Fiscal Fitness: How States Cope

States take new direction in encouraging healthy lifestyles for Medicaid recipients

It's well accepted that a key strategy for improving population health is for people to adopt healthier lifestyles. Is there anything state governments can do to encourage citizens to live healthier? A new Center for Health Care Strategies report evaluates efforts in Florida and Idaho to provide incentives to encourage people to adopt healthy behaviors.

Florida implemented its innovative policy to reward Medicaid recipients up to $125 per year for engaging in specific wellness and healthy behaviors in 2006. And Idaho introduced a reward-based program in 2007 to promote well-child visits, tobacco cessation, and weight management.

Report author Jessica Greene of the University of Oregon tells State Health Watch that state Medicaid agencies have not traditionally sought to influence recipients' health-related behaviors. Wellness programs such as smoking cessation are not universally covered by Medicaid programs. So encouraging healthy behaviors is a new direction for Medicaid agencies.

Ms. Greene says policies to reward healthy behaviors have emerged as part of a national trend in health care toward consumer direction. Consumer-directed health care encourages consumers to take charge of their health and health care by promoting personal responsibility and cost conscious decision making. In Medicaid, she says, there are a growing number of consumer-directed policies that emphasize recipient control over Medicaid dollars. These policies include giving disabled and frail elderly recipients monthly allowances for purchasing personal care services and supplies in what are known as Cash and Counseling programs and the new Health Opportunity Accounts, which are savings accounts for purchasing health care services, coupled with a high-deductible version of Medicaid.

"Improving Medicaid recipients' health and well-related behaviors is important for the long-term health of recipients," Ms. Greene wrote. "Unhealthy behaviors have become the top cause of mortality and morbidity in the United States. Tobacco use, obesity, and misuse of alcohol account for more than one-third of all deaths in the country. The prevalence rates of these unhealthy behaviors are particularly high for those with low incomes and minorities. If Medicaid agencies are successful in improving recipients' health-related behaviors, not only will long-term health outcomes improve, but there could be substantial cost savings to Medicaid."

Variable program success seen

Ms. Greene says that while some private sector studies have indicated efforts to promote one-time health behaviors with financial rewards are generally successful, there has been less consistent success in changing fundamental lifestyle behaviors such as smoking cessation and weight loss. Few studies have followed up with participants to assess whether the behavioral changes were sustained over time, she says. Two studies demonstrate that when incentives continue over a relatively long time frame (10 months), they still are effective. But after the incentives have stopped, studies consistently find that the program effect disappears within one year. "These findings suggest that permanently changing lifestyle behaviors such as smoking and exercise will be a challenge for Medicaid reward programs," she says.

Florida's program created opportunities for all Medicaid recipients to earn rewards by engaging in healthy behaviors. Officials selected 19 behaviors for earning rewards. They included simple wellness behaviors, participation in programs seeking to change fundamental lifestyle behaviors, and appropriate use of the health care system. The eight simple wellness behaviors chosen were checkups such as dental and vision exams and well-child visits, immunizations, and cancer screenings. The rewards for appropriate use of health care are for those who don't skip any primary care appointments and those who comply with prescribed maintenance medications. To encourage fundamental lifestyle changes, the plan rewards initial and six-month participation in alcohol and drug treatment, smoking cessation, weight loss, and exercise programs. Participation in disease management programs also is rewarded.

In Idaho, the Medicaid agency developed its Preventive Health Assistance program to encourage recipients to be responsible for their own health and well-being and to provide a financial safety net for recipients required to pay a monthly premium. Thus, money earned through wellness behaviors can be used to pay the new Medicaid premium. A Wellness Preventive Health Assistance program is specifically for children who are required to pay a monthly premium. Eligible children are rewarded for having an annual well-child visit and being up-to-date with immunizations. The Behavioral Preventive Health Assistance program is intended to encourage lifestyle changes for all Medicaid recipients who use tobacco or who are either underweight or obese, based on Centers for Disease Control and Prevention criteria.

How large must a reward be?

Ms. Greene and her colleagues say it will be important for Medicaid agencies to better understand how large a reward is needed to change wellness and fundamental lifestyle behaviors for Medicaid recipients. Florida decided to cap rewards at $125 per year, allowing recipients to spend about $10 a month on health-related products. Once the upper limit was established, the state decided that rewards for annual behaviors would be $25, semiannual behaviors would earn $15, and more frequent behaviors would earn $7.50. Florida officials said they will monitor the frequency with which each reward is redeemed and will adjust the amounts as necessary in the future.

Because the Idaho plan was developed as a way to help recipients pay a new $10 monthly premium, the amount that can be earned is equal to the premium amount.

The researchers say some studies have examined the importance of the type of reward on influencing healthy behaviors. Those studies compared cash incentives with gift certificates. They found that cash incentives consistently resulted in higher rates of simple wellness behaviors than did gift certificates, although gift certificates still were quite effective.

Cash incentives were not considered by either Florida or Idaho as they designed their programs. Both agencies said they wanted to be sure that recipients could only buy products and services that were themselves healthy. Thus, Florida Medicaid recipients can use their reward money to buy approved pharmacy products not covered by Medicaid such as cough medicine, vitamins, dental supplies, first aid, and other specified over-the-counter products. All pharmacies that accept Medicaid are able to redeem the reward payments from recipients' accounts using the existing Medicaid pharmacy point-of-sale system.

While the state Medicaid agency had expected that recipients would be able to use reward money to pay for health care costs not covered by Medicaid, developing a debit card that limited the types of acceptable purchases would have taken longer than the Medicaid reform implementation time frame allowed. As a result, the state decided to use the existing pharmacy billing system so recipients could buy over-the-counter (OTC) pharmacy products. A limited debit card is to be introduced some time in the future.

The Idaho Medicaid agency wanted recipients to be able to use reward money to pay for health related courses, gym memberships, tobacco cessation supplies, and sports equipment for participating in a sports activity. To facilitate that much flexibility, the agency worked to develop community partners willing to accept recipient vouchers that can then be billed to Medicaid. Participants can request vouchers to buy health-related supplies or enroll in a health program by calling the agency. For children who are not up to date on their premium payments, the incentive balance is automatically allocated to covering the premium cost.

Respondents who were surveyed showed no consistent preference between rewards in the form of OTC pharmacy products and payment of health care costs not covered by Medicaid. More respondents said their child would enroll in an exercise program when the reward was payment for the sports program. And that sentiment was echoed in focus groups.

The researchers found that educating recipients about the incentive programs is a challenge given the population's low literacy skills and the difficulty in reaching many recipients by mail. Florida staff said introducing the program was a greater challenge than they expected because the program differs fundamentally from other Medicaid initiatives.

The report says both Florida and Idaho had the foresight to separate education on the incentive program from education on overall Medicaid reform, thus reducing the sheer quantity of information recipients had to process. Both states relied on recipient mailings to introduce the program. Despite developing materials at a fourth-grade reading level and doing some pretesting with recipients, the Florida Medicaid agency found there was substantial confusion over the universal form included in the mailing. The form is used to document enrollment in a health-related program, but a number of recipients used it to try to enroll in the incentive program (for which enrollment is automatic). The agency no longer includes this form with the incentive program mailings and has made some changes to improve the clarity of written materials.

Both states established call centers for fielding incentive program calls and have made key program documents available on the Internet. "At this juncture, it is unclear whether the current efforts will adequately inform recipients about the incentive programs," Ms. Greene says. "Without recipient awareness and understanding of the incentive program, offering rewards will not be effective for catalyzing promotion of healthy behaviors. One recommendation is to use periodic account balance mailings as an opportunity to reinforce the key components of the program."

The states have found it is easier to track wellness visits than lifestyle behavior changes. Both states are providing incentives for children who have an annual well-child checkup and are up-to-date on immunizations. These types of behaviors plus screening tests and other preventive visits are easily identified using CPT codes in claims data.

While changing lifestyle behaviors such as tobacco use and physical activity levels hold the greatest potential for Medicaid savings, there are no existing programs to track whether Medicaid recipients make lifestyle changes or participate in relevant programs to support change. "Tracking and rewarding behavioral accomplishments is far more difficult administratively than rewarding members who participate in programs that support behavioral change," Ms. Greene says. "Both Florida and Idaho have opted to reward participation in such programs. Both have developed forms that require program representative signature (and in one case a physician signature) to serve as triggers for crediting recipients' accounts."

Florida was able to take advantage of its existing pharmacy point-of-sale system for the incentive program. An account was established for each recipient with only minor adjustments needed to the existing system. The system was easy to implement, the researchers found, and the result was that Florida recipients were able to purchase OTC pharmacy products with their reward money using their Medicaid card. There are limitations, however. If, for instance, the agency wants to increase the reward level for a given behavior to try to increase participation, it is questionable how much money to buy pharmacy products would be attractive to recipients.

In contrast, Idaho was unable to create an electronic billing system for the incentive program. They have developed a manual billing process in which recipients present a voucher to a participating vendor. The vendor submits the voucher to Medicaid to be reimbursed for the cost of services. The report says the Medicaid agency has faced some difficulty in getting major national chain pharmacies and stores to be willing to become program vendors because of the paper process.

The researchers suggest that when states develop incentive programs, they should be mindful of barriers Medicaid recipients face in engaging in healthy lifestyles. There were three key barriers repeatedly mentioned in parent focus groups and surveys in Florida—accessing dental services, transportation, and the high cost of sports-related programs.

Ms. Greene tells SHW the type of incentive program states use will likely vary from state to state depending on local needs and conditions. However, she says, there can be learning from one state to another in terms of recipient education, barriers to participation, and the options that are available for different types of programs.

In looking at key success factors in implementing an incentive program, Ms. Greene cautions against underestimating the difficulty involved in getting recipients aware of the program and how it operates.

"The reality is that there are a lot of dimensions we don't know enough about," she says. "We don't know how much a reward needs to be to be effective and what services recipients should be able to purchase."

Because so little is known about the long-term impact of incentive programs and whether recipients continue their healthy behavior after the incentive is removed, she says it's very important that all programs be evaluated. Noting that many states believe they don't have the time or resources to support evaluations, Ms. Greene says it would be nice if federal waivers would include an evaluation requirement.

Download the report from Contact Ms. Greene at (541) 346-0138 or e-mail