post by Bill Gardner
Ezra Klein has an important article about how the Cleveland Clinic has reduced spending on health benefits for its employees. (Or perhaps you read about this first on this very blog, although I didn't name the Cleveland Clinic to protect an inside source.) In a post tomorrow, I want to examine whether these programs are coercive, and what we might think about that. First, though, let's look at what the Cleveland Clinic does.
Like most employers, [the Cleveland Clinic] struggles to contain health-care costs. But... over the past seven years a series of reforms... slowed and then arrested the growth in employee health-care costs at the clinic. This year, inflation-adjusted spending might actually fall... What happened? Health care costs rose 6% a year nationally. Yet there was no rationing of care or squeezing of providers at the clinic. The clinic’s employees simply got healthier.... [Cleveland Clinic Wellness leader] Roizen says the initiative sprang from a single fact. According to the Centers for Disease Control and Prevention, 70 percent of all medical costs are related to smoking, physical inactivity, food choices and portion size, or stress. Cut smoking, increase physical activity, persuade people to make better dietary decisions, and help them manage their stress, and you can reduce health-care costs before an employee ever steps into a hospital.
In summary: corporations offer incentives for employees to practice better health behaviors. Employees respond, get healthier, and use fewer health services. The reductions in service use allow companies to negotiate better deals on employee health insurance, or reduce costs directly if the company is self-insuring.
However, do these programs really work? Baicker, Cutler, and Song looked at employee wellness programs and found substantial evidence that this works.
In a critical meta-analysis of the literature on costs and savings associated with such programs, we found that medical costs fall by about $3.27 for every dollar spent on wellness programs and that absenteeism costs fall by about $2.73 for every dollar spent.
Baicker et al. note, however, some important limitations in these studies. For example, corporations reporting on themselves have few incentives to publicize failures, so there may be a publication bias. The authors are also concerned that many of the studies are looking only at the health costs of workers who self-select into the programs. That said, the best evidence we have suggests that employee wellness programs do reduce health care costs among people who are young enough and healthy enough to be in the workplace.