Archive for June 12th, 2009

Steven Burd, the CEO of Safeway, has a fascinating op-ed in this morning’s Wall Street Journal called “How Safeway is Cutting Health-Care Costs.” He notes that health care spending has risen from 9% of GDP in 1980 to 18% in 2009; I don’t think anyone would claim we’re twice as healthy as we were 30 years ago. Indeed, this is the problem.

He cites some stats that I had not seen before, but which quantify the obvious. First, 74% of all costs are confined to four chronic conditions: cardiovascular disease, cancer, diabetes and obesity. Of these, 80% of cases of cardiovascular disease and diabetes are preventable, 60% of cancers are preventable, and more than 90% of obesity is preventable. Note that none of these is 100%. Obviously, the kid with leukemia did not do anything to cause it, or the non-smoker who drew the unlucky lung cancer card in that blackjack game called life. But you can acknowledge these numbers without blaming the victim. The person who drinks a liter of Coke for breakfast every day for decades, never exercises and develops Type II diabetes is going to find that being diabetic stinks even if his or her behavior had something to do with it. Wouldn’t it be better to align incentives to prevent suffering in the first place? If this happens to boost the bottom line of the insurer — be it Safeway or the government — that’s great, too.

The problem is that most health insurance has not worked on the auto insurance model, where a speeding ticket can double your rates. Partly this is because many of us get our health insurance through an employer and we don’t want our employers tracking our physical health. It would definitely be a little creepy to have your manager making a note every time you ordered soda instead of water with lunch. We also don’t like the idea of classifying what counts as bad bahavior or not. My husband and my decision to have children drives up the cost of insuring us, even if my healthy behaviors (exercise, diet, not smoking) make these pregnancies low risk.

Nonetheless, Safeway decided to see if they could lower costs on some obvious risk factors by bribing their employees. Rather than cast their variable rates as penalties for the unhealthy, the company labeled them as discounts for those making good, trackable choices. These include tobacco usage, healthy weight, blood pressure and cholesterol levels. These markers all have a fair amount of data supporting them. Employees who wish can be tested for the four measures, and receive a discount off their premiums if they pass (data is collected by an outside party and not shared with management, Burd notes). If a person passes all four tests, annual premiums are reduced $780 for individuals and $1,560 for families. If a person fails any or all of the tests, that person can be tested again in 12 months. If he or she passes or has made progress, the company issues a refund.

Net result? Safeway has held health care costs constant for four years, while most American companies’ costs have increased 38%. Obesity rates and smoking rates are roughly 70% of the national average. Again, while this is saving Safeway money, it’s hard to believe that in a world where many people say they want to lose weight or quit smoking, the employees aren’t also benefiting from having all their incentives aligned.

I understand that there are lots of details to be worked out, and hard cases to be dealt with before such plans are adopted more broadly. But if Pres. Obama is trying to make us all even more responsible, financially, for each other’s health care, then the fact that someone lights up a cigarette or refuses to exercise does affect everyone else. The public has a right to demand some accountability in return.