Shifting Costs onto Consumers May Create Long-term Problems

There are so many studies and surveys in healthcare that sometimes an important one gets lost in the mix—especially with the myriad health reform studies comparing the House and Senate plans.

That was the case with a study released last Friday that has ramifications not only to CMS and policymakers, but health insurers—whether they offer Medicare Advantage or not.

Researchers from Kaiser Permanente Medical Care Program and David Geffen School of Medicine at UCLA compared drug costs and adherence among Medicare beneficiaries with a standard Part D coverage gap versus those with supplemental gap coverage in 2006. Using pharmacy data from the Medicare Advantage Prescription Drug plans, researchers looked to see how the so-called Medicare doughnut hole is affecting seniors and their care.

The doughnut hole requires seniors to pick up the tab for prescription drugs once their annual drug costs reach $2,250 and until the total reaches $3,600. The belief behind the doughnut hole is that transferring costs onto the beneficiary will reduce over prescribing and force beneficiaries to make wiser healthcare decisions.

What researchers found was that Medicare beneficiaries with diabetes in the doughnut hole experienced lower drug costs (3-4% lower), but the bad news is that they had much higher out-of-pocket spending and worse medication adherence to three chronic drug classes.

These results should not surprise anyone—and shows the dangers of shifting costs onto consumers. If people need to choose between food and their blood pressure medication, everyone will side with eating.

How the Medicare Study Links to Group Health Insurance

Some insurers may see that the study involved Medicare beneficiaries and dismiss it as not pertaining to their group health insurance. Although this study targeted the Medicare Advantage population, all health insurers and employers should take note. Shifting healthcare costs to the individual will save money in the short-term, but could have long-range cost implications if the members are not following medication regimens.

There is no better example of how this cost-shifting can affect member health than high-deductible health plans. If these plans are coupled with member education and tools, they have the potential to lower costs and create more informed healthcare consumers. The problem is that high-deductible plans are often lacking in the area of member engagement and tools.

One idea gaining popularity is value-based insurance design (VBID), which removes or lowers cost barriers for those with certain chronic illnesses; the notion being that taking away the cost component will make members more likely to comply with medication regimens. While lowering costs for the most beneficial drugs and services, VBID also increases costs on medication and services that are not valuable.

For HealthLeaders Media's annual 20 People Who Make Healthcare Better, I spoke to one of the people who created the idea of VBID.

A. Mark Fendrick, MD, is co-director of the University of Michigan's Center for Value-Based Insurance Design in Ann Arbor. Fendrick says VBID can lead to averted emergency room visits and hospitalizations, and decreased costs associated with chronic disease. (Check out what else Fendrick had to say about VBID in this audio clip.)

The VBID Alternative

From the onset of VBID nearly 10 years ago, the concept has garnered the support of such innovative large employers and innovators as Pitney Bowes and Marriott. Nevertheless, most health plans and employers are still shifting costs to consumers.

"We view VBID as soft paternalism in the fact that we use the copayment and physician reimbursements to provide that financial and sometimes non-financial nudge to understand that it costs you less as the patient and makes you more money as the doctor" when there is value-based medicine, says Fendrick.

There are other examples of VBID, including UnitedHealth Group, which created the Diabetes Health Plan in its self-insured (larger employer) market, which is the first condition-specific VBID plan. UnitedHealth's plan lowers or eliminates out-of-pocket costs for medications and provides online monitoring, wellness coaches, and self-management programs for diabetics and pre-diabetics if they follow their treatment plans and evidence-based guidelines.

Fendrick also proudly says that VBID is part of the health reform discussion as value-based programs have been mentioned in legislation, including testing the idea in the Medicare population.

Fendrick says lawmakers and health leaders shouldn't merely focus on healthcare costs, but must include value to the discussion. "Cost containment should not be the sole focus of healthcare reform. We need to realize that the reason we provide health insurance and wellness programs is to produce health. As we try to contain costs, we have systemically created barriers for both clinicians and more importantly for patients to get those well established evidence-based interventions that have been clearly shown to improve health at a very reasonable cost," says Fendrick.

And that should be the case whether we're talking about Medicare Advantage, group insurance, or the individual market.