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Cutting Copays, Improving Outcomes

Les Masterson, for HealthLeaders Media, March 5, 2008
Faced with escalating healthcare costs, most health plans and employers increase copays and deductibles to bridge gaps, but growing research is showing that the reverse is actually the better alternative.

A recent study published in Health Affairs of a large employer's value-based insurance design (VBID) program showed how cutting copays for life-saving medications increases adherence. VBID supporters say the theory works: Affordable medicine increases adherence, improves outcomes, and may even save money in the long run through averted ER visits, hospitalizations, and decreased costs associated with chronic disease.

In the study, the employer reduced copays for five chronic medication classes within a disease management program: angiotensin-converting enzyme (ACE) inhibitors and angiotensin receptor blockers (ARBs), beta-blockers, diabetes medications, HMG-CoA reductase inhibitors (statins), and inhaled cortiocosteroids (steroids). And these cuts were significant. The copayment rates for generic medications went from $5 to zero. Copays for brand-name drugs were lowered by 50 percent.

The results showed increased medication adherence in four of the five medication classes and reduced non-adherence by 7-14 percent.

VBIDs have grown in popularity since Pitney Bowes blazed the trail in 2002 by reducing copayments for several classes of prescription drugs. The Stamford, CT, company reported favorable clinical results, medication compliance, and cost savings. Since those first days of VBIDs, a growing number of employers, organizations, health plans, and academics have promoted VBIDs as a solution to medication compliance problems.

I am hosting an audio conference on the topic of VBIDs on March 13 with two of the leaders in the movement, A. Mark Fendrick, co-director of the University of Michigan's Center for Value-Based Insurance Design, and Gregory B. Steinberg, MD, chief medical officer at ActiveHealth Management in New York. Fendrick and Steinberg will provide information on VBIDs, and will highlight the study in Health Affairs.

They will also talk about how a more advanced VBID program could mean greater long-range savings. A tighter VBID option that offers different copays depending on health status goes beyond the more basic programs described earlier in this column. The more sophisticated design:

  • Uses decision-support algorithms to identify people who, based on medical literature, would benefit from specific medications
  • Identifies those who are already appropriately on therapy as well as individuals who are not (but should be)
  • Notifies both the member and the doctor that the member is entitled to a reduced copay
  • Evaluates each consumer's health situation to decide copay costs, which could mean two people who purchase the same drug could pay different copays depending on health status

The tighter option needs a decision-support system to identify the right people and create an infrastructure that ties the pharmacy benefits manager to adjudicate and administer the program once the individuals are identified.

With an increasing number of studies showing the benefits of VBIDs, why have health plans been slow to join the party?

Here are three reasons:

  • The program's newness combined with a lack of detailed research
  • The potential confusion and anger that could come from creating a system with differing copays--and the education program needed to inform people and quell complaints
  • For the tighter program, the initial costs to implement the program's infrastructure scares away some insurers and pharmacy benefit managers--though long-term savings are possible
There is the possibility of great advancement in VBIDs, particularly as health plans and pharmacy benefit managers find ways to better utilize technology.

There are lingering questions about actual savings, but the literature is pointing to its potential. What's needed now is for health plans and the greater healthcare system to fund further VBID research and programs to see if the theory's potential matches reality.


Les Masterson is senior editor of Health Plan Insider. He can be reached at lmasterson@healthleadersmedia.com .

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