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Value-Based Health Insurance Design: How Much Does Socioeconomic Status Matter?
Bruce W. Sherman, MD, and Carol Addy, MD, MMSc
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Value-Based Health Insurance Design: How Much Does Socioeconomic Status Matter?

Bruce W. Sherman, MD, and Carol Addy, MD, MMSc
Socioeconomic status may significantly influence enrollee response to value-based benefit design approaches. Evaluating the association of wage status with claims experience may yield actionable insights.

Socioeconomic status (SES), an important determinant of individual health status, has not been widely incorporated into employer benefits strategies. Recent research has characterized significant differences in healthcare utilization patterns and cost among workers in different wage categories, raising the possibility that SES does influence individual healthcare utilization behaviors. In particular, SES may have appreciable impact on the effectiveness of benefits tactics, including value-based insurance design (VBID).

This paper sets forth a hypothesis that low wage status negatively influences individual receptivity to VBID offerings, which may blunt the impact of current VBID initiatives. In contrast, high-wage earners may already be compliant with recommended care, and implementation of a VBID design may not yield incremental increases in their treatment compliance. As a result, wage status may be a significant predictor of a favorable response to VBID.

Based on these considerations, the authors offer suggestions for employer actions, including evaluation of benefits enrollee response to VBID tactics by employee wage band as an initial step. Employers may also wish to engage benefits enrollees via survey or focus group activities to understand barriers to a more impactful VBID response and consider some of the included benefits design considerations that may result in more equitable and impactful use of VBID. Further research is needed to better understand the relationship between SES and response to VBID offerings.

Am J Manag Care. 2018;24(7):318-321
Takeaway Points

Socioeconomic status, an important determinant of individual healthcare use, has not been widely incorporated into employer benefits strategies. However, it may have appreciable impact, particularly on the effectiveness of benefits tactics, including value-based insurance design (VBID). This paper provides a brief summary of the evidence and offers considerations for employer actions, including:
  • Evaluation of benefits enrollee response to VBID tactics by employee wage band
  • Engagement of enrollees via survey or focus group activities to understand barriers to a more impactful VBID response
  • Suggested benefits design considerations that may promote more equitable and impactful use of VBID
Suboptimal compliance with prescribed medications and evidence-based medical care is a significant contributor to poor patient outcomes, particularly for individuals with chronic conditions. As a potential mitigating solution, value-based insurance design (VBID) has been advanced as an intervention to reduce potential financial barriers to high-value services, which may also affect medication adherence. Early VBID efforts, most notably at Pitney Bowes in 2002, highlighted the opportunity and potential value of this approach, ushering in an evolving era of stakeholder engagement in VBID, with incorporation of the approach in private and public employer health plans, as well as government legislation.1

Despite a sound conceptual basis for VBID, the observed impact has not been as compelling as hoped. An analysis of 13 studies evaluating its impact on medication adherence has shown, on average, just a 3.0% improvement in adherence over 1 year.2 No significant changes in overall medical spending by either patients or plan sponsors were noted. The authors concluded that further research was warranted to identify optimal VBID offerings and maximize their potentially unrealized value.

So why isn’t VBID yielding more impactful results? We have identified one concern that may well be foundational—socioeconomic status—and intend for this commentary to further focus related research efforts.

Wages—and Social Determinants of Health—Matter

Social determinants of health (SDH), including income level, have received increasing attention in recent years as significant contributors to individual health status.3,4 However, during a review of VBID program evaluations, we found just 1 study that incorporated enrollee income as an explanatory variable.5 In that analysis, increased wage status, as assessed by Census block group analysis of mean annual household income, was associated with greater medication adherence. Instead, representative VBID analyses have either controlled for household income using zip code–based imputation6 or summary propensity score matching7 or did not describe incorporation of individual or household income as a research variable.8

What appears to be a fundamental assumption in VBID frameworks is that most individuals will respond favorably to financial incentives for high-value healthcare services. We believe that this may not necessarily be the case for individuals at different wage levels. A recent analysis of healthcare utilization by wage status among commercially insured individuals provides clear indication that those in different wage groups have differing healthcare utilization patterns.9 For example, preventive services utilization (available with first-dollar coverage due to the Affordable Care Act) among workers earning less than $24,000/year was approximately half that of those earning more than $70,000/year. In the same study, adherence for medications included in preventive medication lists (with first-dollar coverage for selected generic medications) was also 18% lower among low-wage earners relative to their higher-earning counterparts. Much in the way that analysis of aggregate population-level data has obscured wage-related differences in healthcare utilization patterns, perhaps a re-evaluation of prior VBID studies will show clearer differences in population subgroup responses to VBID programs based on wage status.

Other evidence lends credence to the idea that wage status influences treatment compliance. The confluence of continued healthcare cost growth in excess of inflation, wage stagnation among lower wage earners, and employer adoption of higher-deductible benefit designs have created significant financial pressures for low-income earners. As a result, these individuals may face the challenge of allocating scarce financial resources, potentially having to choose between basic necessities (eg, food and housing) and medical care. These ongoing trends are concerning, with deductibles increasing by 63% from 2011 to 2016,10 while annual wage increases for low-wage workers appear to be the lowest of all wage groups.11

Consequently, recent analyses of treatment compliance have provided clear evidence that lower-income earners are more likely to forgo or delay necessary care than their higher-earning counterparts.12 For many, financial barriers to care have been identified as the primary driver for the observed behaviors.13

From a behavioral perspective, the notion of scarcity as articulated by Mullainathan and Shafir14 seems particularly relevant. The authors hypothesize that individuals experiencing scarcity in their lives have reduced capacity to engage in opportunities peripheral to their primary scarcity focus. Individuals experiencing significant financial stress, for example, may not prioritize personal health and may not be influenced by a VBID offering. Given the previously noted findings that low-wage status is associated with reductions in both medication adherence and use of no-cost preventive care services, perhaps an opportunity exists to rethink current VBID tactics.

Given these considerations, how might wage status affect individual responses to a VBID offering? Based on prior findings, we hypothesize that there are likely 3 broad types of respondents. In the first group are individuals at the higher end of the wage/income scale, who may engage in a VBID offering without appreciable change in adherence, because they are already compliant with medication use and preventive care. Higher-income earners have both the discretionary financial resources and time to direct toward compliance with treatment. In contrast, low-income individuals are the least engaged with medical care, likely because of other, more pressing personal priorities,14 as well as health literacy15 or other issues. Consequently, they may be least likely to respond to a VBID incentive. The group of individuals in the middle of the wage continuum may have the most favorable response to a VBID offering because they are more likely to be price-conscious and have sufficient resources (ie, time and money) to appreciate the associated health and cost impact. These hypothesized responses likely overlap across income groups depending on the unique circumstances of each individual and the perceived value of the VBID offering. Additional wage-based subgroup analyses of existing VBID offerings can help affirm, refine, or refute this hypothesis.

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