Purchasing Value in Health Care: So Many Roads

I have primarily talked about Medicare and Individual health insurance purchases because that's my area of responsibility. My counterpart handles all of the employer group insurance and I'm substituting for him on a conference call on value-based health plan purchasing. This gave me an opportunity to think about how your employer might buy health insurance and the purchasing process.

On a side note, I used to work at a health plan that called their employer clients, "Purchasers". Websites made references to "Purchasers" as did some literature. When groups realized that they were viewed as buyers, they did not appreciate the term. They thought of themselves as clients if not partners, not a just a buyer of health insurance akin to an import-export agent at an open air market who is haggling and trying to snap up bargains.

Back to the topic, there has been a movement in the last 5 years where employers and coalitions require that health plans to explain the outcomes or "value" of their plan. For example, their network of providers provides the cleanest colonoscopies in town as opposed to scoping every asshole they see and getting paid on volume. At first, there was little data to support the clean colonoscopy (which is kind of like clean coal, sounds nice but doesn't exist yet). However, the employers and coalitions stuck to their values, insisted on outcomes, and carriers began providing data around preventive care, disease management outcomes, proper technology use, and demonstrating that they had steps to promote evidence-based practice. Evalu8 is the Oregon Coalition of Health Care Purchaser's efforts and they have successfully caused most local carriers to focus on outcomes in order to score high on the survey.

Putting together the survey and compelling health plan's to fill it out was no small task. However, the harder task for employers is to trust that selecting a plan that scores well on the survey is the best choice for their employee's health plan. Usually, the price and number of doctors and hospitals on the plan drives the decision and are things that the employee readily sees and is of greater interest. Remaining with a plan that an employer believes will provide the best outcomes and thus lower medical costs requires a longer horizon and a relationship that is not transactional. Employers that self-fund their own plans have more of a financial incentive for this longer term relationship. Regardless an employer needs an interest in their health plan and a belief that it can turn into a competitive advantage over time. This is a difficult vision to maintain especially since it's possible to save just as much medical costs by switching plans every year and picking the plan that underbids everyone else.

The next phase to create value is through the benefit designs. Some health plans are coming up with benefit designs that give away services for free if they help someone with chronic disease manage their illness (like drugs or doctor's appointments for blood sugar tests) or preventive services like prostate checks. The cost of even a $10 drug copay can add up over time or these are procedures that people don't want to do (like prostate checks). Therefore, there is little concerns about abuse of these free services and it makes sense for the employee to pay very little. Since these type of benefit designs encourage more utilization of these preventive services, they will initially cost more. Hopefully over time, always taking their drugs for chronic diseases or getting prostates checked will result in healthier employees and lower costs for the employer groups.

These benefit designs have been called value-based designs or have value in the name. One interesting issue is that health plans currently use the name "value" for their cheaper plans. This new design has to overcome the connotation that the word value in name means cheap plans that cover less as opposed to encouraging effective or highly valued health care services. There has also been some thoughts around requiring employees to pay more for services that are deemed to be low value like certain high tech imaging that is not always appropriate. For example, someone does not always need a 3-D image of their heart for every problem. However from focus groups, we learned that there is a reluctance to inject this type of consumerism into group health plans. Employers do not want their employees to face higher costs for services even if they are not deemed to be high value of evidence-based. The employers were protective of their employees even though it is more expensive and less effective.

In summary, there are 2 roads for value-based purchasing of health insurance. The road that has been traveled is that a certain segment of employers have decided that they will pay more for a health plan that has a track record with producing better outcomes. The road less traveled is that a health plans will set up financial rewards or disincentives for using certain health care services. From the same focus group, there is a real question of whether or not health plans should be the ones dictating which services are effective and which are not. While this does seem to be the domain of the health care provider, health plans do have decades of treatment data from a cross-section of providers.

Will the road less traveled make all the difference? Or based on some interpretations of the Frost poem, it is just idle musing about a journey and either road will reach the destination? Given that employers may no longer be making health care decisions in the future that may also be the case.