Should companies give healthy workers a break on their health care costs?

The issue of who deserves government financed health care came up in one of my classes a couple of weeks ago. Megan McArdle had a post at her blog that reminded me of that called Give Me Liberty and Give Me Death?. Here it is:

"Ezra Klein has an interesting article about the Cleveland Clinic's move to cut its own health costs by somewhat curtailing the choices that its employees can make about their lifestyle:

That left enforcement. The clinic tracks its employees' blood pressure, lipids, blood sugar, weight and smoking habits. If any of these are what the clinic calls "abnormal," a doctor must certify that the employee is taking steps to get them under control. Otherwise, no insurance rebate. The idea is to force employees to have regular conversations with their doctors about wellness. If they participate, they can lock in the rates they were paying two years ago. The savings amount to many thousands of dollars.

It appears to be working. Not only has the clinic cut its health-care costs, but its employees are also getting healthier in measurable ways. Workers have lost a collective 250,000 pounds since 2005. Their blood pressure is lower than it was three years ago. Smoking has declined from 15.4 percent of employees to 6.8 percent.

In one sense, the clinic has achieved the health policy ideal: cutting health-care costs by making people healthier. But consider how the clinic has done it -- tying premiums to personal decisions, firing smokers, tracking employee metrics, eliminating popular sodas and foods from campus. By making it harder and more expensive for employees to be unhealthy, the clinic has radically overstepped the traditional, laissez-faire approach of employers to their workers' personal habits.

It also opens the door to onerous forms of discrimination. The clinic no longer hires smokers. Will the obese eventually face similar hurdles? What about fans of fast food? The experiment might work at a famed medical center where the CEO plausibly argues that aggressive leadership in health care is central to the institution's mission. But would it work at General Motors? Caterpillar? Wal-Mart? Medicaid and Medicare?

Roizen thinks it can -- and should. He estimates that an aggressive program could cut federal health spending by $300 billion to $600 billion a year. If he's right, then simply instituting such wellness reforms could cut the federal deficit by far more than the Simpson-Bowles commission or the congressional supercommittee would.

Perhaps unsurprisingly, I'm pretty skeptical. Let's start by asking what the selection bias was. Cleveland fired two high-profile doctors who wouldn't quit smoking. One imagines that employees who do not want their employer nannying them about their gym time and alcohol consumption probably decline to work at the Clinic.

Selection bias will produce good results for the selecting organization, but you cannot replicate its results on a nationwide scale; fat, smoky people have to work somewhere (or go on welfare). If this became common, you'd see legislative pushback in the form of discrimination lawsuits and legislation. I'm betting there are more obese workers/voters than there are people who hit the gym five days a week.

There's also the question of lifetime cost profile. Cleveland mostly isn't covering people in that expensive last year of life; that honor tends to go to Medicare and Medicaid. Cleveland saves money if its workers have fewer smoking-related problems, but if that keeps them alive long enough to get Alzheimer's, their lifetime health cost may go up.

Now, you can certainly argue that it's still a net gain--people live longer, healthier lives. And I agree that longer and healthier lives are a worthy goal. But from a cost perspective, I suspect that there's less to the Cleveland model than meets the eye."