Healthy Handouts

Borrowing a page from private health insurers, state Medicaid programs are testing the wellness waters.
December 2007
Josh Goodman
By Josh Goodman  |  Former Staff Writer
Josh Goodman is a former staff writer for GOVERNING..

On the state of Florida's dime, Medicaid beneficiaries can buy sunscreen. Or shampoo. Or toothpaste. Or even baby wipes.

That might sound generous, but it comes with a catch. These products, and hundreds of other goods, are available only to Medicaid recipients who engage in healthy behaviors. Those that do get credit that can be redeemed at pharmacies around the state. They receive $25 in credit for getting a mammogram, $25 for participation in a smoking-cessation course and $25 for bringing in a child for immunizations--just to name a few of the enticements. "If we can reward them for doing these types of preventive activities," says Tom Arnold, Florida's Medicaid Director, "it will benefit us and the managed-care plans and the beneficiaries."

That concept is one that a growing number of state Medicaid programs are embracing. For a while now, state health officials have believed that, in order to control costs, Medicaid needed to change from a program that provides health care for sick people to one that prevents people from getting sick in the first place. To that end, Florida and other states have a new approach: Offer rewards to beneficiaries who help themselves stay healthy through preventive care and wellness activities.

Whether little incentives can make a big difference is unclear. Financial rewards have a mixed record of success in health care, and attempts to reshape the behavior of Medicaid recipients is fraught with its own set of challenges. But, since controlling Medicaid costs is a high priority for state governments, officials are willing to try the wellness approach.


In addition to Florida, the leaders in offering incentives for healthy behavior include Idaho, Kentucky and West Virginia. Empowered by the federal Deficit Reduction Act of 2005, which gave state Medicaid programs more flexibility on the mix of services they could offer, states have been free to experiment in the wellness arena.

The details among state programs differ. Florida, for instance, caps its annual rewards at $125 per family. Idaho, which is offering to pay for things like gym memberships and nicotine patches, also rewards parents with $10 a month for bringing their children in for immunizations and well-patient visits. For all the programs, though, the hope is that the psychological pleasure of getting a reward will move Medicaid beneficiaries onto a good-health track--even if they've never given it a thought before. It's the same concept that New York City is using to fight poverty by offering financial rewards for everything from completing job-training classes to ensuring good school attendance for kids.

Such efforts aren't based just on mind games. One reason officials are optimistic about reward programs in Medicaid is that relatively inexpensive benefits mean a lot to people hovering around the poverty line. Martha Roherty, the director of the National Association of State Medicaid Directors, cites earlier experiments in Medicaid that found that a gift of diapers to a pregnant woman increased participation in prenatal care. "It's not a small reward," Roherty says, "when you're in the welfare system."

There's also plenty of behavior that needs to be changed, even beyond smoking and obesity. Through its incentive program, West Virginia is targeting concerns such as unnecessary use of emergency rooms and missed doctor's appointments. The latter problem is bad enough that Joan Phillips, a pediatrician in West Virginia and the former president of her state's chapter of the American Academy of Pediatrics, used to double-book patients. "You knew the kids who weren't going to show up," she says.

Those problems are widespread, which is why so many places are taking an interest in rewarding good behavior. When the University of Oregon's Jessica Greene surveyed state Medicaid officials in late 2006, she found that 28 states were either already planning to add financial incentives or considering doing so. "We're seeing this approach popping up all over the place," Greene says. "There seems to be an acknowledgement that there's no way we can have cost savings if we don't have a behavior change."


That level of enthusiasm might not be justified, however. For many years, academic researchers, typically in small-scale experiments, have studied the use of financial incentives to change health behaviors. In 2004, the University of Minnesota's Robert L. Kane co- authored a paper reviewing the literature. "The programs didn't have very big effects," Kane says, "Unless there was a lot of money involved, they didn't work very well."

One of the programs he studied that worked best relied on negative incentives, not positive ones. When pregnant women were threatened with reductions in WIC benefits, attendance at prenatal classes improved. "The more Draconian the inducement," he says, "the greater the effect."

But that's of little use to state Medicaid programs. West Virginia sounded as though it were moving in the direction of punishment rather than reward when it announced last year that some healthy Medicaid beneficiaries would automatically be enrolled in a plan that reduced their benefits, most notably by limiting recipients to four prescriptions a month. Under the West Virginia model, only beneficiaries that sign health-improvement plans and live up to those promises are eligible for the more generous plans.

That idea brought the state national attention, much of it negative. Now West Virginia officials are implementing their plan in a way that's more lenient than it initially sounded. They stress that beneficiaries get to work with doctors to personalize their health- improvement plans, that perfection isn't required to keep the enhanced benefits and that even those on the lesser plan can receive exemptions to the prescription limit. "We don't want to be harsher on the Medicaid population than we are on ourselves," says Shannon Riley, a West Virginia Medicaid spokesperson. "The goal is not to kick people out of the wellness program."

At first, Phillips, in her role as pediatrician, opposed West Virginia's plan on the grounds that it was too harsh toward children but, she says now, those fears haven't been realized. With poor families involved, other states aren't interested in punishments, either

So, states are trying to make reward-based programs work, in spite of their uncertain past. In doing so, they're facing lots of difficulties that are specific to Medicaid. For one, states still face restrictions from the federal government. West Virginia thought about giving out cash for good behaviors, but realized that the feds wouldn't allow it.

The more fundamental obstacle, though, is that there are often deep- rooted reasons why Medicaid beneficiaries don't take better care of themselves. They eat fast food because that's what they can afford. They don't show up for appointments because they lack access to transportation. And they smoke because so many of their peers do--plus they're bombarded by cigarette advertisements. "A lot of these families are so overwhelmed with life," says Phillips, "and they have so many dysfunctions, doing regular well-child care is very difficult."

Communicating with Medicaid clients about new programs is also notoriously hard. That may be one reason that, so far, the wellness results haven't been especially encouraging. The rewards programs are very new--some aren't fully implemented--so officials caution against passing judgment yet. That said, both Florida and West Virginia are experiencing low participation.

Florida's program, which is active in five counties, has handed out credits to close to 120,000 Medicaid recipients. Fewer than 10 percent, however, have actually gone to a drugstore and used their reward money. This year, West Virginia has gradually rolled out its initiative. So far, only about 1,000 people have signed on to health improvement plans, a small percentage of those who are eligible.


Incentives aren't the only way to get patients to live healthier. States often give out help to quit smoking, for example, without requiring any quid pro quo from patients. Beyond that, Medicaid programs are increasingly focusing on better disease management, especially for patients with multiple chronic conditions, who, if their illnesses aren't kept in check, account for the biggest bills. Another idea that's gaining traction: giving rewards to doctors, rather than patients, for good health. Judith Solomon, a Medicaid expert at the Center on Budget and Policy Priorities, argues that, rather than reward patients, the states should focus on disease management and performance pay for doctors because they have a better track record in seeing things through.

Some state health officials see the situation differently. Kentucky, for example, hasn't fully implemented its rewards program yet. It has, however, moved forward with other wellness initiatives. The state has set up six "centers of excellence" for diabetes care around the state. The centers provide disease-management services for Medicaid beneficiaries and others. Kentucky is also trying everything from health fairs to mobile mammography stations.

Mark D. Birdwhistell, secretary of the Kentucky Cabinet for Health and Family Services, thinks incentives can work when combined with these other types of wellness programs. "The rewards in and of themselves probably would not be sufficient to move the pendulum," he says. "It takes the more substantive engagement, with a lot of education and coordination efforts." Kane is intrigued by multi- faceted approaches, such as offering rewards to both doctors and patients simultaneously. All of the states with major incentive programs are introducing them in conjunction with other efforts to make their Medicaid population healthier.

There also may be ways to make incentives more effective. Greene, of the University of Oregon, suggests focusing incentives on prenatal care and smoking cessation during pregnancy. That way, even if the rewards change behavior only briefly, the newborn child will enjoy lasting health benefits.

Still, no one's completely sure that the rewards will work. What's more, states are going to have a tough time judging whether they've succeeded or failed. The states involved note that they are paying costs upfront, in the hopes that incentives eventually improve health and save money. With some of the activities these states are promoting, such as immunizations, the health benefit is fairly clear- cut. Others, such as weight loss and smoking-cessation efforts, will achieve their goals only if they change behavior over the long term, something many states aren't currently able to measure. Says Phillips: "It's going to be really difficult to say next year--or in five-- whether we made a difference."

Josh Goodman
Josh Goodman | Former Staff Writer |