Bill Would Test Value-Based Insurance in Medicare

HealthLeaders Media Staff, May 15, 2009

Legislation filed yesterday would create a demonstration project to test whether value-based insurance design can work in the Medicare population.

Trumpeted by employers and health plans as a way to both improve patient outcomes and lower long-term health costs, VBID lowers or eliminates copays for high-value prescriptions and treatments, such as medication for diabetes, asthma, and heart disease. The concept follows the logic that removing cost barriers will help at-risk patients follow their prescription regimens and not postpone doctors' appointments because they can't afford the care.

The bipartisan legislation was filed by Sen. Kay Bailey Hutchinson (R-TX) and Sen. Debbie Stabenow (D-MI). Hutchinson says the federal government has lagged behind the private sector in adopting VBID strategies.

"Value-based insurance design has the power to truly bend the healthcare cost curve in the right direction. By taking practical steps to lower healthcare costs and improve health, we can make insurance more affordable for all Americans. Ultimately, that is the single most important goal of healthcare reform," says Hutchinson.

VBID pilot programs have been successful in the commercial population. Pioneers in the VBID movement, Marriott and Pitney Bowes, eliminated cost sharing associated with diabetes medications and achieved positive cost and quality outcomes.
While many health insurers and employers have increased copays and created high-deductible plans as a way to lower their healthcare costs, VBID supporters say the concept is a more forward-thinking way to tackle spiraling costs.

One of the creators of VBID, A. Mark Fendrick, MD, who is co-director at the University of Michigan's Center for Value Based Insurance Design, says, "Cost containment efforts should not lead to preventable decreases in quality of care. The inclusion of value based design into the Medicare program will show that an approach that encourages the increased use of high-value medical services will produce more health for every taxpayer dollar spent."

Could VBID work in Medicare?

A recent white paper by Avalere Health and the Center for Value-Based Insurance Design suggested that the government could implement VBID in Medicare. VBID addresses both the objectives of cost containment and quality improvement by promoting fiscally responsible, clinically sensitive cost sharing, according to the white paper.

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

Medicare beneficiaries are more likely to have chronic illness than the commercial population and more apt to take multiple medications.

Costs can create a barrier to medication compliance for beneficiaries. In fact, the Medicare Part D population takes five prescription drugs per day on average and nearly 20% of them 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 in Washington, DC, and coauthor of the paper.

The researchers reviewed five options for Medicare and found that three of them can be implemented immediately with minor operational changes:

  • Reduce cost sharing for specific drug or drug classes
  • Exempt specific drugs or drug classes from 100% cost sharing in the coverage gap
  • Reduce cost sharing for chronic special needs plan enrollees based on the plan's target condition

The other two options that were reviewed would require policy changes, such as CMS revising its non-discrimination clause to allow for reduced cost sharing for enrollees with chronic conditions or reducing cost sharing for enrollees in Medication Therapy Management Programs.

Tanisha Carino, PhD, vice president at Avalere Health in Washington, DC, and co-author of the paper, says her research shows VBID's potential in the Medicare population. She says VBID has the potential to help make Medicare a "more prudent purchaser of healthcare that meets patient needs. 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 complications of illness."

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