The term "value-based" insurance might strike average consumers as a bit odd: Shouldn't all insurance be value-based?
Indeed, it should be, and more and more of it is, although there are still barriers, according to Mark Fendrick, MD, an internist and University of Michigan medical professor who largely developed the value-based insurance design framework.
"Our goal from the beginning was to change the healthcare expenditure discussion from how much we spend to how well we spend it," said Fendrick, who also directs the University of Michigan Center for Value-Based Insurance Design.
Fendrick coined the term value-based insurance design, or VBID, and started the center in 2005, after years of frustration with traditional insurance, which he saw as riddled with obstacles to preventative care stemming from a one-size fits all framework.
"Fifteen years ago I started to notice that my patients with good commercial health insurance had cost-sharing that was discouraging them from getting the highest value services that I felt should have been a priority for their care -- colonoscopies, lab tests to check for cholesterol -- because their was no clinical nuance in their design," he said, in an interview after speaking at the Maine Health Management Coalition annual conference.
"With the advent and growth of high-deductible, consumer-driven health plans, that has only gotten worse."
A key idea Fendrick uses in tandem with VBID is clinical nuance -- a type of guide that is at once granular and flexible, incentivizing beneficial care based on an individual's needs while discouraging marginally beneficial services.
For instance, he argues, health plans shouldn't pay for 35-year-olds to get colonoscopies ("they should have to pay a fine for taking their mother's place in line."), unless they have a family history of colon cancers -- in which case the procedure should be made cheaper or free. Likewise for eye exams for diabetic patients, cholesterol checks for heart disease patients, and behavioral counseling and medication for smokers.
For the most part, "people pay the same out-of-pocket for high-value services as low-value services," he said. "Currently, Americans are neither incented nor disincented on the value proposition."
That's starting to change, though.
Large self-insured employers like Marriott and Pitney Bowes have started incorporating VBID into their benefit packages, and public employee plans in seven states, including Oregon, Connecticut, Minnesota and Tennessee, have as well -- mostly with union support.
Connecticut, trying to address a $3.5 billion deficit, implemented a VBID plan for public employees in 2011. Employees had the option of staying in a PPO -- with $100 more in premiums per month, plus a $3,500 deductible -- or enrolling in a no-deductible VBID plan that includes a health risk assessment and participation in chronic disease management programs for those with the conditions.
Now, 98 percent of the beneficiaries are enrolled in the VBID program, and while the Connecticut comptroller "can't say he's saving money, it's neutral," Fendrick said.
Also, for the first time, the Centers for Medicare & Medicare Services is allowing value-based designs in Medicaid, with clinically nuanced cost-sharing for drugs, ER visits and hospitalizations. "This is a monumental step forward," Fendrick said.
Michigan's Medicaid expansion plans, as outlined in a federal waiver application, will incorporate a number of designs increasing certain costs (like a sliding scale fee for non-emergency ER visits) and decreasing or eliminating costs for preventative services.
"We are particularly cognizant of cost-related nonadherence in the more traditional Medicaid population of 100 percent of the federal poverty level and below," Fendrick said. "Small changes in cost-sharing, or putting cost-sharing in place at all, may steer patients to make better decisions."
Still, VBID has a ways to go before it's considered mainstream. Fendrick estimates that high-deductible health plans are about 30 percent more prevalent than VBID, and there are still obstacles -- both in perception and policy.
Aetna had a VBID medication program for heart attack patients, offering four drugs shown to help prevent second attacks for free -- and the rate of adherence increased only from 42 to 49 percent. That shows the challenge is not just benefit design, but just as much literacy, Fendrick said.
Another obstacle to VBID is the Internal Revenue Services' regulations on health savings accounts.
"I would like a HDHP that makes bad stuff high deductible and good stuff low," Fendrick said. "But the IRS has tied the hands on that."
Only primary, preventive services qualify for HSAs before the deductible in high-deductible health plans, and that's a barrier to clinically nuanced payment decisions, Fendrick said.
"Because the highest-value services in my opinion pertain to population health and overall impact on the health of Americans are secondary services, the high-deductible health plans that are HSA-qualified are currently not allowed, because of IRS guidance, to make some of the highest-value secondary services available outside of the deductible," Fendrick said.
"One of our great aims for the coming year is to build a multi-stakeholder coalition to convince the Obama Administration that the IRS restriction on the lack of the ability to put secondary preventive services before the deductible needs to be changed."