Transcript Matching the Method to the Message

Value Based Insurance Design
Michael Chernew
Feb 22, 2008
Portions of this research were funded by Pfizer and GSK.
Two Concerns
High (and rising)
Poor Quality
Costs
Premiums rose 87%
since 2000*
Response:
About 50% of time
appropriate care is not
delivered**
• Raise Copays
Response:
• Up 70% 2000 to 2005
•
Disease Management
•
P4P
*Kaiser Family Foundation/HRET: www.kff.org/insurance/ehbs092606nr.cfm
**McGlynn et al The quality of health care delivered to adults in the United States. N Engl J Med 2003;348(26):2635-45
*** www.kaiserfamilyfoundation.org/insurance/7315/sections/upload/ehbs2005slides.pdf
Cost sharing reduces use
$0 to <$10
$10 to <%20
>%20
Ellis JJ. J Gen Intern Med 2004;19:639-646.
Consumers do not respond to cost
sharing as economists would like
Reductions in appropriate use same as
for inappropriate use (Sui et al. 1986)
– Lack of coverage is associated with worse
outcomes
Effects concentrated on poor and chronically ill
– Copays reduce use of preventive services
– Copays reduce use of ‘valuable’
pharmaceuticals
Value Based Insurance Design
Reduce (or keep low) copays for high
value services
– For high value patients
Sources:
Fendrick, et. al American Journal of Managed Care, 2001
Chernew. et al. Health Affairs. 2007
Chernew. et al. Health Affairs. 2008
Copays Within and Outside of Disease
Management
percent of enrollees
60.0%
50.0%
40.0%
Not DM
DM
30.0%
20.0%
10.0%
0.0%
0
<5
5 or 7
10
>10
copay amount (preferred branded)
Source: Chernew, M.E., Rosen, A.B., Fendrick, A.M. “Rising out-of-pocket Costs in Disease Management Programs”. American Journal of Managed Care.
2006. 12: 150-155.
VBID Merits
Increase benefit per dollar spent in the
health care sector
Use insurance design to make
consumers behave as if they were
better informed
Allows more efficient subsidization of
low income patients
– Not all care is subsidized, only valued care
Types of VBID
Targeting
– By service
Pitney Bowes
– Targeted service AND patient group
University of Michigan
Scope
– Lower copays only
– Lower high value, raise low value
Financial Costs of VBID
Greater use of high value services
Greater employer share of spending for
high value services
– Including the services that would have been
used anyway
Administrative costs
– Depends on design
Financing VBID
Target better
– high risk patients
– highly effective services with low baseline use
– price responsive services
Offsets
– Lower costs due to fewer adverse events
– Productivity gains
Increase costs for other services
– Low value
– All others
Pass costs to employees in other ways
Saving money is not main objective
How do we finance health?
How do we enhance value?
Results from literature
Pitney Bowes
– 6% decrease in overall diabetes costs
– Savings exceeded $1 million
Asheville
– Reduced annual, per participant, total cost for
diabetes by $1,200 to $1,872
Retired public employees in CA
– 20% offset overall
– 50% in highest spenders
Source: Mahoney AJMC 2005; Cranor et al 2003; Gruber and Chandra, 2007
Evaluating a VBID Program
Intervention
A large employer lowered copays for selected
medications in January 2005:
–
–
–
–
–
Ace/ARBs
Beta Blockers
Glucose control
Statins
Steroids
Copay reductions:
– Generic:
$ 5.00  $0
– Preferred Brand:
$25.00  $12.50
– Non-Preferred Brand: $45.00  $22.50
Implementation
Implemented by an integrated care
management firm Activehealth
Management (AHM)
– Identify consumers that would benefit but
were not using meds and inform them
– Exclude individuals with contra-indications
Adherence
Effects size for MPR analysis
Effect size
(% points) Base MPR
% increase*
Take-up %**
Ace/Arb
2.59
68.37
3.79%
8.2%
Beta Blockers
3.02
68.30
4.43%
9.5%
Diabetes
4.02
69.46
5.79%
13.2%
statins
3.39
52.99
6.28%
7.1%
steroids
1.86
31.56
5.88%
2.7%
Expenditures
Perspective is key
Societal
– Treat greater employer share for inframarginal
prescriptions as a transfer (zero cost)
– Appropriate for cost effectiveness analysis
– Distributional issues dealt with separately
Firm
– Treat greater employer share for inframarginal
prescriptions as a cost
Financial impact
How much must compliance reduce nonRX costs to completely offset extra RX
spending
– Aggregate perspective: 17%
– Employer perspective: 48%
Could break even with less effectiveness
if:
– Add in productivity gains
– Add in disability savings
– Target more effectively
VBID Summary
Higher copays lead to lower spending (even with
offsets)
– Because of this copays will rise
VBID allows firms to mitigate deleterious
consequences
– Allow firms to hit a cost target in a more efficient
manner
– Part of any strategy to improve quality or decrease
costs
Targeted copay reductions will generate offsets
– May offset some or all of increased drug use
VBID cannot be perfect, but imperfect may be
better than non-existent
END