Leaders from a broad array of health care stakeholder organizations convened recently with President Barack Obama at the White House to discuss strategies for “bending the curve” of the rising cost of health care in our nation. Together, the groups pledged to reduce the growth of national health care spending by 1.5 percentage points each year over the next 10 years, which would equate to more than $2 trillion in savings from projected levels.1 It is rare for such disparate organizations to agree on a common goal, making this a significant step toward addressing important cost control issues at the heart of comprehensive health reform.
According to Office of Management and Budget Director Peter Orszag, economists estimate that $700 billion2 of the $2.4 trillion3 spent annually on health care is unnecessary and could be saved without harming the quality of patient care. Assuming this assessment is accurate, then the next logical question is how to identify the unnecessary $700 billion and separate it from the valuable and necessary care that is delivered every day in this country? Orszag, and the President himself, have emphasized that one way to address this $700 billion problem is more research on what works and what doesn’t work. Comparative effectiveness research (CER), which determines the relative benefits of two or more medical treatments for the same condition, may contribute to solving this problem. By examining which treatments are better suited for patients with specific conditions, federal policy makers expect CER to improve the quality of care and slow the growth of health care spending in the United States. In general, the health care organizations at the center of the reform debate are supportive of CER, although many questions remain regarding how the federal government will prioritize the treatments and therapies to be compared, how they will conduct and report on the results of those studies, how they will be used by health care payers and providers, and whether they will take into consideration the unique aspects of sub-populations. CER can eventually lead to better clinical decision making, as well as help to reverse spending growth when coupled with other programs.4
But the broader, more nuanced questions surround how to ensure the overall value of health care delivered to patients. Value means improving the clinical benefit to the patient for the money spent, or getting better health care delivered for every health care dollar spent. Given the strong interest in health care reform and CER in Washington, there is a growing trend by companies and local governments – and now Congress, with the recent introduction of legislation -- to address this concept through the implementation of value-based insurance design, or VBID.
VBID programs adjust patients' out-of-pocket costs for health services based on the clinical benefit to the individual patient, which could be clarified through CER or other evidence-based evaluations of a variety of healthcare interventions. The basic VBID premise is that patient copayments for proven high-value services should remain low and employers and plan sponsors should actively promote these treatments and interventions that improve health and well being. Conversely, some approaches that are proven not as effective or necessary may have a higher direct cost to the patient and/or a less favorable reimbursement rate to the provider. Dr. Mark Fendrick, head of the Center for VBID at the University of Michigan, pointed out two common, less effective ways to reduce costs: “One way is by increasing premiums, in which health care costs are lower because no one is buying services. Another way is by creating a one-size-fits-all plan, which doesn’t distinguish between high and low value treatments.” Under a VBID program, “the more clinically beneficial the treatment, the lower the patient’s cost share,” said Dr. Fendrick. Such a system reduces the number of unnecessary tests and procedures – as well as hospital visits -- that drive up health care costs while ensuring that individuals with the greatest needs will receive proper care.5
Companies such as Marriott, Caterpillar, and JP Morgan, and local governments like the City of Asheville, North Carolina, already have adopted VBID strategies, with some success. To succeed at a company, VBID programs should adhere to certain principles: ensuring patients are engaged and held accountable; removing barriers to care, such as financial ones; aligning incentives among all stakeholders -- patients, doctors, and payers; developing a comprehensive communications plan; and making data available for analysis.6 The better the data, the better the system is at identifying high-risk patients.
Some companies are taking VBID one step further by taking a broad view of the burden of health conditions, including not only medical and pharmacy costs but also the costs associated with lost productivity. According to a recent National Pharmaceutical Council-supported study in the Journal of Occupational and Environmental Medicine, these conditions include depression, obesity, arthritis, back/neck pain and anxiety, all of which are major drivers of presenteeism, which occurs when employees with health conditions are present at their jobs but unable to perform at full capacity. Addressing these kinds of health issues can help to improve overall worker health and productivity, thus increasing the overall value of the care delivered to both employer and employee.7
VBID, along with CER, could assist public and private payers in realizing the best value for their health care dollar while improving the quality of health care services and employee health. These programs already are leading to a healthier workforce, with reductions in absenteeism, presenteeism, and medical disability. Implementing them on a wider scale could help policy makers reach their goal of improving quality in the system while “bending the curve” of overall health care spending in the right direction.
2 Health Costs Are the Real Deficit Threat, Peter Orszag, Wall Street Journal, May 15, 2009. http://online.wsj.com/article/SB124234365947221489.html, accessed May 18, 2009.
3 Improving Health Care -- By 'Spreading the Mayo' (the Mayo Clinic Model, That Is), January 15, 2009, David Kendall. http://www.dlc.org/ndol_ci1039.html?kaid=450020&subid=900204&contentid=254811, accessed May 15, 2009.
4 The Congressional Budget Office estimates that cost savings would not begin until 10 years after the investment in CER. CBO Budget Options, Vol. 1, December 2008, page 86. http://www.cbo.gov/ftpdocs/99xx/doc9925/12-18-HealthOptions.pdf, accessed May 14, 2009.
5 A. Mark Fendrick, MD, Co-Director the University of Michigan Center for Value Based Insurance Design, Capitol Hill briefing, February 6, 2009.
6 Jan Berger, MD, MJ, President, Health Intelligence Partners, Capitol Hill briefing, February 6, 2009.
7 Health and Productivity as a Business Strategy: A Multiemployer Study. Journal of Occupational & Environmental Medicine. 51(4):411-428, April 2009. Loeppke, Ronald MD, MPH; Taitel, Michael PhD; Haufle, Vince MPH; Parry, Thomas PhD; Kessler, Ronald C. PhD; Jinnett, Kimberly PhD.