A Surprisingly Cost Saving Program--Based on Incentives

Here is an interesting story from NPR about what happens when a simple change in incentives is brought to a population.  The gist of the story is this.

In Cardiff, Wales, a lot of people were reporting to the emergency department with injuries and not reporting to the police.  The hospital did gather information about the location of the injuries and what caused them.  The leaders and people in the local area noticed how much of a toll the violence and injuries were taking on the population.  The hospital changed one thing to help police.

It did not report names.  It only reported locations of incidents and types of injuries.  The police took it from there and focused their prevention and enforcement efforts in areas that were hot spots.

The effect--spending of less than $400,000 saved over $11 million in medical and legal expenses.

That is pretty amazing.  There are a few things to think about.

First, what actually happens to the resources that are freed up?  In other words, what else are they used for?  Hopefully something more productive, but they don't really say in the story.

Second, why does such a simple incentive work?  Hospitals could not report names.  And it is somewhat amazing to think that individuals are actually sufficiently rational to choose whether to engage in violence in bars and pubs as a function of the likelihood of being caught.

Of course, this is not the first study to show that people respond to incentives--even about crime prevention.

Perhaps the idea of using simple changes in incentives with for public health measures--where the possibility of enforcement is understood, not everyone gets caught, but there are significant penalties for those who do--could encourage better public health oriented behaviors.  

Prescribing Fruit and Vegetables

This morning I heard an interesting piece on NPR's morning edition.  The idea is that physicians in New York City can prescribe fruits and vegetables and the individuals to whom they prescribe these will get "Health Bucks" to use at the farmers' markets.  The health bucks are allocated as $1 per family member per day for up to four months.  So, a family of four would get $480 to spend at farmers' markets over four months.  In addition, they get extra education.

Is this a big deal?  Well, on a per-person per-month basis this adds $30 that can be spent only at farmer's markets.  That may be a big deal for some families.  They may be able to access quality fresh fruit and vegetables they would not be able to otherwise.  But, the $30 alone might not do much.

What would happen without information?

Are families able to make trips to the farmers' markets on a regular basis?  There is still an opportunity cost of time.

Maybe it is just enough to get them to try fresh fruit and vegetables after which they engage in better dietary behavior themselves.

There is testimony from one participant and from one physician.  Does that prove the program is successful for everyone?  Well, no program is successful for everyone.  It does offer some proof of concept.  And perhaps for $30/person/month this is a relatively inexpensive addition to a weight control program.  It would be interesting to see how well this generalizes and what options other than farmers' markets could be used when there are fewer available or the travel distances are greater.

Observation Status

This morning, I heard an interesting piece on Morning Edition on NPR about hospitals using "observation status" rather than admitting individuals as inpatients (the story can be found here: http://www.npr.org/player/v2/mediaPlayer.html?action=1&t=1&islist=false&id=218633011&m=218811152).  I listened with interest and thought about unintended consequences--the heart of so much of the study of health economics.

The key message here is that the government (the Center for Medicare and Medicaid Services, abbreviated CMS) has a program in which it reviews old hospital admissions (up to three years back) and determines whether the patient should have been an inpatient or outpatient.  If the patient was admitted as an inpatient and should have been (based on the CMS standards) an outpatient, then the hospital will have to repay the reimbursement it received and will likely get nothing back (according to the story).

Holding a patient in observational status (which we would generally expect would be just for a day or less, perhaps two days) avoids the determination of whether the patient needs inpatient care.  Some patients have been held in observation for even longer.  If their care is essentially inpatient and they recover, they can then be sent someplace else.  So far, if they do not need the full inpatient care this would seem to be good for CMS, good for taxpayers, and good even for the patient to the degree that the patient has copayments for which she is responsible.

The hang up (and the unintended consequence is this).  Patients are only eligible for Medicare to pay for nursing home services if they are discharged from an inpatient setting.  So, now patients who still need fairly skilled care but who do not need hospital care are not eligible for having the nursing home care covered by Medicare.  Who pays?  The family in most cases.

So, the government implemented a policy to control costs.  This led to a rational response by hospitals to avoid losses.  This leads to a lack of ability to discharge to nursing homes and/or get high quality nursing home care as patients and their families cannot pay for it.  This was not part of the intended cost control but is part of the impact.

The solution--perhaps allow Medicare to cover any rehabilitation-related care regardless of prior location.  But what unintended consequences might this have?  I will leave readers to ponder.