Dr. Mark Fendrick and Value-Based Insurance Design

I had the opportunity to interview  Doctor Mark Fendrick, Co-Director of University of Michigan's, Center for Value-Based Insurance Design. We explored his views on the rationale for and state of Value-Based Insurance Design (VBID) in the health care benefits arena today. Here's what Dr. Fendrick had to share:

Mark started by stating the problem: "The typical health plan in the U.S. tends to have in its place for the individual beneficiaries, the same cost for every doctor visit, every specialty visit, every diagnostic test, and every drug within a given tier. This type of one size fits all benefit design does not account for the heterogeneity or differences in benefits that come with various interventions. So for example, the copay for a brand of drug that may save your life from heart disease is exactly the same as the copay for a brand of drugs that will make your toenail fungus go away in over 95% of various types of benefit plans."

Dr. Fendrick advocates VBID as the response to one size fits all consumer out of pocket pricing. "To actually acknowledge the fact that medical services vary in their clinical benefits, we have proposed a type of benefit design that encourages the use of those medical services that provide high values of health, by reducing barriers financial and otherwise, to get access to those services, and in fact lowers or removes all copays and barriers for those high services that seem to be markedly underutilized by your typical American consumer. This is basically in response to most market based reform proposals, such as high deductible consumer directed health plans. When you look at the evidence from consumer behavior in these plans, the high copays or deductibles not only discourage consumers from purchasing those medical services that we determine to have low value, the evidence suggests that they also seem to discourage Americans from getting those super high value services, such as cancer screenings, immunization and chronic medications for conditions where there are effective therapies. So in end, [we advocate] the more beneficial the therapy, the lower the financial barrier. We've had great success convincing some champion companies and health plans to try to remove those barriers and decrease financial disincentives that prevent my patients from getting those services that I beg them to do and they report back to me that they'd like to do them but they can't afford them."

What is the Center's role in all this? Mark states that "as an academic group, we feel we were the first to publish at least in the peer reviewed literature, the concept of a clinically sensitive benefit design program which we've been talking about since the late 1990s. But at the same time, the idea of removing barriers has been put in place by some champion companies independently like Pitney Bowes, and the City of Ashville, North Carolina in addition to Marriott Corporation, Eastman Chemical and in fact my own employer, the University of Michigan has put in place a Value Based Design Program that has worked very hard to maximize the amount of health achieved per dollar spent and getting away from the 'just minimize my expenditures on health care approach' which seems to be pervasive around the country.

Dr Fendrick continues, stating "our team at the University of Michigan and Harvard Medical School are driven by the typical academic motive of doing rigorous evaluation of any change in benefit design looking at the impact not only on the health outcomes, but also the financial ramification via changes. As we know there is a spectrum of innovation in health care and benefit design specifically requiring promotion: a lot of discussion prior to the decision to implement a benefit design change, watching it happen, and doing that evaluation. The Center for VBID has worked with basically every important health care stakeholder including plans to employers to patient advocacy groups to pharmacy benefit managers and employer benefit consultants. Its completely palatable to say our goal is to achieve a greater amount of health per dollar spent. While we promote VBID, we are not at all involved with the in depth pricing out or doing an actuarial analysis of a VBID plan. Nor do we spend a lot of time actually down in the nitty gritty of creating that plan, although you can imagine we have our views about what services should have low barriers and perhaps which ones should have higher ones. I would like to reiterate and enjoy the opportunity to let people know what we are about is making sure that very careful evaluations of these changes are made, Historically in the benefit design arena there have been lots of interesting changes made, but not very careful analyses done to see if in fact what's happened in terms of beneficiary health, as well as the bottom line impact of those benefit changes on the financial statement."

I asked Dr. Fendrick why most of the examples and case studies regarding VBID revolve around the pharmacy benefit. He tells us "most of the examples have been pharmaceutical for a number of reasons, most notably is the ease of access as administered through some large Pharmacy Benefit Managers or PBMs. I think that we have argued strongly that the VBID approach should extend beyond pharmaceuticals and in fact we have various clients looking at VBID type designs for cancer screenings, diagnostic tests such as checking for the level of thinness in your blood and monitoring certain pharmaceuticals as well as certain types of specialty visits and diabetic eye exams. I think that the principal adage regarding VBID goes back to the great philosopher my mother, who said I cant' believe you had to spend a million dollars in grant funding to show that If you make people pay more for something, they'll buy less of it. We have in fact, tried very hard to get my mother's wisdom out into the public domain, and as you might be aware our team published last week the first controlled trial of copay lowering. Thankfully and not surprisingly, my mother was right.  In fact that the company that lowered copays for high value services, such as drugs for high blood pressure, high cholesterol, asthma and heart disease showed a marked increase in adherence of those potentially life saving drugs, compared to a company that had the exact same health plan, disease management company and PBM but had their copays left at standard levels. So while we believe that removal of financial barriers will certainly improve health, our studies do show we have a long way to go beyond copay lowering to get to levels of acceptance to where we want them to be requiring new initiatives in literacy, education, case management and others.

So where does VBID fit into the great health care debate occurring this election year? Mark tells us, "in my opinion the debate of health care in 2008 revolves almost exclusively around health care cost. One of our most important points regarding the health care debate in the U.S., is that we need to restore the term health, to the health care cost debate. I know no other area of the economy where people are being pushed more and more to just choose their services exclusively on the basis of low price without that availability to understand what they're getting for their money. I don't see the lowest cost car on the road. Nor do I see the lowest cost T.V. flying off the shelves. I think that your typical educated consumer will like the idea of value per health care dollar spent. What we have found is that a number of market based reform groups understand that its not all about price. We need to create a system to provide the information on both health benefits and financial implications to understand what are those services deemed high and low value and groups of patients actually benefit most from them."

In respect to our community, Simplifying the Business of Healthcare, I asked Dr. Fendrick how VBID impacted the administration of health care benefits from a health plan, consumer or health care provider perspective. His response was that he has not encountered this issue as an obstacle to date from the various stakeholders, and that other issues have been more at the forefront. Certainly tiering of benefits is already commonplace, and VBID is an approach to tier benefits differently. But from a consumer perspective, great care must be taken from an educational and communications perspective to introduce any new concept, as things are confusing enough.

A podcast recording of the entire interview with Dr. Fendrick is available at: http://community.changenow4health.com/media/fendrick011708.mp3:

You can get detailed information on the Center for Value-Based Insurance Design, University of Michigan, at: http://www.sph.umich.edu/vbidcenter/