Passing on costs to consumers may help the bottom line in the short term, but a growing number of healthcare experts are concerned that higher copays only create more costs in the long run.
According to Gregory B. Steinberg, MD, chief medical officer at ActiveHealth Management in New York City, higher copays reduce medication compliance, which can lead to adverse events and ultimately increased healthcare costs.
A growing number of healthcare experts are offering an alternative to high-cost plans—value-based insurance design (VBID).
Supporters say VBIDs, which are also called evidence-based benefits and value-based benefit design, will improve medication compliance and tackle the issue of unnecessary prescriptions, hospital visits, and procedures.
The idea behind VBIDs is to replace the current system with one that is evidence-based. VBIDs reduce copay costs for medications and tests that are most beneficial and increase copays for tests and drugs that are not as worthwhile and sometimes unneeded.
Steinberg promotes creating a VBID program that “accurately identifies those individuals who really would benefit from these evidence-based therapies.”
The concept is to tier pharmaceuticals so that those who need lifesaving prescriptions for ailments such as heart disease, diabetes, and hypertension will pay less or nothing.
Meanwhile, services or medications that are not as clinically beneficial will cost consumers more. “If it is actually deployed properly, I think the impact on healthcare could be profound,” says Steinberg.
The high-deductible/high-copay options implemented by at least 20% of private health insurance providers are actually creating barriers to medication compliance. Placing those cost barriers on medication means healthcare spends more money to care for sick patients rather than on preventive care, says Steinberg.
Andrew Webber, president and CEO of the Na-tional Business Coalition on Health in Washington, DC, says his organization has been promoting the VBID concept to members as an alternative to high-deductible/high-copay plans. Webber calls high-deductible plans a “pretty blunt instrument.”
VBID, on the other hand, “marries economic incentives at the consumer level together with matching benefit design to the best science and evidence,” says Webber. “Consumers should pay more for medical services when there is not strong evidence of return.” Webber says he favors a plan to tier providers based on performance and effectiveness. “We think that as we begin to shift costs onto individual consumers, that [VBIDs] would just be a much more thoughtful way to engage consumers in understanding that there are consequences for their demand for healthcare services, but at the same time recognize that the last thing we want to do is create economic barriers for people getting services that they really need.”
If people are not taking their medications, you can expect worse outcomes and more costs via hospitalizations and ER visits. Steinberg says studies show that decreased compliance is associated with a “dramatic increase in mortality,” increased ER visits, hospital utilization for diabetes, hypercholesterolemia, hypertension, and chronic heart failure.
Steinberg highlights the findings from Pitney Bowes, which is an early example of a VBID design that was clinically focused on diabetes and asthma and did not require any decision support. The organization lowered copays for diabetes and asthma medications, and preliminary findings showed:
➤ Adherence improved for asthma and diabetes patients
➤ The annual cost of care for both groups decreased
➤ Hospital admissions and ER visits declined for asthma patients but remained the same for those with diabetes
Steinberg says there is also multiyear experience with a more sophisticated VBID design that “uses decision support algorithms to identify individuals who, based on the medical literature, would benefit from specific medications,” such as lipid-lowering drugs, asthma controller drugs, diabetes medications, and beta-blockers. The system identifies those who are already appropriately on therapy as well as individuals who are not but should be and notifies both the member and his or her doctor that the member is entitled to a reduced copay, according to Steinberg.
“Preliminary analysis indicates that this VBID design, when compared to an appropriately matched control group, increases overall compliance with these medications. Preliminary analysis of payer cost data suggests that although the cost of medications, as expected, increases with this program, overall costs do not change significantly, presumably due to a beneficial effect on other medical costs as a result of improved medication compliance,” says Steinberg.
A. Mark Fendrick, MD, codirector of the University of Michigan’s Center for Value-Based Insurance Design, points to results of a Caremark study released last March. The results showed that patients taking asthma, diabetes, hypertension, or hyperlipidemia drugs who didn’t pay for copays were more likely to adhere to their medication than patients in a traditional three-tier prescription plan and a consumer-driven health plan (CDHP). Fendrick says the results show that lower copays improve medication adherence. The tiered pharmacy copay system “does not distinguish between those services that produce a greater amount of health improvements and those that don’t,” according to Fendrick.
“While everyone agrees that an operation or a drug that may save your life is more important than a drug that makes your hair grow back, the status quo of benefit design does not distinguish this variability at all,” says Fendrick, adding that without a change “the entire system is likely to fall on itself.”
Although there have been preliminary studies, such as Caremark’s findings, and anecdotal reports from the companies that have taken the lead on VBIDs, Steinberg is quick to point out that VBIDs still need more research to identify “optimal program components for various populations.”
Prescription drug costs have not risen at the same rate as other segments of healthcare because of greater use of generic drugs and low-cost pharmacies, such as Wal-Mart. But Steinberg warns against looking only at pharmacy costs.
“What counts is the total medical costs spent . . . The key point is that looking at just the drug costs is a myopic view of the overall issue,” says Steinberg.
When reviewing costs, Webber says employers should wait two or three years to see whether VBIDs are affecting hospitalizations, absenteeism, disability insurance, and workers compensation. With those numbers in hand, employers can find the ROI.
Webber says there is a small number of pioneering employers and health plans that are studying VBID. They are performing the initial work, including research, and learning lessons and best practice models that could be copied by others.
Webber says it’s too early to gauge the specific ROI, but he is confident that the ultimate results will show cost savings in the long-term. Regardless of the ROI, a greater emphasis on evidence-based programs are needed, he says.
“We are the purchaser; we are the folks writing the bills at the end of the day. We have created the wrong set of incentives for providers; we created the wrong set of incentives for our consumers and our work force and it’s created a perfect storm of cost escalation in healthcare. We’ve got to change those dynamics,” Webber says.
Take these steps before starting a VBID program
Change is never an easy thing, especially when you’re talking about moving into new territory few have tried and that can affect a company’s employee relations and bottom line.
For those considering whether to create value-based insurance design (VBID) programs, there are avenues to research before implementing the plans. A. Mark Fendrick, MD, codirector of the University of Michigan’s Center for Value-Based Insurance Design, suggests those exploring the option ask themselves the following questions:
➤ Do we understand our employee population? Are our employees being properly diagnosed and treated? Are we properly motivating employees to improve and maintain their health?
➤ Are we holding providers (health plans and pharmacy benefit managers) accountable? How are our health benefits affecting total costs, both directly and indirectly? What is the ROI on our benefit design decisions?
➤ Are we able to make informed decisions? Do we have integrated data (medical, pharmacy, lab, disability, and productivity) to help us assess direct and indirect health-related costs?
➤ What are our employee medication-adherence rates?
➤ What studies were reviewed to support benefit-coverage decisions?
➤ Will our current benefit design positively affect the long-term health and productivity of our employees?
Those questions should help an employer figure out whether to give VBID a try and what kind of VBID program to implement. For instance, should you reduce or eliminate copays on specific patients or on specific medications, tests, and procedures? The former is more complicated because the system will have to identify individuals rather than specific medications, tests, and procedures.
For those more interested in savings and less concerned about the possible employee backlash, Gregory B. Steinberg, MD, chief medical officer at ActiveHealth Management in New York City, suggests a “tighter system because it’s likely to result in more net savings to the payer.” A tighter system would evaluate each consumer’s health situation. For instance, two employees could purchase the same drug, but one may have a lower copay because of health status. A broader program establishes a lower copay for specific drugs. At that point, patients are paying the same amount regardless of the need.
Steinberg says payers interested in a tighter value-based program will need two things:
1. A decision support system to identify whether the right people are chosen
2. The infrastructure that ties into a pharmacy benefits manager (PBM) to adjudicate and administer the program after the individuals are identified
“You need to have a tie-in of the PBM so when the member goes to the pharmacy, there is an auto-adjudication process that occurs at the point of sale at the pharmacy that says, ‘Yes, this member is entitled to the drug and eligible to receive the drug at a reduced copay,’ ” says Steinberg.
After the plan has been formed, the employer has to implement an inclusive education program with employees. Some employees may bristle at the thought they will pay more for the same medication because they do not need it as badly as people with life-threatening conditions. Employers must communicate with employees about the differences. Promoting the program accurately is a key component to establishing a beneficial program that receives the most employee support, says Steinberg.
Creating value-based programs changes the way consumers look at healthcare. The current system has caused employees to expect employers will pay for almost any health service, creating an overutilization of healthcare. Andrew Webber, president and CEO of the National Business Coalition on Health in Washington, DC, says employers have no one to blame but themselves. “I think employers are to blame for creating a consumer-entitled mentality through more traditional insurance design where insurance pays for most everything and there are no economic consequences for individual demand for services,” says Webber.
Once VBID is put into place, Steinberg says each part of the healthcare structure supports the idea: Patients enjoy the lower cost, doctors appreciate the medication compliance, employers want healthier employees, and health plans see the long-term cost-savings benefit.