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Sunday, September 15, 2013

Carrots and sticks

Penn State employees are up in arms, at least some of them (NYT Story). It seems that their employer and financier of certain employee benefits, most notably health insurance benefits, wants to provide incentives to "nudge" them toward certain behaviors which MAY be linked to lower health care costs. My employer has tried similar approaches in the past, offering cash bonuses or credits if employees undertook certain healthy lifestyle activities. In my case, there was an extra bonus of some sort at stake. In the case of Penn State, there was a penalty is one did not participate. There is always a fine line between carrots and sticks. It only takes a modest degree of creative framing and one can always toggle between selling particular actions with carrots or use a carrot as a bludgeon to shove them in the desired direction.

I think this story needs to be viewed from a much broader perspective to understand its deeper meaning. Underlying this story is one set of parties who are in the business of providing a service to  Penn State employees. Their ability to provide this service and remain financially solvent is increasingly contingent on accurate and detailed information. However there is resistance from the counter party to providing the information. When we enter into contractual agreements with various private entities, we voluntarily share all sorts of information. In return, we get specific services and/or goods which we value more than what we give up. Vendors, who may be taking on some degree of risk in servicing our needs and wants, are able to discount the cost based upon the information we reveal. Transparency facilitates the trade which ideally leaves each party better off than when they started.

Big data is the buzz word of the early 21st century. Data drives all sorts of decisions and this is not limited to health care. What big data is all about is transparency. For example, the Progressive Insurance company markets a small device (Snapshot) which you can plug into your care which allows your driving habits to become transparent to them, thus allowing them to potentially provide you with good driver rates. If you are willing to be transparent about your driving habits, they are willing to cut you a deal. This arrangement is totally voluntary. You can still buy insurance from Progressive without revealing your driving habits in detail. You just don't get the best rates. So what do you value more; your privacy or your money?

The real time monitoring is only just beginning. I wear a small step counting device which gives me feedback on how active I am. This and related devices will be able to collect all sorts of data in real time. The possible benefits for medical practice are staggering. However, the potential for privacy intrusions are also significant. If my insurer will give me a serious discount for behaviors their actuaries tell them will save them money, that can and should be an option which two private parties can come to agreements over. If they are able to measure particular behaviors in real time that creates more confidence that they can offer me lower rates. Would I be willing to wear my activity device and automatically relay information to Aetna or Blue Cross for financial reward? Whether any financial delta to me is framed as a bonus or a penalty is totally arbitrary. It depends upon how much money and how onerous the activities required to gain might be. Between private parties, the basic principles underlying freedom of contract allow anyone of us to simply decide that we do or do not want to participate. No one can hold a gun to our heads.

This all works fine as long as the agreements are voluntary and between two private parties who have the ability to say no and walk away.  However, it gets very messy when one of the parties is a governmental entity that has the ability to compel parties to participate using the force of law. What happens when larger and larger segments of the public are insured by state controlled entities and in order for them to provide efficient and cost effective services, they are required to collect huge amounts of information from the very people they are legally obligated to protect. Individual citizens may find they are not able to simply say no to the state. What happens if we move to a single, state payer and that payer compels us to reveal things we care not to reveal?

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