ValueBased Insurance Design

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• Value-Based Insurance Design
• A Clinically Sensitive Approach to Preserve
  Quality of Care and Contain Cost

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Moderation in Health Care Cost Growth Acknowledge
the Cost / Quality Divide

• Recent cost growth less than 10 in most sectors
• Price increases have moderated, especially in
  pharmaceuticals
• Still substantially higher than inflation
• Number and level of insurance decreasing
• Patient contributions continues to grow

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Moderation in Health Care Cost Growth Acknowledge
the Cost / Quality Divide

• Substantial underutilization of essential medical
  services
• Impact on health outcomes must be measured before
  we can determine whether moderation of cost
  growth is considered a good thing
• Motivation for health insurance must be revisited

4
Moderation in Health Care Cost Growth Acknowledge
the Cost / Quality Divide

• The tradeoffs between access to medical
  innovation and the how to pay for it is a complex
  and extremely political issue

5
Dealing with the Health Care Cost Crisis
Interventions to Control Costs

• Denial
• Prior authorization
• 1-800-NO-WAY
• Drive to Canada
• Disease Management

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Benefit Design TrendsDisease Management

• Manage the most costly patients
• Improves outcomes
• May reduce costs - probably not
• Lack of reduction in copays for recommended
  services do not reflect investment in disease
  management

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Dealing with the Health Care Cost Crisis
Interventions to Control Costs

• Denial
• Prior authorization
• 1-800-NO-WAY
• Drive to Canada
• Disease Management
• Cost Sharing

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Benefit Design Trends Cost Sharing Tiered
Formularies

• Copay set on drug price, not value
• Generic drugs - lowest copay
• Preferred brand - middle
• Non-preferred brand - highest

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Different Cost-Sharing Formulas for Prescription
Drugs, 2000-2005
Average Co-Pay in 2005 Tier 1 10 Tier 2 22 Tier
3 35 Tier 4 74
Source Kaiser Family Foundation and Health
Research and Education Trust
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Impact of Increased Cost Sharing on Utilization

• A growing body of evidence demonstrates that cost
  shifting leads to decreases in essential and
  non-essential care

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Compliance with Statin Therapy Stratified by Mean
Prescription Copayment
0 to lt10
10 to lt20
gt20
Ellis JJ. J Gen Intern Med 200419639-646.
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Benefit Design Trends Cost Sharing Consumer
Driven Health Plans

• Centerpiece of competitive market based reform
  proposals
• Charge consumers high out-of-pocket fees
• Will likely reduce costs
• No evidence whether CDHPs reduce cost growth
• Likely will lead to worse clinical outcomes
• Assumption that consumer is informed

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Getting Services to People Who Need Them Should
the Patient Decide?

• If the patient is not the appropriate decision
  maker, the system should provide guidance and
  incentives to promote better decisions

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Getting Services to People Who Need Them Who
Gets the Essential Care?

• Everybody
• Those who demand it
• Those who can afford it
• Those who need it

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Number Needed to Treat to Prevent a Cardiac Event
with Statins, by Prevention Category
NNT to prevent CV event
Ellis JJ. J Gen Intern Med 200419639-646.
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No Difference in Statin Compliance Stratified by
Prevention Category
Secondary prevention cohort
Primary prevention cohort
Ellis JJ. J Gen Intern Med 200419639-646.
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Impact of Increased Cost Sharing on Utilization

• A strategy to offset the undesirable decrease use
  of essential services due to cost shifting is
  warranted

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From One Size Fits All Cost Sharing to
Clinically Sensitive Benefit Design

• Cost sharing set on value, not price
• Highly valued services - lowest copay
• Effective yet expensive - middle
• Unproven or marginal benefit - highest

Fendrick, Chernew. Am J Managed Care. 20061.
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Value Based Insurance Design Implementation

• Alter cost sharing for high valued services
• All clinical indications
• Target specific patient groups
• Only certain clinical indications receive co-pay
  relief

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Value Based Insurance Design Clinical Examples

• Immunizations
• Diabetes Mellitus

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Value Based Insurance Design (VBID)Examples
Predictive Modeling

• Diabetes Mellitus
• Medicare first-dollar coverage (co-pays waived)
  of ACE inhibitors resulted in nearly one million
  life years gained and a net savings of 7.4
  billion over the cohort lifetime

Rosen AB, et al. Ann Intern Med. 200514389.
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Value Based Insurance Design (VBID)Examples
Predictive Modeling

• Lipid Lowering Agents
• Eliminating co-pays for statin users at medium or
  high risk of CHD averted 110,000 hospitalizations
  or ER visits and saved 1 billion annually

Goldman DG, et al. Am J Manag Care. 20061221.
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Implementing Value Based Insurance Design Other
Clinical Examples

• Asthma
• lower co-pay as disease severity increases
• Cancer screening
• lower co-pay if family history, tumor markers
  etc.
• CHF, etc.

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VBID for Diabetes MellitusThe Asheville Project

• Intensive pharmacist management
• Focus on coached self-management
• Co-pays waived for participation
• Five year outcomes included
• Marked increases in medication adherence
• Diabetes performance measures 2-3x higher
• Overall costs 58 below expected trend
• Average annual sick leave halved

Cranor et al. J Am Pharm Assoc, 2003.
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University of Michigan Intervention Needs
Assessment

• 2,500 UM employees have diabetes mellitus
• Numerous quality enhancement interventions in
  place
• Guidelines, disease management, etc.
• Substantial medication underutilization
• Utilization and adherence of 40-60

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University of Michigan Intervention Overview

• All UM employees dependants with diabetes will
  receive of co-pay reductions for
• ACE Inhibitors and ARBs
• Other antihypertensives
• Statins
• Glycemic agents
• Antidepressants

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University of Michigan Intervention Outcome
Measures

• Adherence
• Based on pharmacy claims (MPR)
• Outcomes
• Medication spending
• Total health care spending
• Absenteeism

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Implementing VBIDWhere to Start?

• Identify partners and data
• Care management and claims (ActiveHealth
  Management)
• Pharmacy Benefit Manager
• Built system to enable customized formulary
• Develop custom formulary
• Determine level of clinical targeting
• Set co-pay reductions

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Value Based Insurance Design Essential Partners

• Information technology
• Clinical effectiveness research
• Disease management
• Pay for Performance programs

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Value Based Insurance Design Preserve Quality
and Contain Cost

• Will increase value of medical expenditures
• Not all care is subsidized, only valued care
• Likely to slow rate of cost growth
• Targeting will improve return on investment
• Copay reductions can be funded by
• Clinical events prevented downstream
• Copay increases on non-essential or unproven
  services

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Value Based Insurance Design Preserve Quality
and Contain Cost

• Access to services should be driven by
  differences in benefit, risk of adverse events,
  and (but not exclusively) acquisition cost
• Payers need to actively experiment with benefit
  designs to simultaneously maintain enrollee
  satisfaction and stem rising costs
• VBID preserves use of valued services in
  atmosphere of increased cost shifting

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Center for Value Based Insurance Design Preserve
Quality and Contain Cost

• Engages in the development, evaluation and
  promotion of insurance products that encourage
  the efficient expenditures of health care dollars
  and optimize the benefits of care
• www.vbidcenter.org

Fendrick and Chernew. Am J Managed Care.
2006118
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