As benefits advisors help employers struggle with the burgeoning costs of health care, cost-sharing initiatives seem to be everywhere.
But how exactly should costs be shared?
Health care benefits and co-payments historically have been distributed equally among employees. This arrangement is arguably fair. But is it effective?
Advocates of “value-based insurance design” suggest that it makes more sense to address health care costs based on the value to individual patients rather than using a “one-size-fits-all” solution. VBID is a system of cost sharing that tailors co-payments to the evidence-based value of specific services for targeted groups of patients. Currently, cost sharing is nearly always based on the expense of the service or medicine and rarely is related to its potential benefit to a patient.
The pressures created by skyrocketing health care costs make VBID very timely. The approach can help mitigate some of the downsides of cost sharing, such as the creation of barriers to critical medical services and medicines for the patients who most need them.
While everyone is anxious to address rising health care costs, no one is served if diabetics, for example, do not take their medicine or get regular eye exams because their co-payments are too high. Ignoring chronic problems when they are still treatable will likely require more expensive treatments in the future.
Benefits advisors who promote a VBID approach can encourage the use of services when the clinical benefits exceed the costs.
Bringing VBID to life
While the idea behind VBID has been around for nearly a decade, today’s advances in disease management and data-sharing technology are paving the way for real-world applications.
At its simplest, a VBID program can target clinically valuable services for co-payment reduction. This approach focuses on the service, rather than targeting benefits to individual patients. Pitney Bowes, for example, currently reduces co-payments for all drugs commonly prescribed for diabetes, asthma, and coronary heart disease.
In its most advanced form, VBID considers both the patient’s condition and the available treatments. A program of this type targets patients with select clinical diagnoses and lowers co-payments for specific high-value services. All treatments are considered, and those with more “value” are given a higher priority.
The municipality of Asheville, N.C., and the University of Michigan have implemented programs that reduce copayments for selected medications for employees with diabetes.
Accurately determining the value of services is not always straightforward. It calls for using a blend of clinical judgment, health economics, and actuarial techniques. Adjusting co-pays appropriately also requires robust actuarial analysis.
Several groups provide useful guidance on how to rank services and structure payments. In the United Kingdom, for example, the National Institute for Health and Clinical Excellence publishes recommendations on public health, clinical practice, and health technologies within the National Health Service.
VBID principles are also being promoted in the United States through the National Business Group on Health and the National Business Coalition on Health.
VBID programs also face a number of challenges to implementation, among them human relations concerns, as some employees might object to others paying less for certain services. Benefits advisors who help employers communicate VBID initiatives clearly can help muster this kind of employee enthusiasm. Other concerns include higher administrative costs, the potential for fraud or for attracting patients with targeted diseases, and data issues.
While these are potential barriers for implementing VBID initiatives, many of these challenges have been successfully met. For instance, current wellness and disease management programs conduct claim searches through administrative data and help provide high-value services. In fact, companies may find that these types of programs can lay the groundwork for an effective VBID initiative.
Disease management programs and current VBID programs tend to focus on diseases such as diabetes, in which patients can be easily identified using specific data sets. Advances in technology will continue to improve the ability to collect and share electronic medical records and health assessment data, which are critical steps for implementing VBID programs that address a wider range of diseases.
VBID programs are feasible today. For benefits advisors helping employers considering targeting costs based on the clinical value of services, sound financial forecasting will help determine the scope of their programs. As with other benefits programs, VBID can be crafted to achieve any cost target, including budget-neutral programs created with an actuarially equivalent design.
VBID offers a more nuanced approach to delivering health care benefits, something that many employers are looking for as they seek to both improve their delivery systems and control costs.
David Mirkin, M.D., is a principal and health care management consultant with the New York office of Milliman. He also is a family practitioner. He can be reached at [email protected]