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Federal and state governments need an end-to-end solution to encourage low-income individuals receiving nutrition assistance benefits to make healthier food purchases.

Unhealthy eating habits in low-income families receiving SNAP (Supplemental Nutrition Assistance Program) benefits have been a challenge for years. Unfortunately, many of the 45 million people who rely on SNAP view more nutritious options as an additional expense, and access to healthy food products can be limited. As a result, low-income children are twice as likely to become obese as those in higher-income households.¹

Since most beneficiaries also rely on Medicaid health benefits, government stakeholders have a vested interest in encouraging better eating habits within this population. Research shows that targeted nutrition programs play an important role in medical cost savings; a recent study² found that a small reduction in caloric intake could potentially produce annual cost savings of $58 billion. Not only do healthier people have lower health care costs, but they miss fewer days of work and are less reliant on other social services.

Addressing this nutrition gap, however, requires a comprehensive approach. Deloitte has conceived and designed a software-as-a-service platform dubbed “Healthy States” that would provide SNAP recipients with information to help them make healthier choices, find healthful food suppliers, and reap financial benefits for purchasing more nutritious food.

Hard Choices for Healthy Eating

Started in 1961, the food assistance program—today delivered via an Electronic Benefits Transfer (EBT) payment card rather than stamps—deposits funds directly into recipients’ accounts each month for use at a range of retail outlets. Funded by the U.S. Department of Agriculture’s (USDA) Food and Nutrition Service and implemented at the state level, the goal of the program is to relieve food insecurity for low-income families.

Research shows that although most recipients of food assistance would like to make better choices, they face two significant hurdles to doing so. First, healthy food is usually more expensive. Second, convenience foods can be the only choice for families without transportation. These two factors together result in the presence of food deserts in many low-income areas around the country.

Incentives That Work

In delving into the economics and real-world examples of how incentives might work, Deloitte came across an innovative approach from the Washington, D.C.-based Arcadia Center for Sustainable Food & Agriculture. The nonprofit (also known as Arcadia Mobile Market) brings mobile farmers markets to 19 neighborhoods with heavy SNAP usage. Arcadia makes high-quality food more affordable by matching SNAP spending: for $10 spent on an EBT, the customer gets $20 worth of food.

The program has worked. Between 2012 and 2015, sales increased from $44,000 to $186,000 in neighborhoods written off by full-service retailers. The average SNAP transaction increased from just under $8 to more than $20 per sale. And Arcadia conducted nearly 9,000 transactions with customers using some form of food assistance (more than 65 percent of its revenue).

These outcomes suggest that low-income communities will buy nutritious food if it’s affordable and convenient. Seeing the results of such incentive programs, Congress has appropriated $100 million over five years to SNAP incentive funding for farmers markets nationwide. However, that program only scratches the surface in terms of the need and the potential for impact. Less than one percent of the approximately $75 billion in annual SNAP benefits are spent at farmers markets.

Gaming the System for Better Results

According to classic game theory, two parties naturally gravitate toward the most mutually favorable outcome. Right now, the most favorable outcome for SNAP beneficiaries with a limited monthly SNAP food budget is to maximize their purchasing power by buying low-cost foods. Those foods are usually nutritionally deficient and lead to a host of chronic health issues. Meanwhile, retailers have no reason to make healthy food cheaper for SNAP users.

The key is to motivate both parties: make it financially attractive for SNAP beneficiaries to purchase healthier foods and for SNAP retailers to make them more available and affordable. For example, if a SNAP beneficiary gets 50 cents back on a SNAP account for purchasing $1 worth of apples rather than a bag of potato chips, it increases purchasing power for a healthier food item by 50 percent. Retailers can be encouraged to promote healthy food items through state and local tax breaks. Similar programs can also be presented to traditional brick-and-mortar retailers offering delivery services (particularly useful in rural areas). Federal and state governments can also incentivize nontraditional food retailers that already offer healthy foods, such as Community Supported Agriculture markets (CSAs), to either expand market locations or add deliveries to underserved areas.

A Potential Cloud-Based Solution

To make this work seamlessly, however, there needs to an affordable and easy-to-implement technology solution to encourage, track, and reward healthy food purchases. Although the SNAP program is federally funded, each state must implement the necessary technology to deliver benefits to its residents. Since SNAP and Medicaid claims data is fairly consistent across states, a multitenant solution with a minimal statecentric configuration could potentially be implemented at low cost.

As conceived, Deloitte Consulting’s Healthy States platform comprises multiple components:

A software-as-a-service back end performs data integration, analytics, and mobile enablement services for the incentives program.

A mobile consumer app allows SNAP recipients to manage their benefits, submit receipts for incentive validation, research food items, and locate retail options.

An analytics engine processes SNAP usage data, Medicaid claims, grocery shopping habits, and health self-assessments to provide smart alerts, food advice, and other salient features.

A Healthy Merchant portal enables retailers to perform targeted marketing activities, find information on incentivized food items, and connect with suppliers.

The system will take advantage of a host of new and existing data. Universal Product Code (UPC) data will identify which food is incentivized. A mobile app with receipt-scanning capabilities will allow SNAP users to upload their purchases to the cloud to calculate their incentives. SNAP geographical utilization data will be correlated with USDA data of retail partner locations that accept SNAP payments so that the platform can make recommendations for the best areas to launch local pilot programs. SNAP data will also be cross-referenced with other state and local benefits systems. For example, if SNAP Medicaid claims data reveals hypertension, Healthy States will suggest low-sodium and high-fiber foods.

This single system will capture the information necessary to provide incentive payments in real time. Using a merchant portal, nontraditional retailers such as farmers markets could use the Healthy States app to market healthy foods to target SNAP users in the same way they use mobile apps to provide customized offers to other customers. What’s more, a user will be able to point their smartphone camera at a food item and see the incentive pricing instantly. Users will enter additional health information (e.g., “I’m pregnant” or “My husband is trying to lose weight”) for further personalization. Finally, the Healthy States system will integrate with mobile fitness trackers to gather even more individual health data.

For nontraditional retailers, like farmers markets, a mobile iPad Register feature will enable cashiers to easily allocate available program dollars. All the products to be sold will be loaded into the point-of-sale database, which also manages the rules required for each form of payment. For example, SNAP dollars can be doubled through a “Bonus Bucks” program, the funding for which can be sourced from federal/state/local grant funds or solicited from private donations as Arcadia Mobile Market does.

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Healthy States has the potential to positively transform the eating habits of SNAP beneficiaries. Retailers would use its intelligence to refine inventory, pricing, and marketing efforts. States would have the option to implement healthy food incentives programs quickly and cost-effectively thanks to the ready-to-use cloud platform and, along with the USDA, can use the built-in analytics to better serve their most vulnerable constituents.

—by Timothy Meyer, principal; Benson Chang, specialist master; and Roberto Cota, senior manager, Deloitte Consulting LLP

(Additional contributors include Rob Dunn, consultant, and Jaala Kirkley, senior solution engineer, Deloitte Consulting; Pam Hess, executive director, Arcadia Mobile Market; and Jon Chamot, partner, Perigee Labs)