As more employers embrace the concept of value-based insurance design to improve medication adherence, Dr. A. Mark Fendrick and his colleagues at the University of Michigan Center for Value Based Insurance Design in Ann Arbor have been conducting research to determine how these benefit designs affect health outcomes and employer cost-containment efforts. Dr. Fendrick co-founded the center in 2005 with Michael Chernew, a professor of health care policy at Harvard Medical School in Boston. In an interview with Business Insurance Senior Editor Joanne Wojcik, Dr. Fendrick shared his thoughts on value-based insurance design and described some of the work the center has been performing to support it.
Q: How long have you personally been working in value-based insurance design and what attracted you to it?
Dr. Chernew and I have collaborated for nearly 17 years. Our primary motivation was the lack of appropriate incentives for both consumers and providers of health care to achieve the most health for the money spent.
Initially, the attraction was the lack of alignment between the practice of evidence-based medicine to reimbursement systems. More recently was a concern that one of the most common cost containment mechanisms used by payers—shifting costs to patients—would lead to adverse clinical effects. We can now say with great certainty that this concern has become reality.
Q: Describe some of the projects the center is working on or has completed.
The center is involved in several projects employing the concept of value-based insurance design, including:
Q: How has the center's work been reflected in the various health reform measures under consideration by Congress?
The Senate health care reform proposal includes concepts of value-based insurance design.
The Patient Protection and Affordable Care Act, which represents a combination of bills passed previously by the Senate Finance and Health, Education, Labor & Pensions committees and will become the vehicle for debate on health care reform in the Senate, allows the secretary of Health and Human Services to develop guidelines to permit health plans to use the concepts of value-based insurance design in providing coverage.
H.R. 3962, the Affordable Health Care for America Act, would allow health benefits plans to modify cost-sharing and payment rates to encourage the use of services that promote health and value.
Q: How might VBID principles be applied in government-funded health care programs such as Medicare and Medicaid?
Alignment of incentives to produce (better) health at any price should be a goal of both the public and private sector. There is more than enough money in the system. We just need to choose to spend it on health care services—prevention, diagnosis, treatments and monitoring—that have been demonstrated to produce value, with value defined as the clinical benefit for the money spent.
We were very pleased when, last spring, federal legislation was introduced to advance concepts of value-based insurance design in Medicare. (U.S. Sens.) Debbie Stabenow, D-Mich., and Kay Bailey Hutchison, R-Texas, introduced S. 1040, the Seniors' Medication Copayment Reduction Act of 2009, advancing the principles of value-based insurance design in the Medicare population.
This legislation will establish a five-year demonstration program using value-based insurance design to assess the impact of a reduction in copayments or coinsurance charged Medicare beneficiaries for certain high-value medications on adherence to those medications.
Q: How do you predict VBID will evolve as it is adopted by government and the private sector?
There is great momentum behind the VBID concept in both public and the private sector. While initially limited to prescription drugs, self-insured organizations and health plans have incorporated VBID principles into prevention, diagnostic testing, physician visits, hospital selection and treatments.
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