The Lynx Group

Value-Based Insurance Design in Oncology

July 2011, Vol 2, No 4

Philadelphia, PA—The “one-size-fitsall” approach to current benefit designs does not recognize that health services have different levels of value; such an approach, therefore, lacks incentives for patients to adhere to diagnostic tests and treatments with proven effectiveness that may help to contain costs to various healthcare stakeholders. This was the message delivered by A. Mark Fendrick, MD, Professor, Department of Internal Medicine, Department of Health Management and Policy, and Founder and Co- Director, University of Michigan Center for Value-Based Insurance Design, Ann Arbor

With current benefit designs, argued Dr Fendrick, co payments, premiums, and de ductibles are similar no matter the value of the service rendered. This misalignment of incentives fails to encourage utilization of high-value treatments and discourage utilization of low-value treatments.

By properly aligning incentives, patient outcomes can be improved at any level of healthcare expenditure, Dr Fendrick says. “If you move from current benefit design systems to one that is value-based, I could give you first class for the price of coach.”

With cost remaining the principal focus of healthcare deliberations, the “health” portion of the healthcare cost debate seems to have been forgotten, he says. “Too many are trying to drive down cost, without any consideration of the product—the health of our patients, clients, and family members,” Dr Fendrick emphasizes.

When oncologists or physician extenders are asked which health services are underutilized, they mention high-value screenings, diagnostic tests, therapies, and monitoring/follow- up tests. The probability of receiving such high-value services is no better than a coin flip for most Americans, says Dr Fendrick.

These quality gaps are costing payers: an extra $500 million is spent on healthcare because evidence-based practices are not followed. He implores all stakeholders to encourage widespread implementation of evidence- based clinical practices and to look beyond the initial cost of implementing such services.

A redistribution of $2.5 trillion spent annually on healthcare in this country could catapult the United States to number one in healthcare metrics among industrialized countries, he argues, as opposed to last—the position it now occupies.

The Rationale for VBID
“There are meaningful ways to redistribute money we have in the system to bring about more health at the price we are paying now—the motivation behind value-based health insurance design [VBID],” says Dr Fendrick.

Many previous strategies to lower costs have not lived up to their hype, he insists. Managed care and information technology have not produced the cost-savings promised, and although patient-centered medical homes are likely to improve quality of care and value, they are not likely to lower costs. Cost-sharing—how much patients pay at the point of service for various interventions—in most health plans, public and private, has been implemented in a one-size-fits-all way, meaning that every physician visit costs the same. “Whether you see the top oncologist for a treatable cancer costs the same as seeing a dermatologist for mild acne that I could barely see,” he says. “Every diagnostic test costs the same, whether it is a US Preventive Services Task Force Grade A recommended service or ‘D,’ as in dangerous.”

The same is true for drug tiers; patients pay the same out-of-pocket (OOP) amount for drugs in the same tier, regardless of their value. In some plans, all generic drugs may cost as little as $4. “There are some generic drugs I would pay my patients to take,” given the extraordinary benefit they provide, notes Dr Fendrick, whereas others in the same generic tier may have little value.

One problem with this practice is that most patients have no way to distinguish a drug that is potentially lifesaving from one that has no benefit or, in some rare circumstances, may actually be harmful. Oncologists cite similar coinsurance for drugs of different value as a major inefficiency. For example, the coinsurance for a drug that can cure a cancer is the same as for one used in a late round of chemotherapy with practically no chance for a cure.

Removing Barriers to High-Value Services
Financial hurdles to proven cancerscreening tests also create disincentives for patients. One example is the woman with multiple family members with breast cancer having to pay a high cost for a mammogram. Another is the patient with familial polyposis being asked to pay 20% of the cost of a colonoscopy. In both instances, the copayment discourages use of the screening test in populations that payers want to screen.

Consumer-directed high-deductible health plans were considered to be the answer to cost-sharing, but asking consumers to make wise choices with their healthcare options is unrealistic. “Colleagues who are physicians make terrible choices with their money regarding healthcare,” he says. As cost-sharing goes up, “people stop buying the things you don’t want them to buy, which is exactly why you should cost-share, but people also stop buying the things I beg them to do: immunizations, screening, prescription drugs, specialist visits, and necessary treatments.”

In some cases, patients are asked to share in the cost of procedures for which doctors receive bonuses, resulting in a misalignment of incentives in the system.

Charging copayments for ambulatory doctor visits had the intended effect of limiting visits, along with the unintended consequence of increasing the number of hospitalizations, thereby eating up any savings generated from fewer visits.

“Consumers are not the appropriate decision maker, particularly in a clinical area as stressful as cancer,” advises Dr Fendrick.

Where the evidence is hard and equivocal, barriers to services (through lower costs to patients) should be removed, and physicians and other providers should be awarded for the increased uptake of those services.

VBID: Incentives for Evidence- Based Services
The VBID concept is one in which value trumps cost alone. The challenge with the approach is in determining which patients derive high value from a particular intervention and which do not. “We can use VBID across the whole continuum of oncology care,” Dr Fendrick said.

“If you’re a first-degree relative of a colon cancer sufferer, you should be paid to get colon cancer screening. That’s because the evidence is strong that screening first-degree relatives not only improves health enormously, it actually lowers medical spending,” he said. “I have argued that people at age 50 should get colonoscopy for free,” because of the substantial underutilization of this test in this population.

High-cost chemotherapy is another treatment for which incentives for use are misaligned. Most health plans require the same OOP expenditure for a chemotherapy agent with multiple indications, even though its use for one of the indications can cure cancer 50% of the time, whereas its use in another indication is dubious on outcomes.

Some health plans are now recognizing the value of positive incentives and pay their doctors to perform evidence- based screening and may even pay their patients in the form of cash or lower premiums to obtain these evidence- based services.

In diagnostic testing, the use of genetic markers in some instances can lead to better targeting of therapies, while lessening the risk for potential harm by avoiding the use of an agent in patients not likely to benefit. “Why not set the patient’s copay on the likelihood of significant benefit?” he asks.

The VBID concept was included in the Patient Protection and Affordable Care Act. In December 2010, the Departments of Labor, Health, and Human Services and the Treasury issued a Request for Information on VBID and preventive care. This request sought detailed information on VBID programs in relation to the current health reform legislation to address VBID and preventive care. “We hope to see this beyond preventive services into cancer care,” Dr Fendrick concluded.

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