Discussions about health insurance almost always include atleast an allusion to value. Whether the carrier is implementing avalue-based payment model or whether the employer is attempting toget more bang per buck via a wellness program, value (or lack thereof) hasbecome an integral facet of the American health care debate.

When it comes to the discussion of integrating value into healthcare, policy experts on payer, provider and academic sides allmention the work of the University of Michigan's Center for Value-Based InsuranceDesign, established in 2005. Since then, Center director andoriginator of the V-BID concept, Dr. A. Mark Fendrick, has focusedhis research and policy efforts to help Americans get more healthout of every health care dollar.

He notes that a common response by public and private payers toescalating health expenditures is the shifting of costs toconsumers.

“Beneficiaries are now paying more in premiums, copayments anddeductibles,” he says. “While I support engaging consumers in theirhealth care choices, I think there's a better approach thanincreasing cost-sharing in the typical 'one-size-fits-all' way.Under the current approach, consumers now pay more for every doctorvisit (that is, they pay the same amount to see a cardiologistafter a heart attack as they do to see a dermatologist for mildacne), every diagnostic test and every drug within a formulary tier(the system carries the same copayment for a lifesaving cancer ordiabetes drug as for a drug that treats toenail fungus).”

The increasing financial burden on consumers concerned Fendrick,a general internist.

“I was motivated by the fact that my patients – even those withgood insurance – couldn't afford to pay for the medical services Ibegged them to do, such as immunizations, cancer screenings, and fillingprescriptions for potentially life-saving medications,” hesays.

Clinical nuance

The growing problem of cost-related non-adherence inspiredFendrick and his University of Michigan colleague Michael Chernew(now at Harvard Medical School) to find a better way.

Fendrick coined the phrase, “clinical nuance,” which is thebasis upon which the concept of value-based insurance design isbuilt.

“The first tenet of clinical nuance is that medical servicesdiffer in the level of health produced,” Fendrick explains.

In other words, certain clinician visits, diagnostic tests anddrugs are more important than others in terms of the amount ofindividual and population health produced.

“The second tenet of clinical nuance is that for every medicalservice, there will be variations in clinical value depending onwho gets the service (that value could vary due to patientcharacteristics like, for example, gender and family history), whodelivers it (provider characteristics like whether the clinician isa primary care provider or a specialist) and where it's provided(for example, inpatient or outpatient care).”

These concepts are critical because value-based insurancedesigns reduce or remove financial barriers to specific high-valueservices for those individuals who are most likely to benefit. Itseems simple – a mere reallocation of funds to those services orproviders that produce high-quality (and vital) health careservices for the money and away from those that don't. Such a movetoward clinical nuance would require payers to utilize tools thatmeasure both the quality of the care delivered by a provider andthe specific medical needs of the patient.

“Clinical nuance is an essential element of the movement fromvolume to value in that in that it specifies the appropriateclinical circumstances for care,” Fendrick notes. “Such an approachseems more intuitive than increasing consumer costs for allservices regardless of the clinical benefit produced – I think weshould provide nuanced incentives for clinicians and consumers toimprove access to those services that accepted metrics deemed ashigh-quality care. These includes services like cancer screenings,glucose control and eye exams for diabetics, and use ofguideline-recommended medications, such as beta-blockers after aheart attack or long-acting medications that reduce asthmaflares.”

Lacking innovation

Although payers, insurers and clinicians are implementingvalue-based thinking in payment model structure and negotiations, asimilar innovation has yet to revolutionize health benefit design.And that means increasing numbers of patients who faithfully meettheir premium obligations for their employer-provided orexchange-purchased health plans yet can't afford vital medicationsor physician-recommended screenings.

“There is growing momentum regarding a shift from volume tovalue on the payment reform side,” Fendrick says. “The move awayfrom fee-for-service to quality-based payment programs isencouraging. But I am greatly concerned that the rapidproliferation of insurance plans with higher co-payments anddeductibles is making it harder for consumers to access the sameservices that value-based payment models are using to benchmarkdoctors.”

He offers an eye exam for a patient with diabetes as anexample.

“As a primary care physician, I am provided a bonus based on myeye exam completion rate for my patients with diabetes,” Fendrickexplains. “As I strive to practice high-quality care, it makes nosense to me that a diabetic patient enrolled in certainhigh-deductible health plans has no coverage for an eye exam andother guideline-recommended services until the deductible for theyear has been met.”

And an eye exam is far from the only (or most significant)non-deductible-exempt expense that a patient with diabetes mightnot be able to afford – there are medications to fill,smoking-cessation and weight loss programs, and other servicesthat, when offered to these specific patients, could eliminatemillions of dollars of future health care expenditures.

Although a plan with V-BID elements is not yet accessible forall Americans, Fendrick notes that substantial progress has beenmade regarding the adoption of clinically nuanced plan designssince he and Chernew first published the V-BID concept more than adecade ago.

“One of the most popular aspects of Obamacare, or the PatientProtection and Affordable Care Act, is the elimination of consumercost-sharing for specific preventive care such as immunizations andscreening for cancer, depression, HIV and diabetes,” he says. “Thisis nuanced coverage. Although they might not be aware of the term'clinical nuance,' all health plans are already implementingvalue-based insurance design since they now must provide coloncancer screenings, PAP smears and other preventive care at no costto specifically defined patient groups.”

Fendrick says that employers should be excited about theprospect of value-based insurance based on the accumulatingpublished evidence.

First, “if you allow consumers to pay less for something,they'll buy more of it,” he points out.

V-BID programs that lower consumer out-of pocket costs have beenshown to modestly increase adherence – between 3 percent and 13percent, depending on the size of the subsidy, the populationstudied and how effectively the program was communicated, amongother factors.

“Under no circumstance should those gains be perceived as apanacea to our adherence problems,” Fendrick cautions.

“Second, the V-BID programs are a welcome give-back in anenvironment of take-aways,” he continues. “As consumers are askedto pay more for everything, lower out-of-pocket costs are somethingthat I believe brokers and employers can market well, even if theV-BID coverage enhancements are relatively small. Third – mostwell-designed V-BID programs for common chronic diseases do notincrease total costs. While cost savings are unlikely to occur forseveral years, we do produce more health at the same price. It'slike flying first-class for the price of a coach ticket. Theseprograms may not be big price-savers – nor were they ever intendedto be. If you need savings in the short term, it is necessary tocouple V-BID cost-sharing reduction 'carrots' with increases incost-sharing for low-value services 'sticks'. We have developedtools to assist with these tradeoffs.”

Breaking economic barriers

Last, Fendrick notes that the populations that benefit most fromvalue-based insurance plans are those individuals who areeconomically vulnerable or those who are dealing with multiplechronic diseases.

“We're very pleased to know that V-BID is one of many availabletools that can be used to help reduce the well-documenteddisparities in health care that exist among socioeconomic levels,”he says.

In addition to the lack of clinical nuance in the health carespace, there have been other obstacles to implementing V-BIDprinciples. High-deductible health plans, which have beenskyrocketing in popularity, almost universally lack the nuance thatvalue-based insurance design demands, and health savings accountplans cannot cover high-value secondary services because theInternal Revenue Service “safe harbor” rule does not allowfor making such services deductible exempt – so at the moment, aV-BID/HSA hybrid plan is not a possibility.

“Convincing the IRS to refine the 'safe harbor' provision toallow more services to be provided as deductible-exempt is a majorinitiative for the V-BID Center and its broad, bipartisan,multi-stakeholder coalition” Fendrick says.

He calls the proposed hybrid a high-value health plan, which hehopes will one day soon be a valid consumer alternative to HDHPs.

“If successful, the Center's proposed HVHP would exempt moreessential medical services from deductibles while maintaining highdeductibles for services with little or no evidence of benefit,” heexplains. “A V-BID Center collaboration with Harvard and Universityof Minnesota researchers estimates that more than 40 millionAmericans would enroll in this type of 'smarter' high-deductibleplan.

“The evidence documenting the negative impact of higherdeductibles on access to evidence-based care will be an importantmomentum-driver for the V-BID movement,” Fendrick predicts. “As acolleague, Joseph Ditre, often reminds me, 'The one thing worsethan being uninsured is paying health care premiums and still beinguninsured.' Unfortunately, that's a predicament in which a growingproportion of Americans are finding themselves as they areenrolling in these very skinny plans with little coverage beforethe deductible is met.”

Public policy issues – such as adjusting the IRS safe harbor rule and inching V-BID ideasinto Medicare and Medicaid programs – have been front-and-centerfor Fendrick as he's worked to overcome hurdles toimplementation.

“VBID is one of the few health care ideas with bipartisanpolitical support,” Fendrick notes when referring to bipartisanlegislation to include VBID principles in Medicare Advantage plans.“As evidence is accumulated and momentum builds, brokers will beincreasingly instrumental to the dissemination of value-basedinsurance design among employer groups – and to the implementationof its use by consumers.”