Why Investing in Health Care Enhances Employee Productivity

By Dennis M.D.

Oct. 29, 2004

Yes, rising health-care costs continue to present a significant challenge to companies. Still, it’s important to resist the temptation to cut back on health-care spending. Doing so can cost you dearly in terms of productivity.

    Businesses should recognize that human capital is an asset. Investing in that asset requires more than the traditional approaches can offer.

Unintended losses
    Businesses should turn from the traditional view of health care as simply a cost center and apply the same principles they use to manage tangible assets, like equipment, buildings or other parts of the infrastructure. Management should evaluate the short- and long-term implications of benefit-design changes. This means using new methods for measuring productivity and integrating the total cost of health care. Achieving short-term health-care savings on one side of the ledger could result in unintended losses in productivity on the other.

    Current research is demonstrating to be true what I observed firsthand as assistant vice president, health services, at Union Pacific Railroad. Studies have shown that health status directly affects productivity, absenteeism, disability and safety. Moreover, health-benefit design influences employees’ health decisions and, in turn, their health status.

Drugs can pay off
    Consider pharmaceutical costs. The evidence shows that when employees have access to medication at a cost they can afford and use it as prescribed for certain chronic conditions such as asthma, allergies, depression and diabetes, they’re more likely to be healthy and on the job. The appropriate use of medication can reduce productivity losses for some of the most common and expensive health conditions, according to “Pharmaceuticals and Worker Productivity Loss: A Critical Review of Literature,” published in the June 2003Journal of Occupational and Environmental Medicine.

    Given the effect that drugs can have on chronic conditions such as high blood pressure and diabetes, it makes sense to promote their use. Benefit design that includes disease management and encourages employees to take the appropriate medication will save on long-term health-care costs and improve productivity. Both of these approaches may increase utilization, which can boost overall employee health and productivity to more than offset the increased expense.

    According to doctors Wayne Burton of Bank One and Alan Morrison and Albert Wertheimer of Temple University, for chronic conditions that affect work performance but are rarely disabling–migraine, diabetes and respiratory infections, for example–prescription medicines help keep employees healthy and on the job, which saves disability costs.

    Another study, published in the Journal of Occupational and Environmental Medicine in January 2003, showed that medical and disability costs have to be considered in tandem to help foster a return to work. The study, “The Health and Productivity Cost Burden of the ‘Top 10’ Physical and Mental Health Conditions Affecting Six Large U.S. Employers in 1999,” demonstrated that the medical costs associated with a heart attack are much higher than those associated with back pain. However, the costs of disability and absence associated with back pain make it a more expensive problem for employers. This suggests that employers might want to focus on prevention efforts like risk-factor reduction for heart attacks and place more emphasis on disability-management programs for employees suffering from back pain.

    The authors concluded that absence and disability losses constituted 29 percent of the total health and productivity expenditures for physical conditions and 47 percent for all mental-health conditions.

    Business & Health reports that Bank One experienced productivity improvements when it took a multi-pronged approach–including treatment and training–to help employees with allergies. When the pollen count was high, allergy sufferers were 7 percent less likely to reach their usual productivity level. Productivity greatly improved, however, for allergic employees who took medication. In fact, they had about the same productivity levels as those who did not suffer from allergies.

Look at the whole picture
    These studies prove how crucial it is to look at the whole picture when it comes to the impact of employee health on productivity. The traditional cost-cutting approach to save health-care dollars can result in unintended productivity losses that erode the potential for profit.

    Although health coverage may be an enticing target for expense control, benefit managers should design benefit plans that encourage employees to get the health care they need. Otherwise, the result could be greater absenteeism and a loss of productivity.

    As more employers heed this advice, they will see that careful investing in their employees’ health makes them more competitive.

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