Value-Based Insurance Design Can Improve Health at No Added Cost, Study Says

Thu Jan 21, 2010 10:58am EST

* Reuters is not responsible for the content in this press release.

U-M,  Harvard  researchers show that reducing co-payment fees encourages
patients to take medication without increasing total health care spending

ANN ARBOR, Mich.,  Jan. 21  /PRNewswire-USNewswire/ -- Value-based insurance
design programs - which reduce patient co-payments for highly effective
treatments - can break even financially or possibly save money, according to a
new study from  University of Michigan,  Harvard  and other researchers.

In an article published today by  Health Affairs,  the researchers analyzed
data from a large corporation that implemented a VBID program in 2005.
Co-payment rates were reduced for employees using five classes of drugs used
to treat several serious but common chronic conditions, including diabetes,
hypertension and heart disease.

In this VBID program, patients using the specified medications were offered at
least a 50% co-payment reduction.  The study's authors examined both the
amounts spent on the high value services and overall spending by the employer
using the VBID plan.

"From a total cost perspective, the VBID program likely broke even, and
possibly saved money," said  A. Mark Fendrick, M.D., co-director of the 
University of Michigan's  Center for Value-Based Insurance Design

The financial returns from an employer perspective will be less favorable, but
significant savings from reduced use of non-drug services are likely and will
substantially offset the added employer spending on prescription drugs, the
researchers found.

"But even if the VBID program were to slightly increase employers' medical
costs, our expectation is that as people increase the use of high-value
services, their health will not only improve, but overall medical costs will

Fendrick, who also is a professor in the Department of Internal Medicine and
professor of Health Management and Policy, created the VBID concept with 
Michael Chernew, professor in the Department of Health Care Policy at  Harvard
Medical School. Both are authors on the new study.

"It seems reasonable to conclude that the financial effects of this VBID
intervention were at least cost neutral - if not cost saving - from a total
cost perspective.  Value-based insurance designs could be an important
component of a broader cost containment strategy," says Chernew about the

Fendrick stresses that VBID programs focus on removing barriers for treatments
that are proven to be effective. When costs are reduced, patients are more
likely to use high value services. For those with lower co-payments, the
percentage of patients not taking their medication declined by about 10
percent in 4 of the 5 drug classes.

The financial impact of behaviors resulting in improved health can be measured
in terms of savings on both medical [such as fewer emergency room visits and
hospitalizations] and non-medical [such as fewer disability days, less
absenteeism and greater worker productivity] spending, Fendrick says.

Fendrick and Chernew currently are working with Congressional leaders on
incorporating VBID concepts in health care reform. Language encouraging the
use of VBID concepts is in the bill being negotiated in conference committee.

"The clinical benefits of removing barriers to high value services were clear,
but before this paper, the economic ramifications of VBID programs were
uncertain. We can now say, at worst, VBID programs are cost neutral from a
total cost perspective," Fendrick says.

Chernew adds.  "Payers are facing tremendous pressure to reign in health care
costs.  Compared to the status quo, we are confident that, if carefully
designed, VBID programs can produce more health at any price.  We believe that
VBID should remain an integral part of ongoing health care reform

Funding: The study was funded with support from GlaxoSmithKline and Pfizer.

Additional authors:  Allison B. Rosen, M.D. assistant professor of Internal
Medicine and Health Management & Policy at the  University of Michigan;  Iver
A. Juster,  Mayur Shah,  Arnold Wegh,  Stephen Rosenberg, all of ActiveHealth
Management;  Michael C. Sokol  of Merck and Company; and  Kristina Yu-Isenberg
 of Ortho-McNeil Janssen Scientific Affairs.

SOURCE   University of Michigan  Health System

Mary F. Masson,, or Margarita Bauza,,
+1-734-764-2220, both of University of Michigan Health System

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