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June 26, 2012

What's Next – Emerging Trends In Managing Population Health

Summary:

Our 20-year experiment with modern day corporate sponsored health and wellness has not saved money. While some people have been helped by it, in the end it has not been effective in controlling health costs.

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New promising trends in managing population health are emerging.

Our 20-year experiment with modern day corporate sponsored health and wellness has not saved money.* While some people have been helped by it … no doubt … in the end it has not been effective in controlling health costs. The facts on this have been known for several years yet many Human Resources managers have clung to the notion that health and wellness will eventually turn their spending trends down if they can just find the right mix of incentives, communications, prizes, games, or whatever.

I’ve been speaking on this topic for years. Last week I gave a speech in front of an audience of corporate benefit managers and something surprising happened. For the first time much, or even most, of the audience agreed!

This is really good news as it paves the way for getting past trying to implement solutions that don’t work and start doing things that DO work. What does work? Micromanaging the outlier population in plans, i.e., the 6-8% of plan members who are spending 80% of plan dollars.

There is much confusion about who the outliers are. It’s not averages that are important but rather distributions. Using averages in population health matters is a fallacy-rich proposition. Actuaries understand that well. Distribution analyses reveals outliers.

Let me explain by an example. Benefit executives tell me they are devoted to managing their diabetes cases because the average diabetic spends about $30k per year.

That $30k figure is kind of correct, but not really.

90% of the diabetics may be spending $7k per year but 10% (outliers) may be spending $240k per year. The average is about $30k, but that does not describe the diabetic cases well, does it?

What do you want to manage? The $7k cases? Or the $240k cases? Hint: A good size proportion of the $240k cases are having tests and surgical procedures which offer no mortality or lifestyle advantage.

Another example: The average age of a group of people may be age 50. But if the group is made up people half of whom are age 10 and half age 90, then saying the average age is 50 is misleading. (By the way, we are not supposed to do averages on bimodal populations like these examples.)

Promising trends:

  • Some benefit managers are starting to think like risk managers.
  • People are realizing that health and wellness will not save money.
  • Some companies are digging deep into their data.
  • Companies are starting to look at distributions of spending, not just averages.
  • Companies are starting to understand the needs of their outlier populations.
  • Some companies are starting to develop special solutions for their outliers.

That is all good news.

*Having said all this, promoting health and wellness in your company is a good thing. Just don’t expect dollar savings.

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