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Public Programs Are Using Incentives to Promote Healthy Behavior

Among states, there is growing interest in offering incentives to those enrolled in public health plans to promote healthy behaviors. A number of states are developing programs to motivate enrollees to curtail smoking, lose weight, and access timely child immunizations and prenatal care. By providing rewards for healthy behaviors, these states are trying to give members a greater stake in improving their health status, enhance prevention and health outcomes, and reduce program costs.

Focusing on behavioral change to improve health and control costs is a central concept of "patient engagement," which is being promoted by the U.S. Department of Health and Human Services. The premise is that the motivating power of financial rewards for practicing healthy behavior can make a significant impact on the efficiency and effectiveness of health care. Thus, many incentive programs focus on two major sources of morbidity and mortality — smoking and obesity. Using incentives to change unhealthy behaviors is also related to two other trends: value-driven purchasing, which involves providing consumers with information about health care quality and costs, and patient-centered care. Each of these movements encourages people to take a more active role in their care.

States are using a variety of incentives to encourage healthy behaviors, primarily among Medicaid populations but also in the State Children's Health Insurance Program (SCHIP) and state-funded programs. Incentives can take the form of reduced cost-sharing, or vouchers or coupons for health-related products such as over-the-counter medications, as in Florida.1 As in Michigan (described below), the rewards can be clinical services such as dental care, which may not be part of the standard Medicaid benefit package. California's Medicaid program provides non-health-related incentives, such as movie tickets or gift certificates, to reward parents who keep up with scheduled well-child visits for their infants and adolescents.2 Some states, including Wisconsin (described below), are seeking to link their incentive programs with efforts to improve health literacy.


Wisconsin is incorporating incentives for healthy behaviors into BadgerCare Plus, an expansion of its SCHIP program, known as BadgerCare.3 The goal of the expansion is to extend coverage to all of the states' uninsured children and to thousands of uninsured adults.4 Implementation is scheduled to begin on January 1, 2008. Once BadgerCare Plus is fully implemented, state officials hope that it will significantly reduce the state's uninsured population (currently 272,000 individuals), bringing access to affordable coverage to 98 percent of all residents.

One unique feature of Wisconsin's strategy is its request of health plans to develop grant proposals for individual incentive programs, through the new "Healthy Living" component of BadgerCare Plus. By piloting and evaluating at least five demonstration projects, Wisconsin hopes to identify creative, evidence-based approaches under the Healthy Living portfolio that could potentially be rolled out across the state. The programs are anticipated to begin in April 2008.

According to Donna Friedsam, health policy director at the University of Wisconsin Population Health Institute, "there are two goalposts here. The end goal of course is behavior change. We want to see appropriate body mass index among children, more children immunized on time and early prenatal care; and we want to see members stop smoking. . . . [but] until we understand what incentives can get people engaged in the programming, we will not achieve significant success with incentives for behavior change."5

In addition to the individual incentive programs, the state has developed a voluntary member pledge. By signing the pledge, families will promise to practice healthy behaviors; in turn, health plans will promise to support members in these efforts, in part through the incentive programs. The state is currently conducting focus groups with approximately 100 current BadgerCare members to learn what types of incentives might be effective, how they should be structured, and, perhaps even more important, what it would take to get people to participate in voluntary programs. The state envisions that health plans whose incentive strategies are chosen through the request-for-proposal process will work closely with providers and/or outreach workers to review the pledge with members, and to incorporate it into their overall strategy to improve patient health.

Finally, Wisconsin is developing a health literacy campaign to educate public plan members on how to ask providers appropriate questions to guide their health care treatment. It plans to use AskMe3 materials, developed by the Partnership for Clear Health Communication, which focus on three questions to facilitate discussion between patients and providers: "What is my main problem?," "What do I need to do?," and "Why is it important for me to do this?" The state is also considering working with providers in using the AskMe3 materials and, as with the member pledge, will ask health plans to incorporate the materials into their incentive program strategies.

According to both Friedsam and Linda McCart of the Wisconsin Department of Health and Family Services, medical directors of some participating health plans have already expressed interest in the use of incentives and the health literacy campaign.

Plans in Other States

While Wisconsin is on track to embark on its incentive program next April, other states are in the planning stages, with some considering incentive programs as part of larger Medicaid reform efforts.

For example, in Michigan, both the executive and legislative branches are planning to incorporate incentives into the state's Medicaid program. Governor Granholm has introduced the Michigan First Health Care Plan, which would require Medicaid health plans to offer education, support, and financial incentives for lifestyle changes. Features of this plan include:

  • asking enrollees to complete a health risk appraisal within 90 days of enrollment and having them follow up with a primary care physician;
  • waiving copayments on important maintenance drugs for chronic diseases;
  • offering incentives to members to use behavior change/wellness programs; and
  • setting performance measures for participating health plans.

In February, the Michigan Senate approved SB-1 — the "Authorize Medicaid Healthy Behavior Incentives" bill — which would require Medicaid to provide incentives to enrollees who participate in programs designed to assist in smoking cessation, weight loss, and compliance with doctors' visits, among other behaviors. The incentives would be used to motivate individuals to enroll in Medicaid, and to get those already involved to participate in healthy behavior programs. Some of the incentives that were proposed in the bill include expanded benefits (such as dental care), as well as reduced premiums and/or copayments. Included in the bill is a measure that would give the Department of Community Health the flexibility to create pay-for-performance programs for Medicaid managed care plans, providing incentives related to meeting outcomes for chronic disease and patient compliance.

Following a unanimous vote of 37–0 in favor, SB-1 was referred to the senate's Health Policy Committee, where it remains at this point. T. J. Bucholz, spokesperson for the state's Department of Community Health, says that Governor Granholm would like to see the bill passed, but it will likely need some amendments to ensure that it does not include any punitive measures. According to Bucholz, "giving people ownership into their own health care is important. We want to make sure the bill outlines proactive incentives for people to get healthier and not penalize people in reality or perception."

Texas is also working to incorporate healthy behavior incentives in Medicaid. Recently passed and signed into law, Senate Bill 10 outlines a package of Medicaid reforms. One component is a pilot program in which Medicaid beneficiaries who volunteer would receive expanded benefits if they participate in smoking cessation or weight loss programs, as well as credits in "individual health rewards accounts" that could be used to purchase additional health services. By the end of this year, the state's Health and Human Services Commission will submit a waiver request to the Centers for Medicare and Medicaid Services, which must grant approval in order for Texas to implement the proposed reforms.


It remains to be seen whether incentives for promoting healthy behaviors among Medicaid and other public program populations will have a significant effect on health outcomes and costs. A review of the literature by the Center on Budget and Policy Priorities (CBPP) found that no rigorous studies have been conducted to determine whether incentive programs achieved their goals, and the few existing studies did not look specifically at the Medicaid population.

Developing and implementing incentive programs requires an investment on the part of a state's Medicaid program. With limited Medicaid budgets, there is some question as to whether the cost — both administrative costs and the incentives themselves — will result in significant returns in terms of cost savings and health outcomes. The CBPP report notes that states need to consider what might be more effective: an incentive program that provides financial rewards, or creating a benefit to cover comprehensive treatment for a certain condition. Smoking cessation, which forms the cornerstone of many incentive programs, offers a key example. The CBPP report highlights Idaho's Behavioral Preventive Health Assistance Program, which offers up to $200 in financial rewards for individuals who get smoking cessation counseling, medication, and nicotine replacement products. However, the amount of the incentive does not cover a full protocol of care for smoking cessation, and some critics argue that it sets up participants for failure.6

What's more, environmental factors play a role in unhealthy behaviors — an issue not easily addressed by incentives or other efforts. Low-income individuals face considerable barriers to obtaining healthy foods and getting sufficient exercise and activity. Creating programs targeted not just at individuals' behavior but also at the unhealthy environments in which they reside will require enormous creativity and energy from states hoping to promote healthy lifestyles.

  1. The Florida Medicaid "Enhanced Benefits" demonstration program provides beneficiaries with $15 to $25 in credits that can be redeemed for such products.
  2. P. Redmond, J. Solomon, M. Lin, "Can Incentives for Healthy Behavior Improve Health and Hold Down Medicaid Costs?" Washington, D.C.: Center on Budget and Policy Priorities, June 1, 2007.
  3. Governor Doyle's health care agenda includes BadgerCare Plus, a cigarette tax, and an expansion of Medicaid to childless adults.
  4. Adults to receive coverage include more pregnant women, self-employed parents, farm families, caretaker relatives, and youth aging out of foster care.
  5. The University's Population Health Institute is working closely with the state in the design, implementation, and plans for evaluation for BadgerCare Plus, serving as a representative on the BadgerCare Plus Advisor's Group and the Healthy Living workgroup; Body Mass Index is a tool used to measure the percentage of body fat based on a person's height and weight.
  6. The recommended duration of treatment using a generic nicotine replacement patch is six to 20 weeks. The recommended duration of treatment using other medication is seven to 12 weeks, followed by six months of maintenance treatment. In both cases, $200 would only purchase eight weeks' worth of treatment products (CBPP, 2007).

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