Total Benefits:Pay for (Patient) Performance

Illustration By Olaf Hajek

"People are constantly making trade­offs between immediate gratification and delayed benefits," says Kevin Volpp, Associate Professor of Medicine and Health Care Management at the University of Pennsylvania's Wharton School. Employers could get better results in their wellness programs if they focused more on the immediate gratification, say Volpp and a team of academics currently researching the role of behavioral economics in these programs.

Volpp and Wharton School Professor of Health Care Management Mark Pauly call this approach "P4P4P": pay for performance for patients. Too often, they say, employers' wellness programs have had major incentive-related design flaws that hampered results. "I am here to say, T-shirts do not work," Pauly says. Rather, people's psychological motivations should become a key part of wellness-program design, Pauly, Volpp, and their collabor­ators say, "Our human nature is a combination of rationality and irrationality. It is best to design a program that uses both approaches," Pauly says. "The rational thing is to be conscious of your mortality and doing something about it, but that is hard for many people. In some ways, life is too short to be rational all the time."

Others are talking about behavioral economics' role in wellness programs, too. "We have 25 years of research on the use of behavioral economics on the retirement-planning side, and we are now starting on the health side," says Paul Fronstin, Director of the Health Research and Education Program at the Employee Benefit Research Institute (EBRI) based in Washington. "What employers have learned is that they have not provided the right incentive" in wellness programs. Some employers, he says, have "just thrown a wellness program out there with the 'We will build it and they will come' mentality."

That appears likely to change. "I think the use of most types of incentives is going to double or triple in the next few years," says Barry Hall, a Boston-based Principal at Buck Consultants, LLC. He points to Buck statistics that the average amount of a wellness reward already jumped nearly 50% from 2007 to 2008, from $100 to $145. "It is a new area for employers, and more employers are trying to figure this out than are spiking the ball in the end zone. It is not just something you can take out of a book, or look at what another employer has done and say, 'Let's do the same exact thing.'"

What works differs based on the desired behavior change and the particular employees involved. "The whole challenge of the psychology is, what is the trigger point?" says Chris Mathews, a Vice President at The Segal Co. in Washington. Employers know their populations' trigger points better than wellness providers, he says. "Most of the organizations that commit to these programs do not take on the responsibility themselves: They assume that the vendor is going to do the job for them, but you cannot expect a vendor to change behavior. The plan sponsor must take on the responsibility of facilitating behavioral changes."