Medicaid programs are increasingly interested in strategies for engaging consumers, including the use of financial incentives to promote healthy behaviors. Steve Fitton, former Medicaid director from Michigan and current Principal at Health Management Associates, ushered in Michigan’s Medicaid expansion, Healthy Michigan, along with a financial incentive program to encourage such behaviors. Michigan is one of a few states that provides reduced co-payments and premiums, as well as incentives such as gift cards, to Medicaid enrollees in the expansion population who complete a health risk assessment and commit to healthy behaviors such as losing weight and smoking cessation. In developing that component of the program, Mr. Fitton relied on experts in the field of behavioral economics. CHCS recently spoke with Mr. Fitton, a former Fellow of CHCS’ Medicaid Leadership Institute (MLI), about his experience developing this program.

Q: You spearheaded the expansion implementation in Michigan and included financial incentives for healthy behaviors. Why was it important to focus on encouraging healthy behavior change as part of Medicaid expansion?

A: The healthy behaviors initiative that was part of Healthy Michigan was, like almost everything in state government, a group process. We were focused on implementing the Medicaid expansion under the Affordable Care Act. Through that process, some stakeholders wanted to ensure that Medicaid expansion would go beyond coverage and focus on improving health outcomes in the state.

When looking at the Oregon Medicaid experiment, there were some real positives that came out of offering coverage to a larger population. But one of the discouraging aspects was that it was very difficult to measure health outcomes or health indicators on markers such as sugar levels for individuals with diabetes. While it is important to focus on coverage, we also wanted to move services in a direction that impacts health behaviors.

Q: What was your experience working with experts in the field of behavioral economics to develop this program?

A: It was very enlightening to work with experts in behavioral economics. Standard economic assumptions would say that if there are financial incentives, generally speaking, people will respond to those incentives. Behavioral economics looks at the individual making the economic decision in a more complex way. We got a feel for how those factors play out; for example, if an incentive is too small to move the needle for whatever individual motivation is necessary to change behavior, it can actually have negative consequences. Under-incentivizing can be counterproductive, and group dynamics can also strengthen the incentive.

Q: How did the expertise of behavioral economists help to inform and enhance the program design?

A: A lot of the program was designed in the legislative process; the legislation was fairly specific in terms of the incentives and types of incentives. To the extent that there was flexibility, we were able to shape the incentives, as well as the size of the incentives based upon the behavioral economic principles that we were introduced to.

A lot of what we were trying to do was introduce, through a health coverage program for low-income citizens, motivations and financial incentives to accomplish what public health programs have been attempting to do for a long time. There is a whole landscape of behaviors that public health has been aiming to promote. To the extent that longevity and overall wellness are tied to healthy behaviors, you start to see how influential relatively modest financial incentives—but not ones that are “too small”—can be, especially given that it is in our own self-interest to feel better and live longer. Building public health objectives into a Medicaid program is integral, but is also really challenging.

Q: What was the most important thing you learned about engaging members successfully?

A: One part that was quite successful was getting a first part of the health risk assessment completed over the phone as members were engaging with the enrollment staff to choose a health plan at the point of eligibility. Virtually everyone who called in was willing to compete a health risk assessment. This demonstrated that engaging members when you have access to them is going to help you succeed; otherwise, you’re dependent on their response in an external environment on something like a questionnaire in the mail or in the physician’s office. It is important to note that the response in completing the full health risk assessment (beyond the initial phone connection at enrollment) has been disappointing. While it is equal to or better than many commercially employed populations, it is still a modest proportion of the entire Healthy Michigan population. Engaging the population in healthy behaviors, even with incentives, is very challenging.

Q: How did you set out to measure success?

A: When you think about bringing a new population into the program, there are always a lot of concerns. We were particularly concerned about whether our IT enrollment systems would have the capacity to process large numbers of newly eligible individuals. We were also concerned about data feeds and very focused on engaging folks. We were tremendously successful in outreach and our enrollment operations and were able to enroll over 600,000 individuals in the Healthy Michigan program in its first year. We also ended up with data on how many folks had been to a primary care provider, which is another pathway to the health risk assessment and setting healthy behavior goals.

Q: What was your biggest challenge in designing the incentive program?

A: Behavioral economics is an evolving field, so there’s a lot that still needs to be learned and discovered. There certainly wasn’t a lot of experience with Medicaid populations, which is a unique population. A lot of the challenge was determining how to get started.

Q: How did your participation in MLI help you in developing and implementing components of Healthy Michigan?

A: There were a couple of things about the MLI program that were helpful. Number one being the curriculum focused on organizational skills and understanding the broader environment, including the political environment that led to the focus on healthy behaviors. It helped to broaden my perspective and helped me to be more strategic as a manager and leader in what is an increasingly political position. It was also really enlightening to have access to national experts who are leaders in a field, such as behavioral economics.

Q: What advice would you give to other Medicaid directors who may want to design and implement innovative programs to promote healthy behaviors, community engagement, etc.?

A: It would be important to reach out and access the best thinking on this topic. This includes the basic principles and findings from an academic environment, but I would also suggest reaching out to individuals with practical experience, either in the private or public sectors, and other Medicaid directors who have experience in this area, particularly if they have an innovative program that’s been in existence for a while.

Understanding the broader environment in their states is also important because a state’s health environment will be influenced by a number of factors. That might include: the political environment; what’s going on in the private market; what the major insurers are working on because some can be very innovative; and connecting with the public health director.

It’s essential to seek resources in a number of places to have the best thinking and understand the theoretical principles, but also understand the practical components.