Transcript Options for The Michigan State University Health Benefit Plan

Options for The Michigan State
University Faculty & Academic
Staff Health Benefit Plan
Roger Feldman
Blue Cross Professor of Health Insurance
University of Minnesota
My Charge

Assess MSU’s information needs to address the
following questions:

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What options would have the best impact on health care
quality and cost for the faculty and academic staff?
What options are distractions to be avoided?
What options could be implemented quickly versus over the
longer term?
What options would have immediate versus longer term
payoff?
Options apply only to active faculty & academic staff
and dependents
Data Sources
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Consultant’s own experience
Literature review
Interviews with 4 key informants:
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Dann Chapman, Director of Employee Benefits,
University of Minnesota
Dave Haugen, Director of Center for Health Care
Purchasing Improvement, State of Minnesota
Richard Hirth, Associate Professor and member of
Committee on Health Insurance Premium Redesign,
University of Michigan
Pam Beamer, Assistant Vice President for Human
Resources, Michigan State University
Frame of Reference

All informants emphasize that their employers are
non-profit organizations (state government or
universities)

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“We are not profit-making organizations”
“We don’t make money by taking benefits away from
employees”
Health benefits are a key to attracting and retaining
employees in these organizations
The goals of health plan redesign are to reduce
costs and improve quality

Cost reduction that reduces quality is not acceptable
Key Areas for Consideration
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Optimize incentives for patients and providers
Evidence-based medical practice
Consumer-based plans
View community providers as a system
Improve the prescription drug benefit
Change the health care environment
Optimize Incentives for Patients and
Providers
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Patients:
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Disease management and wellness programs
Variable cost sharing
Convenience clinics
Better information on price and quality
Providers:
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Pay for performance
Option #1: Disease Management and
Wellness Programs

The focus of disease management (DM)
programs is to “promote recognized
standards of care through member and
physician care-supported interventions, and
to assure program effectiveness in delivering
health status improvement and cost reduction
outcomes”
JE Pope et al, Health Care Financing
Review, 2005
DM Results

Programs typically focus on patients with
chronic conditions (e.g. diabetes)
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Costs are high and predictable
Medical care with episodic, acute focus may not
achieve optimal management of chronic conditions
DM for diabetes achieved 24.7% reduction in cost
with higher quality scores for some indicators
Another diabetes intervention achieved
improvement for 6 HEDIS quality measures
Sources: VG Villagra and T Ahmed, Health Affairs, 2004;
LM Espinet et al, Disease Management, 2005
Wellness Programs
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Emphasis on changing behavior (e.g. poor diet or lack of
exercise) that may result in chronic illness
Wellness issues may not show up on medical claims
An alternative detection approach is member surveys
 University of Minnesota and Minnesota State
Employees Group Insurance Program (SEGIP)
implemented wellness surveys in 2006
 UM employees received $65 after-tax bonus for
completing the survey; State employees received $5
reduction in office visit co-payment
 Completion rates: 48% (UM), 73% (SEGIP)
Employees identified as eligible for wellness programs
may participate on voluntary basis
Wellness Implementation Issues
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Wellness surveys/programs can be up and running in 67 months
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Should dependents be allowed/encouraged to
participate?
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Some initial member concerns over confidentiality at UM
Very few complaints after program was initiated
High degree of employee acceptance at UM and SEGIP
UM dependents can take the survey but there is no reward and
very few took it
SEGIP does not have dependent participation at this time
Dependent participation would require additional financial
incentives
The next big thing: discounts for health club membership
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Key issue: what is the return on investment?
Wellness Implementation Issues, cont.
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Who should conduct surveys and administer
wellness programs?
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UM uses outside vendors for survey (Staywell) and
programs (Harris Health Trends)
 Health plans were competitors and unhappy losers
SEGIP lets plans run their own surveys and programs
 No griping from plans - but this approach may
involve loss of uniformity and ability to analyze the
results
Option #2: Variable Cost Sharing
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Cost sharing in health insurance is important
because it provides an inventive for patients to
consider the cost of care when making decisions
Michael Chernew (“A Benefit Based Co-Pay,”
Harvard University working paper, 2006) has
proposed that cost sharing be targeted to maximize
benefits:
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It should be lowest for services where consumer
demand does not respond strongly to price
It should be highest on the margin where incentives
matter
Examples of Variable Cost Sharing
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Hypothetical examples:
 Cost sharing for cancer drugs or kidney dialysis should
be very low because consumer demand is
unresponsive to price
 “where expenditures are large because of serious
illness and there there are multiple clinically acceptable
treatment options, cost sharing should be modified so
that it only applies on the margin where care seeking
decisions are being made” (Chernew, p. 6)
Actual examples:
 University of Michigan M-Care HMO waived cost
sharing for diabetes medicines
 Destiny Health (see consumer-based health plans)
covers chronic medications so members don’t need to
pay from their health care spending accounts
Problems with Variable Cost Sharing
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What if a service is used mainly by higher-income
workers, who may be less sensitive to price than are
lower-income workers?
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Higher-income workers, on average, might wind up
paying less cost sharing than lower-income workers
Administrative complexity
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Some therapies are used for different conditions
Dann Chapman is worried about patient ‘pushback’ if
the same therapy had different coverage depending
on how it was used
Option #3: Convenience Clinics
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Both UM and SEGIP recognize the
advantages of convenience clinics, staffed by
nurse practitioners and physician assistants
who are qualified to evaluate, diagnose and
prescribe medications for simple illnesses
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Users receive $5 reduction in office visit copayment
State employees can combine this with $5
reduction for completing wellness survey
Convenience Clinics: Brief Facts
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Cost ~ $50-$60 (1/2 of office visit cost, 1/3 of urgent
care visit, ¼ of ER visit)
Sore throat accounts for 40% of visits to Minute
Clinics, followed by ear infections and bronchitis
About 40% of patients are kids, 60% adults
Convenience and cost are the key factors to users
High degree of user acceptance
Can be implemented easily
It’s up to patients to determine if referral doctors are
in their provider network
Option #4: Better Information
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Information on quality and price is a critical –
but untested – component of the ‘consumer
activation’ strategy
Sponsors are struggling to take the first steps
to provide information, but we have to
compare progress to the current state of
affairs, not to an ideal world
Quality Information: MN Community
Measurement
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A nonprofit organization that monitors how
well physician groups deliver preventive care
and manage a variety of health conditions
SEGIP members can find quality ratings
including process and quality of care
Program started in 2006
There were 30,000 ‘hits’ on the website
during open enrollment
Quality Information: Wisconsin
Collaborative for Healthcare Quality
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A consortium of physician groups, hospitals,
health plans and labor organizations
Quality information is available on physician
groups, hospitals, and health plans
Example: Percent of women who had
postpartum medical visit ranged from 64% to
94% by medical group
Price Information
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Humana Inc. lets 44,000 members compare
prices for 30 inpatient and six outpatient
operations at most Milwaukee-area hospitals
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Plan was put together for Business Health Care
Group of Southeast Wisconsin
Price for colonoscopy ranged $940-$1,150 at low-cost
hospital to $2,890-$3,530 at high-cost hospital
Source: Milwaukee Journal-Sentinel, February 23,
2006
A similar program is being run by the Medica
health plan in Minneapolis
Next Step: Information on Price and
Quality
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The long-term goal is to provide meaningful
price and quality information to enrollees
Makes sense only if enrollees have incentive
to use providers that offer lost cost and high
quality
Overall importance: high
Payoff: long-term
Option #5: Pay for Performance
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Payments to providers typically have been
independent of quality
Fee-for-service reimbursement may even
discourage quality
‘P4P’ systems link payment to quality
measures at the individual provider, clinic
site, or group level
Does P4P Improve Quality?
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Laura Peterson et al (Annuals of Internal Medicine,
2006) reviewed the literature:
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5 of 6 studies assessing quality rewards for individual
physicians show improvement on one or more quality
measures
7 of 9 studies of group rewards reach similar
conclusions
But the effects may be small, especially when
incentives are directed at the group rather than the
individual doctor, when the rewards are small, and
when providers are paid by multiple payers
Examples of P4P Effects
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Rosenthal et al found small improvement
(3.6% difference) in rates of cervical cancer
screening after a group incentive program
Fairbrother et al randomly assigned 60
physicians to a control group and several
incentives e.g. $1,000 for 20% improvement
in pediatric immunization rates
The bonus group rate improved 25.3% but the
difference versus controls was not significant
Sources: MB Rosenthal et al, JAMA, 2005; G
Fairbrother et al, AJPubH, 1999
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Bridges to Excellence
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A national, purchaser-led program for rewarding
performance excellence among physicians
Minnesota SEGIP implemented diabetes care
program through Bridges:
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5 indicators for optimal care: HbgA1c < 7, LDL < 100,
Blood pressure < 130/80, non-smoker, aspirin for
patients over 40
Providers receive $100 per patient for ‘superior
performance’ (>10% of patients meeting standards for
optimal care at the group level)
Group average = 6%
No evaluation results at this time
P4P Implementation Issues
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Most P4P programs focus on process-of-care goals
rather than outcomes
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Some evidence suggests that P4P improves
documentation but not actual performance
Suggested approach: combine process goal
(documentation of smoking cessation advice) with
outcome (quit rate)
P4P may encourage ‘dumping’
Should you pay for achieving absolute performance
goals, performance improvement, or for each patient
achieving the goal?
Evidence-based Medical Practice
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Build an evidence-based medical plan
Centers of excellence
Option #1: Build an Evidence-based
Medical Plan (EBP)
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Many therapies are overused or have
questionable benefits

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The rate of back surgery in the U.S. is almost 40%
higher than in any other developed county
Across countries, the rate of back surgery increases
almost linearly with the number of neurosurgeons
Medicare patients in Fort Myers FL are twice as likely
to have back surgery as those in Miami, without
objective indicators that they need more surgery
Sources: GM Gaul, Washington Post, July 24, 2004; DC
Cherkin et al, Spine, 1994
Back Surgery, continued
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Nationally, 300,000 patients per year have surgery
to relieve the symptoms of sciatica (ruptured disk
impinging on the root of the sciatic nerve causing
leg pain)
A 2-year study compared waiting and back surgery
for 2,000 patients with sciatica
There was no difference in outcomes, although
surgery appeared to relieve pain more quickly
Source: JN Weinstein et al, JAMA, November 2229, 2006
Principles for Building an EBP
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Only cover treatments that work
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Require at least one peer-reviewed study showing
that treatment is effective
When treatment works for some people, establish
an objective probability threshold for effectiveness
Can be combined with variable cost sharing
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Provide 100% coverage for evaluation and
management of back pain, but require cost
sharing for surgical intervention
Obstacles to Building an EBP
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The same procedure may work on some
patients but not others
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Specifying the rules for coverage would be
complex and possibly confusing
‘Managed care backlash’ – patients don’t trust
health plans to make decisions in their best
interest
Likely resistance from providers
First Steps in Building an EBP
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Start with a small number of procedures for
which there is no scientific evidence of
effectiveness
Get physicians to make the coverage
decisions, then publicize them very clearly to
members
Long-term horizon for both implementation
and payoff
Option #2: Centers of Excellence
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100%
Quality differs
95%
significantly among
90%
providers
85%
Quality is often
80%
associated with
75%
70%
volume
65%
Survival after liver
60%
transplant at Mayo
1 mo. 1 year 3 year
Clinic vs. national
Source: Liver transplant volumes and
data
statistics for Mayo Clinic
Mayo Clinic
National
Centers of Excellence
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Some employers and the federal government
are interested in this idea
Advance Health Advisors is working with
HealthPartners HMO in Minneapolis to
identify centers of excellence for bariatric
surgery
Plan is to come up with a ‘short list’ and then
explore direct contracting with these centers
and/or patient incentives to use them
Centers of Excellence: Information
Needs
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How to select centers?
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Quality only (best quality)
Price and quality (best buy)
Will the proposed centers provide adequate
access to services for MSU employees?
Can MSU work with health plans to contract
with the proposed centers?
Medicare Coverage for Bariatric Surgery
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Effective February 12, 2006, Medicare covers
bariatric surgery, but only if the patient has a
complicating problem (e.g. diabetes) and only if
the procedure is performed in a facility that does
a large number of procedures and has highly
qualified surgeons
Selection based on quality: Medicare recognizes
certification programs of the American College of
Surgeons and the American Society for Bariatric
surgery
Certified Bariatric Centers in MI
Center
Number of Surgeons
Harper University Hospital,
Detroit
2
Henry Ford Hospital, Detroit
2
Spectrum Health – Blodgett
Campus, Grand Rapids
3
Port Huron Hospital, Port
Huron
2
Source: Surgical Review Corporation
Additional Complication: Risk Selection
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EBP is not a ‘one size fits all’ model
EBP would have to be offered as a choice
along with traditional health plans
If past evidence from HMOs is a guide, EBP
would attract healthy (or at least compliant)
enrollees
MSU would have to adjust payments to plans
to reflect lower risk in EBP and higher risk in
other plans
Consumer-based (High Deductible)
Health Plans
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What are they?
Who chooses them?
Do HDHPs experience favorable selection?
Are HDHPs bad for the chronically ill?
Do HDHPs control costs?
Why offer a HDHP?
‘Classic’ HDHP Model – Definity
Health Tools
Health
and Resources
Health Tools and Resources
• Care management program
• Internet enabled
$$
Definity
Health
Care
Advantage
Annual
Deductible
HRA
Preventive Care 100%
Health Coverage
• Preventive care covered 100%
• Annual deductible
• Expenses above deductible
covered at 80-100%
Health
Coverage
Annual Deductible
Health Reimbursement Account
(HRA)
• Employer allocates $$$ to HRA
• Member directs HRA
• Account rolls over at year-end
• Account does not belong to employee
Web- and
PhoneBased
Tools
The HSA Model
An HSA is a special account
owned by the individual where
tax-free contributions to the
account are used to pay for
current and future medical
expenses.
HSAs offered by UnitedHealth,
the Blues, Aetna (w/preventive
meds), Cigna, Humana, and
Kaiser Permanente
Annual Deductible
Bush Administration has
proposed refundable tax credits
for individuals to purchase
plans with HSAs
$$
Annual
Deductible
HSA
Preventive Care 100%
Used with High Deductible
Health Plan (HDHP)
Health
Coverage
Who Chooses HDHPs?
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Strongest and most consistent evidence:
HDHPs are preferred by highly-compensated
employees
A large employer that offered a PPO and
POS plan introduced an HRA plan in 2001
38% of employees choosing the HRA had income
above the firm’s 75% percentile
 19% of POS and 29% of PPO enrollees were
above the 75th percentile
Source: ST Parente, R Feldman, and JB
Christianson, Health Services Research, 2004

Do HDHPs Experience Favorable
Selection?
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When the University of Minnesota offered an HRA in
2002, there was no evidence of favorable selection
(Parente, Feldman, and Christianson, HSR, 2004)
In the large employer previously mentioned, HRA
enrollees had lower baseline illness burden than PPO
and POS enrollees
In our largest sample of 80,000 covered lives in 3
employers, there is evidence of mild unfavorable
selection against HRA plans
HSA may experience favorable selection because
healthy employees see account as tax-preferred saving
Are HDHPs Bad for the Chronically Ill?
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Short answer: No
Employees with chronic illness are equally likely as other
employees to join a HDHP, to understand key plan
coverage features, and to report having a particularly
positive or negative experience with their plan
HDHP enrollees with chronic illnesses assign higher
ratings to their plan than do other HDHP enrollees. They
are more likely than other HDHP enrollees to use
informational tools (p<.05), more likely to anticipate
spending all of their savings account dollars (p<.05), and
more likely actually to spend more than the deductible.
Source: Parente, Christianson, and Feldman, Disease
Management and Health Outcomes, forthcoming
Do HDHPs Control Costs?
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HDHP cohort had
initial favorable
selection vs. PPO
and POS
But the cost
difference
disappeared by 2nd
year
2003 saw
continuation of
unfavorable trend
$9,000
$8,000
$7,000
$6,000
$5,000
$4,000
$3,000
$2,000
$1,000
$0
HDHP cohort
PPO cohort
POS cohort
2000 2001 2002
prior
year
Sources: Parente, Feldman, and Christianson, HSR, 2004; Feldman, Parente,
and Christianson, Inquiry, forthcoming
Design is Important
The HDHP in this study had very generous benefits:
Coverage
Employer
Contribution
Gap
Coinsurance
Above Gap
Single
$1,000
$500
0%
2-person
$1,500
$750
0%
Family
$2,000
$1,000
0%
Why offer an HDHP?

Dann Chapman is not convinced that “there is
any silver bullet” in HDHPs
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However, a minority of employees may want this
choice
HDHPs can drive consumer engagement
Dave Haugen: SEGIP unions don’t like HDHPs

But they could be an “elegant way to design a
health plan” if the size of the employer’s
contribution were linked to enrollee behavior
change
Designing a HDHP to Change
Employee Behavior
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In 2008, Ridgeview Medical Center in
suburban Minneapolis will begin paying
$50/month extra into HSA accounts for
employees who:
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Stop smoking as verified by regular testing; or
Discontinue use of lipitor and control cholesterol
through diet, exercise and stress management
Bonus is about equal to single employee’s
monthly out-of-pocket premium
Payments may continue up to 18 months
View Community Providers as a System
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Eliminate wrong surgery
‘Get it right’ the first time – reduce drug
prescribing errors
Option #1: Eliminate Wrong Surgery
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Wrong surgery’ (wrong site, wrong procedure
or wrong patient) was identified as a problem
by a consortium of Minneapolis hospitals,
Mayo Clinic, and the Institute for Clinical
Systems Improvement (ICSI)
Objective: eliminate wrong surgery
Structure: semi-annual CEO group meeting;
monthly operations meeting; and safe site
collaborative with ICSI providing support
Some Preliminary Results
45
40
35
30
25
20
15
10
5
0
Wrong rate /
million
surgeries
05
20
04
20
03
20
e
02 lin
20 ase
b
01
20
Source: G Mosser, “On the
Road to Right Surgery:
Illustrations of
Organizational Change,”
University of Minnesota
working paper, May 8, 2006
Barriers to Improving Health System
Performance
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Payoffs may be significant but progress to date has
been slow and difficult

Lack of standard protocol

Limited engagement of CEOs

Inadequate means for achieving focus within hospitals

Autonomy of surgeons

Economic threat to hospitals
For further information, consult Dr. Gordon Mosser,
University of Minnesota
Option #2: Reduce Drug Prescribing
Errors

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Medication errors harm at least 1,500,000 people
each year and may kill 7,000, according to the IOM
(National Academies News, July 20, 2006)
Costs of treating medication errors in hospitals alone
are at least $3.5 billion per year
Computerized provider entry order (CPOE) can
reduce medication errors by 55%, according to DW
Bates et al, JAMA, 1998
Adoption of CPOE is lagging, especially in small
physician practices
Strategies to Reduce Drug Errors

Patient incentives to use ‘Leapfrog’ hospitals

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Leapfrog is a buyer-driven initiative that rates
hospitals according to several quality criteria,
including CPOE
Provider incentives to adopt CPOE


Estimated to cost about $.50 to $1.00 per member
per month based on 2,000 patient panel (Robert
Wood Johnson Foundation, Achieving Electronic
Connectivity in Healthcare, 2004)
Requires collaboration with health plans to identify
physician practices meeting criteria for subsidy
Improve Prescription Drug Benefit


Generic substitution
Buy Canadian
Option #1: Generic Substitution

MSU adopted 3-tier tiered pharmacy plan in
2002 and 4 tiers in 2006

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69% of covered workers have 3-tier benefits,
according to the Kaiser Family Foundation
Generic dispensing rate increased from about
35% in 2001-02 prior year to about 50% in
2006-07
This is good progress but the plan could do
more to encourage generic substitution
Generic Substitution at UM





University of Minnesota requires employees
and dependents to pay the full marginal cost
of a brand name drug if a generic is available
Generic prescription rate increased from 46%
in 2005 prior year to 61% in 2006
Projected savings = $2-3 million (6.7-10%)
Actual savings = $4-5 million (13.3-16.7%)
There is a medical necessity ‘escape clause’
and no major user complaints have surfaced
Option #2: Buy Canadian


“Minnesotans deserve affordable prescription
medicine” – Governor Tim Pawlenty
‘Minnesota Advantage Meds’ program



State employees who order drugs from a list at a
Canadian pharmacy pay zero co-payment
The State will reimburse the pharmacy
Top 4 drugs used by MSU enrollees (lipitor,
prevacid, singulair, nexium) are on the list
Buy Canadian Results


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Between May 13 and July 31, 2006, 13,507
Canadian orders were placed
$103 savings per prescription - $58 to
program in reduced cost; $45 to member in
waived co-payment
Still represents only 1% of the drugs
purchased by SEGIP members
For more information, visit
http://www.advantagemeds.state.mn.us/index.html
Change the Health Care Environment


Self-insurance
Encourage new statewide bidders
The Health Care Environment

Lansing is a difficult health care market

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2 main hospitals
 Most MSU doctors practice in both hospitals
 Very difficult to make them available on different terms
 Impossible to exclude either hospital
Provider-owned health plan (PHP) historically has been fully
insured
 MSU has pushed PHP to offer self-insured product
 PHP is in process of doing this
MSU operates under political constraints


Must offer a statewide health plan at multiple campuses
Only qualified bidder is Blue Cross, a non-restrictive PPO with
almost every hospital and doctor participating
Option #1: Continue the Push for SelfInsurance

According to Dave Haugen:



Self insurance is more flexible than full insurance
The employer doesn’t pay a premium to the
insurers
Above all, the employer owns its data
University of Minnesota Experience

Health plans initially objected to data release


Primary fear was that UM would ‘reverse engineer’ the
claims to figure out plans’ fee schedules
Dann Chapman’s advice:




Be proactive – tell plans how you intend to use the
data
Address plans’ specific concerns (e.g. over fee
schedule information)
Discuss proposed new uses for data (e.g. profiling
physicians) with plans
But “hang tough” because you own the data
Option #2: Encourage New Statewide
Bidders

UnitedHealth Group (the previous
administrator for PHP) had a ‘non-compete’
agreement but has severed that relation and
is now in a position to bid for statewide
coverage


UnitedHealth Group has a nationwide network of
participating doctors and hospitals
Aetna is also a potential bidder for statewide
coverage
Concluding Comment: Use Local Talent





Prior to 2003, the University of Michigan offered a
choice of health plans and contributed 100% of the
single coverage premium regardless of plan cost
Provost appointed committee chaired by SPH
professor with other highly-regarded faculty
members
Committee recommended that University make a
fixed contribution based on premiums of two lowestcost comprehensive plans
University adopted Committee’s recommendations
This was a smart move (see JP Vistnes, PF Cooper
and GS Vistnes, Int J Health Care Finance &
Economics, 2001)