If health care reform fails, what will the insurance industry do for an encore?

Nearly two decades ago, after insurers successfully campaigned to deep-six President Bill Clinton's health care reform effort, the industry moved tens of millions of Americans with employer-based coverage into health maintenance organizations (HMOs). The shift succeeded in holding down costs for a while. But by the late 1990s, their ham-handed strategy of using HMOs to deny coverage in an irrational manner provoked a patient rights backlash. Faced with the probability of tough new rules regulating their behavior, the insurers backed off and near double-digit health spending growth rates quickly returned.

If their current campaign to defeat reform succeeds, the insurance industry will once again be faced with major decisions about how to curb skyrocketing costs. In recent weeks, there has been renewed attention on two strategies that will probably see much more emphasis in the years ahead. Both would be encouraged by reform, but are not dependent on it. They involve moving people into health plans that 1) use value-based insurance design (VBID), which adjusts co-pays to encourage greater use of and better compliance with high-value health services; and 2) place more emphasis on wellness programs, which reward employees who work to improve their own health (or, in some cases, penalize those who fail).

What's notable about both approaches is that they seek to hold down costs by using economic incentives to change the choices made by millions of patients, who are viewed as health care "consumers." While they claim to borrow a page from the burgeoning field of behavioral economics, which asserts that carefully designed incentive programs can nudge people to do the right thing, the main argument in favor of their eventual success is the expectation that individuals seeking health care will behave like other consumers and gravitate to the least costly alternatives.

What's not expressed, but is equally notable, is that they both absolve health care professionals and the institutions that deliver care from adjusting their own practices, such as the overuse of high technology imaging or invasive procedures, which are the major drivers of skyrocketing health care costs. The architects of VBID and wellness programs assume that it is easier to lower demand that restrict supply. Suppliers, as Elliott Fisher and colleagues at Dartmouth have repeatedly shown, have the uncanny ability to create their own demand and the political acumen to get politicians and patient advocacy groups to scream "rationing" whenever anyone attempts to stand in their way.

But can VBID and greater use of wellness programs actually succeed in bending the cost curve down? And can they do it without triggering a new backlash from patients and the insured public?