Dr. Mark Fendrick referred to the fable of the race between the hare and the tortoise to frame the task facing proponents of value-based insurance design (VBID) at The Alliance Learning Circle “Making It Happen: The Health Care Evolution Continues” on July 22 at The Monona Terrace.

In the fable, the overconfident hare sprints ahead and then pauses to take a nap. Meanwhile, the slow-and-steady tortoise stays the course, passing the slumbering hare and winning the prize.

Dr. Fendrick

Dr. Mark Fendrick University of Michigan Partner, VBID Health

“We are the tortoise in this race,” Dr. Fendrick declared. Dr. Fendrick is a founding partner of VBID Health and a co-founder and the current director of the University of Michigan Center for Value-Based Insurance Design. He continues to see patients in his general internal medicine practice and is a professor in the Department of Internal Medicine and the Department of Health Management and Policy at the University of Michigan. Dr. Fendrick and the VBID Center have worked with The Alliance and member employers to introduce VBID concepts.

‘Get More Health for the Money’

Dr. Fendrick said employers need to broaden their focus from how much they spend to include how well they spend it, which is the way to “get more health for the money.” He cited a number of changes that can help employers who want to apply VBID to broaden the health care debate and their health plan design.

    • Think about what health care expenditures you “want to buy more of,” Dr. Fendrick said. For example, your company’s self-funded health plan may want to spend more on disease prevention and care for people with chronic conditions to prevent high health care expenditures down the line. Replace “one size fits all” approaches with plans that address the top chronic conditions in your workforce.
    • Consider changing what you charge for some types of diagnostic visits and some types of medication. Charge less for things you want people to do more of. In other words, align your benefit design to make it easy for patients to access high-value treatments and services, but make patients put more effort into getting low-value treatments and services. For example, set lower co-pays for employees who are buying a medication for treating diabetes. Charge a higher rate for nonessential medications for conditions such as toenail fungus.

More About Specialty Medications

Use a VBID lens when examining your specialty medication approach. Specialty medications are used to treat rare conditions and some of these drugs are “life-saving breakthroughs.” Many employers are asking employees to pay a bigger share of the cost for the most expensive specialty medications. “You are charging your patient the same amount for a drug that cures cancer 90 percent of the time as one that never clears a case,” Fendrick said.

  • Build “clinical nuance” into your plan design to begin the transition from “how much you spend to how well you spend” as part of VBID. Recognize that medical services differ in the benefits they provide and develop your plan accordingly. “Just because things are expensive doesn’t mean they’re bad and just because things are inexpensive doesn’t mean you should do more of them,” Fendrick noted. Identify the conditions in your workforce that place you at risk for higher long-term expenditures and then use clinically-nuanced benefit design to address them.
  • Aim to create a benefit design “package” that reshapes your health plan approach. The ACA requires 100 percent coverage of some preventive benefits, such as mammograms for women over age 40. These changes reflect a VBID approach but are aimed at broad populations. A true VBID approach requires altering your plan design with a scalpel, not a chainsaw. “These individual levers don’t work as well as when they’re all aligned together,” Dr. Fendrick said.
  • Accept that a VBID approach typically increases costs in the first year as people buy medications for chronic conditions and make regular physician visits. VBID is more likely to see savings in the third and fourth years of the plan as people with targeted conditions avoid complications and escalation of disease. Dr. Fendrick cited a New England Journal of Medicine study that showed that VBID increased medication adherence, which has been proven to be difficult to impact, by roughly 10 percentage points to 49 percent among heart attack patients taking four or more medications. In addition to bending the trend over time, Dr. Fendrick said VBID can improve morale, increase retention and reduce the number of employers with short-term and long-term disability.
  • For short-term savings, use VBID to begin addressing the issue of unnecessary, wasteful care. Experts say that as much as one-third of health care is unnecessary and in some cases may even harm patients. Dr. Fendrick advised employers to promote the Choosing Wisely campaign that helps patients make better health care decisions. He also suggested that employers “look very carefully at things you’re spending money on that you should never buy in the first place,” such as some types of medical imaging. VBID Health worked with Milliman to develop a waste calculator that is available to employers.
  • Consider combining “carrots and sticks” in your health benefit plan. Carrots use positive rewards to encourage desirable behavior, while sticks make patients pay more when they buy undesirable services.

Why Value-Based Insurance Design Has Broad Support

Dr. Fendrick noted that creating a VBID-driven health plan is only part of the challenge. Employers who take a VBID approach must also be willing to explain it to employees and other audiences. Fortunately, Fendrick said VBID is easy to explain: It removes financial barriers to services that will make people healthier. That explains why the “tortoise” in the race to improve health care has supporters among Republicans and Democrats as well as labor and management.


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