Value Based Insurance Design
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Transcript of Value Based Insurance Design
Value Based Insurance DesignValue Based Insurance Design
Michael ChernewMichael Chernew
Feb 22, 2008Feb 22, 2008
Portions of this research were funded by Pfizer and GSK.
Two ConcernsTwo Concerns
High (and rising)
Costs
Poor Quality
Premiums rose 87% since 2000*
Response:
• Raise Copays
• Up 70% 2000 to 2005
About 50% of time appropriate care is not delivered**
Response:
• Disease Management
• P4P*Kaiser Family Foundation/HRET: www.kff.org/insurance/ehbs092606nr.cfm
**McGlynn et al The quality of health care delivered to adults in the United States. N Engl J Med 2003;348(26):2635-45
*** www.kaiserfamilyfoundation.org/insurance/7315/sections/upload/ehbs2005slides.pdf
Cost sharing reduces useCost sharing reduces use
Ellis JJ. J Gen Intern Med 2004;19:639-646.
$0 to <$10
$10 to <%20
>%20
Consumers do not respond to cost Consumers do not respond to cost sharing as economists would likesharing as economists would like
Reductions in appropriate use same as Reductions in appropriate use same as for inappropriate use (Sui et al. 1986)for inappropriate use (Sui et al. 1986)– Lack of coverage is associated with worse Lack of coverage is associated with worse
outcomesoutcomes• Effects concentrated on poor and chronically illEffects concentrated on poor and chronically ill
– Copays reduce use of preventive servicesCopays reduce use of preventive services– Copays reduce use of ‘valuable’ Copays reduce use of ‘valuable’
pharmaceuticalspharmaceuticals
Value Based Insurance DesignValue Based Insurance Design
Reduce (or keep low) copays for high Reduce (or keep low) copays for high value servicesvalue services
– For high value patientsFor high value patients
Sources:
Fendrick, et. al Fendrick, et. al American Journal of Managed Care,American Journal of Managed Care, 2001 2001
Chernew. et al. Chernew. et al. Health AffairsHealth Affairs. 2007. 2007
Chernew. et al. Chernew. et al. Health AffairsHealth Affairs. 2008 . 2008
Copays Within and Outside of Disease Management
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
0 <5 5 or 7 10 >10
copay amount (preferred branded)
per
cent of en
rolle
es
Not DM
DM
Source: Chernew, M.E., Rosen, A.B., Fendrick, A.M. “Rising out-of-pocket Costs in Disease Management Programs”. American Journal of Managed Care. 2006. 12: 150-155.
VBID MeritsVBID Merits
Increase benefit per dollar spent in the Increase benefit per dollar spent in the health care sectorhealth care sector
Use insurance design to make Use insurance design to make consumers behave as if they were consumers behave as if they were better informed better informed
Allows more efficient subsidization of Allows more efficient subsidization of low income patients low income patients – Not all care is subsidized, only valued careNot all care is subsidized, only valued care
Types of VBIDTypes of VBID
TargetingTargeting– By serviceBy service
Pitney BowesPitney Bowes
– Targeted service AND patient groupTargeted service AND patient groupUniversity of MichiganUniversity of Michigan
ScopeScope– Lower copays onlyLower copays only– Lower high value, raise low valueLower high value, raise low value
Financial Costs of VBIDFinancial Costs of VBID
Greater use of high value servicesGreater use of high value services
Greater employer share of spending for Greater employer share of spending for high value serviceshigh value services– Including the services that would have been Including the services that would have been
used anywayused anyway
Administrative costsAdministrative costs– Depends on designDepends on design
Financing VBIDFinancing VBIDTarget betterTarget better– high risk patientshigh risk patients– highly effective services with low baseline usehighly effective services with low baseline use– price responsive servicesprice responsive services
OffsetsOffsets– Lower costs due to fewer adverse eventsLower costs due to fewer adverse events– Productivity gainsProductivity gains
Increase costs for other servicesIncrease costs for other services– Low valueLow value– All othersAll others
Pass costs to employees in other waysPass costs to employees in other ways
Saving money is not main objectiveSaving money is not main objective
How do we finance health?How do we finance health?
How do we enhance value?How do we enhance value?
Results from literatureResults from literature
Pitney BowesPitney Bowes– 6% decrease in overall diabetes costs6% decrease in overall diabetes costs– Savings exceeded $1 million Savings exceeded $1 million
AshevilleAsheville– Reduced annual, per participant, total cost for Reduced annual, per participant, total cost for
diabetes by $1,200 to $1,872diabetes by $1,200 to $1,872
Retired public employees in CARetired public employees in CA– 20% offset overall20% offset overall– 50% in highest spenders50% in highest spenders
Source: Mahoney AJMC 2005; Cranor et al 2003; Gruber and Chandra, 2007
Evaluating a VBID ProgramEvaluating a VBID Program
InterventionIntervention
A large employer lowered copays for selected A large employer lowered copays for selected medications in January 2005:medications in January 2005:– Ace/ARBsAce/ARBs– Beta BlockersBeta Blockers– Glucose controlGlucose control– StatinsStatins– SteroidsSteroids
Copay reductions:Copay reductions:– Generic: $ 5.00 Generic: $ 5.00 $0 $0– Preferred Brand: $25.00 Preferred Brand: $25.00 $12.50 $12.50– Non-Preferred Brand: $45.00 Non-Preferred Brand: $45.00 $22.50 $22.50
ImplementationImplementation
Implemented by an integrated care Implemented by an integrated care management firm Activehealth management firm Activehealth Management (AHM)Management (AHM)– Identify consumers that would benefit but Identify consumers that would benefit but
were not using meds and inform themwere not using meds and inform them– Exclude individuals with contra-indicationsExclude individuals with contra-indications
AdherenceAdherence
Effects size for MPR analysis
Effect size(% points) Base MPR % increase* Take-up %**
Ace/Arb 2.59 68.37 3.79% 8.2%
Beta Blockers 3.02 68.30 4.43% 9.5%
Diabetes 4.02 69.46 5.79% 13.2%
statins 3.39 52.99 6.28% 7.1%
steroids 1.86 31.56 5.88% 2.7%
ExpendituresExpenditures
Perspective is keyPerspective is key
SocietalSocietal– Treat greater employer share for inframarginal Treat greater employer share for inframarginal
prescriptions as a transfer (zero cost)prescriptions as a transfer (zero cost)– Appropriate for cost effectiveness analysisAppropriate for cost effectiveness analysis– Distributional issues dealt with separatelyDistributional issues dealt with separately
FirmFirm– Treat greater employer share for inframarginal Treat greater employer share for inframarginal
prescriptions as a costprescriptions as a cost
Financial impactFinancial impact
How much must compliance reduce non-How much must compliance reduce non-RX costs to completely offset extra RX RX costs to completely offset extra RX spendingspending– Aggregate perspective: 17%Aggregate perspective: 17%– Employer perspective: 48%Employer perspective: 48%
Could break even with less effectiveness Could break even with less effectiveness if:if:– Add in productivity gainsAdd in productivity gains– Add in disability savingsAdd in disability savings– Target more effectivelyTarget more effectively
VBID SummaryVBID Summary
Higher copays lead to lower spending (even with Higher copays lead to lower spending (even with offsets)offsets)– Because of this copays will riseBecause of this copays will rise
VBID allows firms to mitigate deleterious VBID allows firms to mitigate deleterious consequencesconsequences– Allow firms to hit a cost target in a more efficient Allow firms to hit a cost target in a more efficient
mannermanner– Part of any strategy to improve quality or decrease Part of any strategy to improve quality or decrease
costscosts
Targeted copay reductions will generate offsetsTargeted copay reductions will generate offsets– May offset some or all of increased drug useMay offset some or all of increased drug use
VBID cannot be perfect, but imperfect may be VBID cannot be perfect, but imperfect may be better than non-existentbetter than non-existent
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