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A Year of Value-Based Insurance Design: 2017 Highlights
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A Year of Value-Based Insurance Design: 2017 Highlights

Since its inception in 2005, the University of Michigan Center for Value-Based Insurance Design (V-BID) has led efforts to promote the development, implementation, and evaluation of innovative health benefit designs balancing cost and quality. A multidisciplinary team of faculty, including A. Mark Fendrick, MD and Michael E. Chernew, PhD, who first published and named the VBID concept, have guided this approach from early principles to widespread adoption in the private and public sectors. The Center has played a key role in the inclusion of VBID in national healthcare reform legislation, as well as in numerous state initiatives. The basic VBID premise is to align patients' out-of-pocket costs, such as copayments, with the value obtained from health services and providers.
This article was collaboratively written by A. Mark Fendrick, MD, director of the Center for Value-Based Insurance Design (V-BID), and several V-BID Center staff. 

The year 2017 was one of uncertainty and change in healthcare, as well as sharply divided political views, but value-based insurance design (VBID) was 1 concept that consistently maintained bipartisan support. With its emphasis on clinically nuanced benefit design and applicability for both public and private payers, VBID is central to many healthcare reform efforts due to its potential to both improve outcomes and reduce costs in the American healthcare system.

As we look back on 2017, the University of Michigan V-BID Center highlights the progress that was made in value-based reform across several of the Center’s high-priority initiatives, including Medicare Advantage (MA), health savings accounts (HSAs) and high-deductible health plans (HDHPs), low-value care, precision benefit design, and defense healthcare reform.

1. Launch and expansion of the VBID Model test

The MA-VBID Model test launched on January 1, 2017, with the goal of assessing the utility of structuring consumer cost-sharing and other plan elements to encourage the use of high-value clinical services and providers for beneficiaries with specified chronic conditions. Based on the success of value-based approaches in the commercial market, the inclusion of clinically nuanced VBID elements may be an effective tool to improve the quality of care and reduce the cost of care for MA enrollees with chronic diseases.

In 2018, the model expands to 3 new states and will add 2 clinical categories before expanding again in 2019 to include an additional 15 states, allow Chronic Condition Special Needs Plans to participate, and allow participants to propose their own systems or methods for identifying eligible enrollees.

2. The introduction of “smarter” deductibles in HSA-HDHP reform

In an invited commentary in JAMA Internal Medicine, the University of Michigan’s Mark Fendrick, MD, and Harvard University’s Michael E. Chernew, PhD, who are also the co-editors-in-chief of The American Journal of Managed Care®, put forth the framework for what they call a “high-value health plan” (HVHP).

The HVHP combines the consumer-driven, market-based concepts of HSA-HDHPs with exemptions that enhance coverage for the clinical services that have been proven to benefit patients the most. This combination of consumer engagement and protections has garnered broad bipartisan and multi-stakeholder support, including from the Trump administration.

A draft executive order, entitled “Reducing the Cost of Medical Products and Enhancing American Biomedical Innovation,” that emerged in late June 2017 would update the IRS code to provide HSA-HDHPs the flexibility to offer pre-deductible coverage for services and drugs used to treat chronic diseases. Such a change would allow for the development and implementation of HVHPs. Adoption of this voluntary, clinically nuanced HVHP has the potential to mitigate cost-related nonadherence, enhance patient-centered outcomes, allow for premiums lower than most preferred provider organizations and health management organizations, and substantially reduce aggregate healthcare expenditures. The HVHP would provide millions of Americans a plan option that better meets their clinical and financial needs.

3. Passage of the CHRONIC Care Act further expands the MA-VBID Model Test

In September 2017, the US Senate unanimously passed S. 870, “Creating High-Quality Results and Outcomes Necessary to Improve Chronic (CHRONIC) Care Act of 2017,” a bipartisan bill to strengthen and improve health outcomes for Medicare beneficiaries living with chronic conditions. Among the recommendations in the “CHRONIC Care Act” is the expansion of the MA-VBID demonstration to include plans in all 50 states.

Building on the widespread support for greater incorporation of VBID principles in MA, a recent CMS Medicare Advantage Proposed Rule recommended giving plans greater flexibility around the MA uniformity requirement. This change would allow for the implementation of VBID principles throughout the MA program and ultimately provide more targeted, “higher-quality and more cost-efficient care” to MA beneficiaries.

4. Task Force on Low-Value Care identifies “top 5” low-value services

Following increasing evidence of the financial burden of low-value care on the US healthcare system, VBID Health’s Task Force on Low-Value Care  identified a “top 5” list of low-value clinical services for purchasers to target for reduction. The selected services were chosen based on their association with harm, their cost, their prevalence, and the availability of concrete methods to reduce their use. The “top 5” low-value services include:
  1. Diagnostic testing and imaging before low-risk surgery
  2. Vitamin D screening tests
  3. Prostate-specific antigen testing for men over age 75
  4. Imaging for low back pain within 6 weeks of onset in the absence of clinical warning signs
  5. Branded drug use when chemically equivalent generics are available

5. The 2018 NDAA supports precision medicine

In December 2017, President Donald Trump signed the $700 billion National Defense Authorization Act for fiscal year 2018. The defense bill includes the incorporation of VBID principles within Section 702 – Modifications of cost-sharing requirements for the TRICARE Pharmacy Benefits Program and treatment of certain pharmaceutical agents. This section sets cost sharing within the TRICARE Pharmacy Benefits Program to reflect the clinical value—not just price—of pharmaceuticals, and is another major milestone for VBID in public payers.

For more 2017 updates on VBID and the V-BID Center, view the interactive timeline below and visit our website.

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