How Payers Can Reduce Medical Costs Through Member Engagement

Healthcare costs are rising faster than the system can absorb.

U.S. national health spending grew 8.2% in 2024, outpacing wage growth and GDP, with Medicare Advantage premiums increasing by double digits in many markets.¹ Pharmacy spend continues to accelerate, rising over 10% to $800B in 2024²—while margins tighten, risk adjustment faces heightened scrutiny, and payers are expected to do more with less. 

Traditional cost-control strategies (e.g., utilization management, network steerage, care management vendors) have stabilized trend lines but are no longer delivering the step-function change required to protect margins. At the same time, consumer expectations are rising, digital engagement is table stakes, and payers are competing on experience as much as benefit design. 

The next frontier in sustainable medical cost reduction is member behavior—and the strategic use of engagement and behavioral science to influence it. 

The Cost Pressure Landscape 

The primary drivers of avoidable medical spend are well understood: 

• Avoidable emergency department use and readmissions
• Low medication adherence and suboptimal chronic condition management
• Preventive care gaps
• Suboptimized pharmacy utilization (e.g., unnecessary brand vs. generic use, delayed biosimilar adoption)
• Member confusion, leakage, and poor navigation to cost-effective sites of care 

Avoidable medical costs total roughly $79 billion annually, driven by overtreatment and low-value care, lack of price transparency, and suboptimal drug utilization, representing one of the largest, unrealized cost-reduction opportunities for healthcare organizations._³

While the financial impact is clear, the underlying cause is less often acknowledged: the system relies on members to make complex healthcare decisions without timely guidance, context, or motivation. 

Traditional outreach compounds the problem. Members receive high volumes of generic mailers, alerts, and reminders that fail to connect to real healthcare decision-making moments. Internally, clinical, quality, Stars, and engagement initiatives operate in silos. The result is predictable: member abrasion, low signal-to-noise engagement, and missed opportunities to redirect cost-driving behaviors. 

At the same time, member expectations and preferences are evolving. Roughly 80% of adults 65+ now use a smartphone, retail care is expanding, and members benchmark their healthcare experiences against Amazon, not other health plans.⁴ Competing on accessibility and simplicity is no longer optional, it’s directly tied to downstream utilization and, ultimately, cost. 

Engagement Is Now a Determinant of Cost 

For too long, payers have treated engagement as a communications or experience function—measured by sends, clicks, impressions, or satisfaction scores. But in today’s margin-constrained environment, that view is no longer sufficient. 

Engagement is not solely a channel strategy. It is a clinical and financial intervention. Because when a member takes action, or fails to, the outcome is almost always cost-bearing. 

When engagement works, members don’t just receive information, they make different decisions: where they seek care, when they refill a medication, whether they schedule that overdue screening, or how they navigate benefits during high-stress moments. Each of these decisions carries a measurable cost consequence. 

Done well, engagement directly alters the utilization patterns that define total cost of care: 

• Preventive care adherence reduces acute episodes
• Medication adherence lowers long-term chronic condition costs (estimated impact: up to $300B annually in the U.S.)⁵
• Avoidable ED reduction decreases acute spend
• Navigation to high-value sites of care shifts utilization profiles
• Conversion to biosimilars reduces pharmacy and medical drug costs 

These are not clinical optimization problems alone. They are behavioral activation problems. A member who does not understand their benefit design, mistrusts plan communication, or receives irrelevant outreach at the wrong time isn’t making a clinical choice—they’re making a personal one, often driven by convenience, anxiety, habit, or uncertainty. Engagement shapes those moments. And when plans apply it with precision, discipline, and behavioral design, the financial impact materializes quickly. 

In our recent work for a national health plan, we’ve seen this in action, with newly designed member journeys that leverage segmentation and hyper-personalization leading to a 10x reduction in the total cost of care for members battling chronic conditions. 

Hyper-personalization Is the “How” 

If engagement answers “what we need members to do,” hyper-personalization answers “how we get them to actually do it.” The gap between outreach and impact is rarely awareness— it’s about whether the message reaches the right member, with the right relevance, at the right moment, in a way that actually changes behavior. 

 The most effective plans are moving beyond broad segmentation toward individualized, context-aware interactions that reflect each member’s health status, preferences, motivations, and real-time needs. Hyper-personalization aligns with how people actually make decisions in healthcare—emotionally, situationally, and under cognitive load. 

Hyper-personalized engagement requires several foundational elements: 

• Identity-accurate member views: Knowing who you are speaking to—across channels, devices, and datasets—is the starting point. Identity resolution and a “golden record” allow plans to match outreach to the individual, not the file.
• Longitudinal, context-rich data: Engagement becomes powerful when it accounts for the member’s history, preferences, care patterns, risk factors, and past behaviors—not just their demographics or diagnoses.
• Behavioral signals and intent: Hyper-personalization considers not only clinical need but behavioral readiness—refill patterns, past responses to outreach, channel preferences, timing cues, and moments of elevated decision-making.
• Motivational relevance: What matters is tailoring the message to why that specific member would act: convenience, security, family responsibilities, fear of missing out, or the desire to stay independent. The motivator differs by person, and so must the outreach.
• Precision timing at moments that matter: Members rarely make healthcare decisions during business hours. Hyper-personalization ensures outreach coincides with the actual decision point—when a refill is late, when symptoms recur, when an appointment is missed, or when a member is actively searching for care options. 

Combined, these elements shift engagement from generalized nudges to individualized “next best actions” that feel intuitive, relevant, and timely. And when outreach aligns with personal context, the probability of action increases dramatically, resulting in measurable changes in utilization. In our work with a large national health plan, the use of hyper-personalized emails drove a 15% increase in “helpfulness” ratings from members, boosting message resonance alongside improved clinical and cost outcomes. 

From Concept to Cost Reduction 

Turning engagement strategy into measurable savings requires operational discipline and a culture of experimentation. The plans seeing transformational savings are not doing more outreach, they are doing smarter, targeted, continuously optimized engagement. 

One national plan exemplified this approach, achieving tens of millions of dollars in medical cost savings in just nine months by implementing a hyper-personalized, test-and-learn engagement model. Even more compelling was the team’s ability to rapidly experiment, identify what works, and deploy “next best actions” at scale, driving exponentially greater savings over time. 

So how do plans move from strategy to this level of impact? 

1. Start with high-cost behaviors: Rather than designing broad member campaigns, leading plans start with specific, high-yield cost behaviors. Examples include ED diversion to shifting members to lower-cost sites of care, preventing unnecessary surgeries through condition management, steering use to preferred providers, and accelerating biosimilar adoption.
2. Ready your data: Establish reliable identity resolution, longitudinal member views, and a strong data foundation spanning demographic, behavioral, and attitudinal factors.
3. Experiment relentlessly: Top-performing plans are running continuous A/B testing at scale across the member journey, not just isolated messaging experiments. This test-and-learn mindset enables rapid identification of the interventions that drive real behavior change and cost impact.
4. Hyper-personalize, with precision: Success requires hyper-personalization grounded in behavioral science, not generic segmentation. Winning plans tailor engagement around the individual—not just clinically, but motivationally and contextually. This behavioral layer is what enables optimized “next-best actions” instead of broad outreach blasts.
5. Scale what works, quickly: The defining difference between experimentation and transformation is scale. Institutionalize agile experimentation and personalization into the engagement operating model, continuously testing, deploying, and refining. 

Conclusion 

The medical cost crisis demands new levers. Engagement is a chronically overlooked, yet incredibly powerful, mechanism for influencing behavior, shifting utilization patterns, and driving measurable cost savings. 

Health plans that approach engagement as a core engine of cost containment will outpace competitors who do not. The leaders shaping the next era of cost management are not waiting for costs to fall. They’re engaging members in ways that make lower medical costs inevitable. 

The question for 2026 isn’t “Should we invest in engagement?”, it’s “How fast can we scale it?” 

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