July 21, 2017

Value-based insurance improves care—but it might not save money, research suggests

Daily Briefing

Research shows that value-based insurance design (V-BID) programs can help to reduce use of low-value care, but other studies suggest the decrease in costly services might not translate to lower overall health care spending, Austin Frakt reports in the New York Times' "The Upshot."

The CFO's guide to value-based purchasing

Background

Under V-BID programs, insurers offer "more generous coverage" for high-value health care services and "less generous coverage" for "services that provide little or no health benefit" as a way to decrease their use, and ultimately reduce health care spending, Frakt reports.

According to Frakt, the Affordable Care Act started transitioning the federal government toward V-BID by requiring insurers to cover more than 100 preventive health care services without cost-sharing. In addition, CMS this year launched a five-year Medicare Advantage (MA) demonstration program to test V-BID that allows MA insurers in seven states to reduce cost-sharing and increase benefits for beneficiaries with certain chronic conditions. Further, the Department of Defense in 2018 will begin a V-BID program that will reduce cost-sharing for high-value medications and services in an attempt to improve health care and outcomes for U.S. military personnel.

Some state governments and large employers also have implemented V-BID programs, Frakt reports.

Studies show V-BID reduces use of costly health care services

According to Frakt, several studies have shown V-BID programs work to increase medication use and, as a result, reduce use of other more costly health care services.

For instance, a study published in 2011 in the New England Journal of Medicine found that heart attack patients who received their medication at no cost were more likely to use the drugs than patients who had a co-payment between $10 and $25.

Similarly, a study published in 2010 in Population Health Alliance found when cost-sharing requirements were reduced patients with diabetes took their medications more regularly and ED visits and hospitalizations declined by 36 percent and by 13 percent, respectively.

Likewise, Connecticut's Health Enhancement Program—a program the state launched in 2011 for state employees that required participants to use chronic disease preventive services and high-value primary care, and reduced cost-sharing for the services—resulted in higher use of the services and medications to treat chronic conditions, and fewer ED visits.

In a different approach, a large public employer in Oregon raised cost-sharing requirements for advanced imaging services, upper gastrointestinal endoscopies, sleep studies, and some types of "overused" procedures in instances when the services' use was not determined to be medically necessary, "The Upshot" reports. A study on the changes published last year by the National Bureau of Economic Research found that total use of the services decreased by about 12 percent.

Some research shows V-BID fails to reduce health care spending

While research shows V-BID programs can reduce use of some costly health care services, other studies have shown the programs do not necessarily reduce overall health care spending.

For instance, Blue Cross Blue Shield of North Carolina in 2008 implemented a V-BID program under which the insurer reduced cost-sharing requirements for more than 700,000 enrollees for medications to treat congestive heart failure, diabetes, hyperlipidemia, and hypertension. Despite the program, the insurer's overall health care spending remained similar to other insurers' spending for patients not enrolled in a V-BID program.

Michael Chernew, an economist at Harvard University, said, "For the most part, V-BID isn't a way to save money." He continued, "What it can do is shift health care use from lower- to higher-value care," and as a result can make care more affordable for individuals who need maintenance medications and regular care (Frakt, "The Upshot," New York Times, 7/10).

The CFO's guide to value-based purchasing

CMS's Hospital Inpatient Value-Based Purchasing (VBP) Program differs from other other pay-for-performance programs: it's budget-neutral and provides an opportunity for financial gain. Hospitals that earn an incentive payment exceeding the withhold effectively earn a bonus payment, while hospitals earning an incentive less than the withhold are effectively penalized.

This research note details why you should act on VBP measures now to minimize year-over-year reimbursement reductions.

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