A Value-Based Solution for Medicare

Les Masterson, for HealthLeaders Media, March 18, 2009

Healthcare reform discussions have focused mostly on covering the uninsured, but as Massachusetts has found out, a major reform package without cost controls is simply punting the larger problem.

The Bay State is facing that issue now as health leaders look for ways to control costs that threaten to cripple the reform effort. Massachusetts has discovered that extending coverage to more people is the easy part of healthcare reform—the real problems come when it's time to talk cost controls.

Federal lawmakers are exploring one idea that has been tested in the commercial setting as a way to both cut long-range healthcare costs and improve patient outcomes. Value-based insurance design (VBID) takes quite a different approach than what has become common in these cost-shifting days of high-deductible health plans. The concept of VBID is that lowering medication and service costs for clinically beneficial services for patients with certain chronic illnesses, such as diabetes and hypertension, will remove cost barriers, and improve compliance and patient outcomes.

One example is a health plan that removes copays for evidence-based diabetic drugs. VBID addresses both the objectives of cost containment and quality improvement by promoting fiscally responsible, clinically-sensitive cost sharing.

VBID has been successful in the commercial market. Early pioneers of VBID, such as Marriott and Pitney Bowes, have cut costs to diabetes medications, and achieved positive cost and quality outcomes.

UnitedHealthcare is also testing VBID in the self-insured (large employer) market with its Diabetes Health Plan. Diabetics and pre-diabetics who follow their treatment plans and evidence-based guidelines receive incentives, such as free services and medications, online monitoring, wellness coaches, and self-management programs. VBID has been successful in the commercial setting, but the concept can also have a place in a public program, such as Medicare, says one of the creators of the concept: A. Mark Fendrick, MD, co-director of the University of Michigan's Center for Value-Based Insurance Design in Ann Arbor.

"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," he says about VBID.

Some policymakers agree and are looking at the option for both the Medicare and the Department of Veterans Affairs populations. In fact, Sen. Debbie Stabenow and Congressman John Dingell held a briefing at the Capitol to discuss the concept last month. VBID advocates and policymakers think the concept could be a winner in the Medicare population because of the chronic illness epidemic. 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.

Costs can create a barrier to medication compliance for beneficiaries. 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 a recent white paper by Avalere Health and the Center for Value-Based Insurance Design at the University of Michigan that analyzed whether VBID could be used within the current Medicare Part D structure.

Policymakers could immediately implement VBID in both Part D, which provides prescription drug benefits coverage of most outpatient drugs, and chronic special needs plans, which cover dual eligibles—those who are institutionalized and have severe or disabling chronic conditions.

Researchers said the two public programs and VBID have the same goal: promote better medication use for beneficiaries with chronic conditions.

They tested five options and found that Medicare could implement three of the options now:

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

Though the research shows that Medicare could implement VBID, there are still questions as to whether it would work in the senior population. However, the recipe of spiraling costs, a sputtering economy, and the need for major healthcare reform is just the combination that should spark government officials to test VBID in Medicare.

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