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VBID may have a place in healthcare reform

VBID may have a place in healthcare reform

Benefit design could work in Medicare

Policymakers looking for ways to cut healthcare costs and improve patient outcomes may have a friend in value-based insurance design (VBID), according to a recent white paper released by Avalere Health and the Center for Value-Based Insurance Design at the University of Michigan.

The healthcare reform debate in Washington, DC, the sputtering economy, and spiraling healthcare costs could prove to be the recipe that sparks government officials to test VBID in Medicare.

In fact, policymakers at Medicare and the Department of Veterans Affairs are looking at VBID. Michigan Sen. Debbie Stabenow and Rep. John Dingell (D-MI) held a briefing at the Capitol in February to discuss the concept.

In response to the growing tide, Avalere Health and the Center for Value-Based Insurance Design at the University of Michigan conducted the analysis to see whether Medicare could use the concept with its Medicare Part D beneficiaries.

A. Mark Fendrick, MD, codirector of the University of Michigan’s Center for Value-Based Insurance Design in Ann Arbor and one of the cofounders of the VBID concept, says the white paper answers legal questions surrounding discrimination and confidentiality.

Tanisha Carino, PhD, vice president at Avalere Health in Washington, DC, and coauthor of the paper, says the current Medicare structure does not take a long-term view of saving money on prescription drugs or downstream medical costs. This is especially true for prescription drug plans (PDP) that offer drug-only coverage.

Rather than raising copays and passing costs onto members, Fendrick says VBID is a “clinically nuanced” solution. “While there are major initiatives to cut, cut, cut, we have the ability to preserve the baby while throwing out the bathwater of waste and inefficiency,” says Fendrick.

VBID supporters in the commercial setting also hope that getting Medicare on the VBID train could serve as a catalyst in the private sector.

In this age of cost shifting, VBID takes a different approach than the high-deductible health plans that have become common. The concept behind VBID is to lower medication and service costs for clinically beneficial services for patients with chronic illnesses such as diabetes and hypertension.

For example, a diabetic patient doesn’t have to pay for insulin and other evidence-based diabetic drugs. Lowering or removing copays for these services and drugs removes cost barriers and makes patients more apt to comply with their medication, resulting in better outcomes. VBID addresses the objectives of cost containment and quality improvement by promoting fiscally responsible, clinically sensitive cost sharing, according to the white paper.

Marriott and Pitney Bowes, pioneers in VBID, eliminated cost sharing associated with diabetes medications and achieved positive cost and quality outcomes. However, early users have also faced barriers, such as employee backlash because some employees were charged more for their medications, while also needing the technology platform and data exchange necessary.

“Tailoring benefit design for unique needs of patients is what everybody wants,” explains Carino. “But when employers in the private sector have gone to implement this, they have faced the hurdle of the data infrastructure to identify the right people and track their progress.”

VBID advocates and policymakers think the concept could be a winner with the Medicare population. Twenty-three percent of Medicare’s 26 million beneficiaries have five or more chronic conditions, which accounts for nearly 70% of the program’s spending.

Medicare beneficiaries are more likely to have a chronic illness and take multiple medications than the commercial population. Costs can create a barrier to medication compliance for beneficiaries. On average, the Medicare Part D population takes five prescription drugs per day, and nearly 20% are not able to fill a prescription or delay filling a prescription because of cost, according to the white paper.

“You have the potential to have an even greater impact [in the Medicare population] because the sicker the beneficiary is and the more you can target a value-based insurance design, the better the outcomes are likely to be,” says Lisa Murphy, manager at Avalere Health and coauthor of the paper.

Part D could benefit from VBID

Medicare prescription drug benefits provide coverage of most outpatient drugs for Medicare beneficiaries.

Beneficiaries who choose to take part in Part D coverage can enroll in a PDP that offers drug-only coverage or select a Medicare Advantage prescription drug (MA-PD) plan that provides medical and drug benefits. As of January, 17.4 million enrollees were in PDPs and 8.8 million were in an MA-PD.

Beneficiaries in either plan are also enrolled in a medication therapy management program (MTMP) developed in cooperation with pharmacists and physicians to help patients improve medication compliance and reduce adverse events.

Another initiative that focuses on promoting better medication use for beneficiaries with chronic conditions is chronic special needs plans (C-SNP), which are for dual eligibles who are institutionalized and have severe or disabling chronic conditions.

The focus of the two programs is to promote better medication use for beneficiaries with chronic conditions, which researchers say mirror the goal of VBID.

To research whether VBID would work in Medicare Part D prescription drug benefit programs and C-SNPs, researchers explored four factors that could affect the speed and scope of implementation: the potential size of the Medicare Part D population that would be affected (using diabetes as a test case), CMS’ authority to change policy within existing statutes and regulations, requirements for implementation, and political support.

Three options are possible now

Researchers presented five options, three of which can be implemented immediately. (See Figure 12 below.) For the options that would not need regulatory changes, Murphy says VBID could get a boost from Congress and CMS if they create incentives to get insurers to try VBID.

“Even easier to implement than incentives, just positive statements from CMS encouraging plans to do this, saying that this is something CMS might look favorably on, I think would go a long way in easing concerns plans might be having about whether this would be approved,” says Murphy.

The researchers found that options 1 and 3 would affect the largest number of diabetes beneficiaries (6 million). (See Figure 13 on p. 14.)

Option 1, targeting specific drugs or drug classes, is an option CMS can implement immediately, and one Part D plan, UnitedHealthcare’s Senior Dimensions, already has a similar program. Although option 1 is doable, stakeholders and beneficiaries might object to CMS choosing which drug classes to reduce or eliminate copays. “Though it looks on the surface that it could be much easier, it’s probably politically much more charged,” says Murphy.

Option 2 is also available immediately and targets beneficiaries with high annual drug spending who may benefit from an intervention, but only three PDPs offer gap coverage for brand-name medications. Researchers suggested that policymakers may want to create new incentives to encourage more Plan D plans to test option 2.

The third option now available, option 5, targets C-SNPs and would not affect as many beneficiaries as the other two options (less than 268,000 beneficiaries). However, researchers suggested the small patient population could be the ideal first step in introducing VBID to the Part D population. CMS and policymakers could encourage C-SNPs to incorporate VBID into their benefit designs and collect data on adherence and outcomes for CMS and policymakers to review before expanding VBID to a larger Part D population.

Although options 1, 2, and 5 would not need any policy or operational modifications, options 3 and 4 would need changes. (See Figure 14 on p. 14.)

For example, reducing cost sharing for enrollees with chronic conditions or for those enrolled in MTMPs would require CMS to revise its nondiscrimination clause.

Despite that barrier, the researchers suggested that option 4 could benefit MTMP participation and enrollment and improve medication adherence. Expanding this option could also improve health outcomes and lower overall costs.

The final option, option 3, could potentially reach numerous Part D beneficiaries and save costs, but the barrier of new legislation or regulations makes this option less desirable than the others.

“There would have to be some kind of mechanism put in place to allow plans to do that,” says Murphy. “It would be easier for MA-PD to do because they would have medical claims data and they would be able to identify certain claims that correspond to the chronic condition you’re trying to target. On the PDP side, without medical claims, they would need to get that information from CMS for the fee-for-service population.”

If VBID has such potential in the Medicare population, why have insurers in Part D not tried the concept? The researchers gave three reasons:

  • Incorporating VBID in Part D could create adverse selection, meaning sicker beneficiaries could be drawn to those plans
  • Plans may believe that reducing cost sharing for some beneficiaries or drugs will cause plans to increase costs for other beneficiaries
  • PDPs, which offer drug benefits only, do not have the financial incentives because they won’t benefit from the lower medical costs

Despite those concerns, the white paper shows VBID’s potential in the Medicare population. “VBID has the potential to help Medicare into a more prudent purchaser of healthcare that meets patient needs,” Carino says. “These tools need to be considered in the context of health reform, as they map directly into the administration’s goals of improving quality and preventing compilations of illness.”

Avalere and the Center for Value-Based Insurance Design are planning a follow-up study that may test the options’ potential for cost savings, Carino says.