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The American Journal of Managed Care July 2013
Healthcare's 'Big Data' Challenge
Julia Adler-Milstein, PhD; and Ashish K. Jha, MD, MPH
Previously Unrecognized Trends in Diabetes Consumption Clusters in Medicare
A. Enrique Caballero, MD; Jaime Davidson, MD; Angelo Elmi, PhD; James Gavin, MD, PhD; Kenyatta Lee, MD; Gail L. Nunlee-Bland, MD; Farhad Zangeneh, MD; and Gary A. Puckrein, PhD
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Change in Claims-Based Diabetes Medications Is a Diabetes Improvement Indicator
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Encouraging Value-Based Insurance Designs in State Health Insurance Exchanges
Christine Buttorff, BS, BA; Sean R. Tunis, MD, MSc; and Jonathan P. Weiner, DrPH
The Patient-Centered Medical Home in the Veterans Health Administration
Ann-Marie Rosland, MD, MS*; Karin Nelson, MD, MSHS*; Haili Sun, PhD; Emily D. Dolan, PhD; Charles Maynard, PhD; Christopher Bryson, MD, MS; Richard Stark, MD; Joanne M. Shear, MS, FNP-BC; Eve Kerr, MD
Early Results From the Hospital Electronic Health Record Incentive Programs
Julia Adler-Milstein, PhD; Michael F. Furukawa, PhD; Jennifer King, PhD; and Ashish K. Jha, MD, MPH
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Simone Crespi, MPH; Matthew Kerrigan, PhD; and Vipan Sood, MBA, MRPharmS, RPh
Physician Assistants and Their Intent to Retire
Jennifer Coombs, PhD, MPAS, PA-C; Roderick S. Hooker, PhD, MBA, PA; and Kim Brunisholz, MST

Encouraging Value-Based Insurance Designs in State Health Insurance Exchanges

Christine Buttorff, BS, BA; Sean R. Tunis, MD, MSc; and Jonathan P. Weiner, DrPH
Encouraging Value-Based Insurance Designs in State Health Insurance Exchanges
There is some precedence for state involvement in valuebased service determination. For its state-sponsored insurance programs, including Medicaid, Oregon compiles a detailed list of services it deems of high value, and covers as many of the services as possible with the funding allotted in a given year (Table 1). The Oregon Health Plan ranks medical services “in a way that represents the comparative benefits (ie, clinical effectiveness and cost-effectiveness) of each service to the entire population to be served.”27

Oregon’s 11-member Health Services Commission has an established process for selecting covered services, starting by ranking clinical areas from highest to lowest benefit. Common treatments and procedures are assigned to the clinical categories ranging from maternity and newborn care (category 1) to “inconsequential services” (category 9).28 These categories are then combined with a series of metrics to derive an overall score: clinical effectiveness, population impact measures, the need for the service, and the net cost (Figure).

Having a state agency regulate VBID for private insurers is a politically tough option as there are substantial technical and analytic challenges associated with identifying both highand low-value services. The US Department of Labor recently held an open comment period on VBID, and many patient groups, disease-specific advocacy organizations and even local health departments voiced concerns that VBID would be used as a way to limit access to medically necessary services.29

Decisions over the appropriate services to include as high or low value are not without controversy. For example, the USPSTF recently recommended delaying regular mammograms for women until after age 50 years due to the high rate of false positives.30 This could leave many women facing higher copays on mammograms conducted at earlier ages in a VBID policy. Oregon’s solution to the change in recommended screening frequency was to cover mammograms for all women aged 40 years and over if the physician advised it. After age 50 years, the state suggested that mammograms should be done every 2 years.31

There are several drawbacks to setting up a similar process elsewhere. The first is in timing. Oregon developed its method over a decade and a half, making it difficult to replicate elsewhere in a short period of time.27 There are also potential adverse consequences for states deciding to maintain small group or individual markets outside of the exchanges. Requiring some plans to offer certain services for free could raise the cost, forcing some people out of the exchange. However, the subsidies offered to lower premiums would likely make this result unlikely. More importantly, in order to curb any adverse selection in the exchanges, health plans are required to have similar premiums for similar coverage in and outside of the exchange.1

Alternative 2: Require Insurers to Design Their Own VBID Plans

Another approach to promote VBID would be to require HIE-participating plans to offer insurer-created value-based designs. The major advantage of this option is allowing flexibility for insurers. In the Department of Labor’s open comment period on value-based designs, the Blue Cross Blue Shield Association commented that because the field is still emerging, insurers need the flexibility to innovate.29 Researchers at the University of Michigan’s Center for Value-Based Insurance Design also urge flexibility, arguing that mandating too many benefits could limit an insurer’s ability to offer plans in the lower-cost bronze tier.32 If insurers were required to offer too many benefits free of charge (as in Alternative 1), then it could be very hard for the insurer to offer the basic benefits plans that would be part of the exchange’s bronze tier—the 60% actuarial value tier.

Alternative 3: Incentivize/Encourage Insurers to Offer VBID Plans

Incentivizing insurers could promote VBID without facing the potential negative political consequences of mandating non-coverage of low-value services. The University of Michigan’s VBID Center offered a brief piece of guidance on this issue. The authors argue that states need to allow for flexibility in setting up the plans, that states should not set uniform cost-sharing levels, and also suggested that VBID could represent a plan quality performance measure.32 For example, a state could consider whether a plan incorporated VBID as one quality indicator when evaluating which plans are qualified to sell in its exchange. In such a case, plans using VBID could be rewarded with extra “points” in a request for proposal process. Maryland’s lawmakers took this route when writing the legislation enacting the state’s exchange board, indicating that VBIDs could be used as 1 criterion for plans to be selected into the exchanges.33 Exchanges could also encourage the selection of particular services for inclusion in VBID designs. Items a state could incentivize might be zero copays on generic drugs for treating chronic diseases. Massachusetts issues requests for proposals for insurers wanting to participate in its exchange,and scores them on how well they do at providing consumers “good quality and value, according to standards set by the Connector.”34 Plans receive better scores if they have “innovative pharmacy management” and incentives for wellness.35

One final example of incentive-based encouragement is the quality ratings the Centers for Medicare & Medicaid Services (CMS) uses for assessing Medicare Advantage plans. The health reform bill allows CMS to make incentive payments to Advantage plans if they meet certain quality benchmarks.36 For example, one of the metrics evaluates the plans’ ability to have patients up-to-date on screenings and vaccinations. While not directly linked to value-based designs in terms of reduced cost sharing for certain services, this program does serve as a possible template in encouraging the use of more highly valued services.

As an alternative to direct incentives, states could also encourage insurers to offer VBID plans in the exchanges. The closest existing example for this approach would be Oregon’s VBID recommendations. Oregon has 2 separate pieces to its VBID processes (see Table 2). There is the formal priority setting that makes the list of covered services and establishes the varying levels of copays for all of the public plans under the state’s control, as mentioned above. It then created a separate list from this process, which comprises recommended highvalue services for the commercial market. The commercial plans are not required to adhere to the recommendations.37

Oregon’s approach for commercial payers is a relatively hands-off one for selecting certain services for reduced copays as part of the plans, but does take advantage of Oregon’s research-based priority setting process for identifying services for reduced copays. While evidence is scarce on whether the private plans in Oregon take up the recommendations, the public employee plans do take the suggestions into account.38 The boards overseeing these plans chose to both raise copays on certain undervalued services like emergency department visits and lower them on several highly valued services such as vaccinations. The program was adopted in 2010 and has yet to be evaluated. Oregon’s experience represents a way states could encourage VBID plans.

Alternative 4: Offer No Guidance to the Plans

State exchanges could remain silent on the issue of VBID, which would let insurers decide for themselves what types, if any, to offer beyond what is required in the ACA. This approach would presumably result in limited adoption of VBID unless interest in this model increases substantially. However, many insurers and employers are already experimenting with different types of incentives. In a survey of 1300 large employers, Choudhry et al found that many benefit managers are thinking of implementing some version of valued-linked incentives, either of the behavioral change type, or the reduced copays for high-value medical treatments, or both.7 The authors found that while less than 20 percent of employers in 2007 were currently using some type of incentive, over 81 percent planned to in the next 5 years.

Impediments to VBID Implementation

The ultimate impact of VBID designs on health plan premiums has not yet been clearly determined, in part because there is so little well-evaluated experience with initiatives raising cost sharing for low-value services. These are likely to generate most of the savings, but face more implementation challenges. Neumann and colleagues reviewed issues associated with increasing copays for “low-value” services.6 These interventions are much more controversial, both because of the added financial burden on patients and also because it is technically challenging to determine with high confidence which services are low value.

Additional challenges have prevented insurers from widely adopting these designs, including a lack of evidence of what works, and difficulty in determining which services are high or low value.7 These challenges are followed closely by concern over the effective targeting of incentives to the right populations. For example, dropping the copay on all hypertension drugs means the insurer will spend more money on the patients who are already adherent, just to gain improved outcomes for the subset who are not. The lack of continuous enrollment and high turnover rates in US insurance markets means health plans have limited incentives to invest in preventive or behavior-changing initiatives if the enrollees leave the employer or plan before the benefits accrue.39

Providers may also object if investing in better preventive care or care coordination means extra expense for them. In an Institutes of Medicine report, providers cited the lack of reimbursement for promoting valuable services or discouraging low-value ones.40 In the report, providers urged a focus on long-term outcomes for patients, such as managing chronic illnesses, as part of an overall agenda of paying for quality. The report also suggests another aspect of VBID could be reducing the overuse or misuse of services.  Separate from helping patients navigate what services will provide the most benefit at the lowest cost, providers also face their own challenges with VBID when plans choose to “tier” hospitals and physicians according to some kind of quality metric. Some initial results from Massachusetts’ experience in this area have shown the copay signals can be counteracted with information from other sources, so more research in this area is needed.41

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