Value-Based Insurance Design A.Mark Fendrick, MD University of Michigan Center for Value-Based Insurance Design

Returning Health to the Health Care Debate  There is little disagreement over the fact there is enough money in the US health care system  Therefore, we need to focus on how – not simply how much – we spend on healthcare

Predicted Life Expectancy Based on Health Care Expenditure

Dealing with the Health Care Cost Crisis Interventions to Control Costs  Generic Drug Programs  Prior Authorization  Disease Management  Information Technology  High Deductible Health Plans  Make Beneficiaries Pay More

Dealing with the Health Care Cost Crisis Shift Costs to Consumer  Increase premiums  Increase “one size fits all” cost sharing for clinician visits, diagnostic tests and prescription drugs

Increased Cost Sharing at Point of Service Copay set on Price, not Value  Generic drugs - lowest copay  Preferred brand - middle  Non-preferred brand - highest

Cost Sharing Should Not Produce Preventable Reductions in Quality of Care – The archaic “one-size-fits-all” approach fails to acknowledge the di ff erences in clinical value among medical interventions and among patients – Ideally, higher patient co-payments would discourage the use of low-value care

Cost Sharing Should Not Produce Preventable Reductions in Quality of Care – A growing body of evidence demonstrates that cost shifting leads to decreases in essential and non-essential care

Value Based Insurance Design Inspiration “I can’t believe you had to spend a million dollars to show that if you make people pay more for something they will buy less of it.” Barbara Fendrick (my mother)

Value Based Insurance Design: More than High-Value Prescription Drugs  Wellness programs  Prevention/Screening  Diagnostic tests/Monitoring  Treatments  Clinician visits  Physician groups/Hospitals

“Lowe's is offering employees incentives in the form of reduced out- of-pocket costs to come to the Cleveland Clinic for heart procedures.”

Value Based Insurance Design Policy Implications

Patient Protection and Affordable Care Act VBID Included “2713(c) Valued-based Insurance Design. –The Secretary may develop guidelines to permit a group health plan and a health insurance issuer offering group or individual health insurance coverage to utilize value-based insurance designs.”

Sec 2713 Interim Final Regulation – July 2010 Strong Support for VBID “The Departments recognize the important role that value-based insurance design can play in promoting the use of appropriate preventive services. ”

PPACA Sec. 2713: Certain Preventive Services be Provided without Patient Cost Sharing  Receiving an A or B rating from the United States Preventive Services Taskforce  Immunizations recommended by the Advisory Committee on Immunization Practices  Preventive care and screenings supported by the Health Resources Administration (HRSA) for infants, children and adolescents  Additional preventive care and screenings recommended by HRSA for women

PPACA Sec. 2713: Certain Preventive Services be Provided without Cost Sharing – Role of Networks  When a provider network exists, no requirement to provide coverage for recommended services delivered by an out of network provider  Department of Treasury guidance allows steerage to high value locations WITHIN networks [e.g. ambulatory centers instead of in-hospital colonoscopy]

Interim Final Regulation – July 14, 2010 Definition of Value-Based Insurance Design “Value-based insurance designs include the provision of information and incentives for consumers that promote access to and use of higher value providers, treatments, and services.”

Request for Information Regarding V-BID in Connection With Preventive Care Benefits – Dec 2010 “this RFI solicits additional information on specific examples and best practices of VBID for recommended preventive services, as well as data used to support and inform VBID benefit design, measurement, and evaluation in the context of recommended preventive services. ”

National Quality Strategy– March 2011 Consumer Incentives and Benefit Designs “Some employers and private health plans already use the evidence-based programs to promote better health. Similar approaches can improve adherence to recommended medications, which many Americans fail to take, often due to cost. At the Federal level, HHS is promoting value-based insurance models.”

Value-Based Insurance Design More Health at Any Price V-BID Center Symposium 2011: The State of Value-Based Insurance Design: Evidence, Policy, Implementation, and Tools October 4, 2011 The University of Michigan Center for Value-Based Insurance Design is the leading advocate for development, implementation and evaluation of VBID programs