, and all that? Because of “churn.” For something that has immediate consequences, helping their members stay healthy has an immediate payoff for the health plans. But most of the big things that would make you healthier take a longer time to manifest: You quit smoking or start eating better, you will have a much better health profile in five years, but it won’t make as much of a difference in, say, one year.
“Churn” is the industry term for the annual percentage of members who leave a health plan, and it can be surprisingly high. If each year 20 percent of a health plan’s members go to some other health plan for whatever reason (they move, lose their job, change employers, get Medicare, find a better deal), then it is not worth it for the health plan to invest in their members’ long-term health. If the health plan invests time and effort (which means money) to get you to quit smoking, and you then quit and become someone else’s customer, they lose that investment – and the other company gains, by getting a customer who is less likely to need expensive long-term treatments.
But what if they did not lose that investment? What if your long-term health profile were a corporate asset of your health plan? What if, when you changed health plans, the new health plan had to pay the old health plan for the rights to insure you? Call this a health plan member’s Net Present Value, that is, the member's future value as a customer discounted to a single amount in the present. If you don’t smoke; have a body mass index of 26 or below; and your cholesterol, blood pressure and resting heart rate indicate basic cardiovascular fitness and so forth, the new plan has to pay a high price for those rights, because you’re a valuable customer: You will pay your premiums, and have a lower risk of making expensive claims. If, on the other hand, you have diabetes, are obese, or smoke (or all three), you have a low Net Asset Value, or none. The new health plan has to take on the risk of your medical expenses (in an environment where they can’t exclude you for your pre-existing conditions), but at least it does not have to pay anything to get you as a customer.
The idea would have to be established and enforced as an industry standard, presumably by some semi-governmental body similar to the Financial Accounting Standards Board, and enforced by state insurance regulators. But there is no reason that the price of such Net Present Values would have to be set by any official body. They could be bundled and bid for in auctions that would dynamically find the true market value of a member’s long-term health status in each regional market.
Ironically, older patients who changed to a healthier lifestyle would create more value than younger ones. A 22-year-old who smokes is not likely to get COPD or lung cancer by the age of, say, 27. If a 22-year-old quits smoking, it doesn’t change their 5-year health profile as much as it would for a 60-year-old who quits smoking. So, as you get older, the health plans’ eagerness to help you get healthier increases. Yet, unlike schemes that would increase premiums for the less healthy, this eagerness is never coercive on the individual patient, and makes no assumptions about why a particular patient has a poor health profile, or how much it is actually under their control.
It has been estimated in various studies that some 70 to 75 percent of all health care costs derive from chronic conditions. You may be dealing with a heart attack, for instance, but that is an acute manifestation of chronic heart disease. It is similarly estimated that some huge fraction of health care costs derive from, or at least vary with, behavior. That is, to a large extent, what patients do drives their health status, through their addictions, whether they exercise, whether they text while driving, whether they smoke, how they eat, how they handle stress.
So there are vast sums (and we are talking, literally, trillions of dollars) to be saved by getting people to change their behavior – but almost no one in health care actually has any incentive to help them do that.
Health plans compete now in all kinds of ways to lower their risk by getting healthy customers and avoiding sick ones. What if they could also compete by creating healthy customers for other health plans? What if they could recover the invested value in customers that they lose? They would have a much greater incentive to help their members become as healthy as possible, not only for the short term, but for the long term.
We hear a lot about “perverse incentives” in health care: Your disease benefits a lot of players in health care, your staying healthy does not. Smart people have been asking, “Why isn’t anybody really paid to help me stay healthy, rather than to just treat me when I am sick?” To answer that question, we have to identify what economic value is created by your staying healthy, and who gets that value. If we could make sure that value accrues to an organization that has some leverage in keeping you healthy, we will have created a powerful economic engine for health.
Selling patients: Remember, you heard it here first.