- Email: [email protected]
Can Value-Based Insurance Impose Societal Costs?
VALUE IN HEALTH 17 (2014) 749–751
Available online at www.sciencedirect.com
journal homepage: www.elsevier.com/locate/jval
Can Value-Based Insurance Impose Societal Costs? Lane Koenig, PhD1,*, Timothy M. Dall, MS2, David Ruiz Jr., MA3, Josh Saavoss, BA1, John Tongue, MD4 1 KNG Health Consulting, LLC,Rockville, MD; 2IHS Global, Inc.,Washington, DC; 3Econometrica, Inc., Bethesda, MD; 4Oregon Health & Science University, Tualatin, OR
AB STR A CT
Background: Among policy alternatives considered to reduce health care costs and improve outcomes, value-based insurance design (VBID) has emerged as a promising option. Most applications of VBID, however, have not used higher cost sharing to discourage specific services. In April 2011, the state of Oregon introduced a policy for public employees that required additional cost sharing for high-cost procedures such as total knee arthroplasty (TKA). Objectives: Our objectives were to estimate the societal impact of higher co-pays for TKA using Oregon as a case study and building on recent work demonstrating the effects of knee osteoarthritis and surgical treatment on employment and disability outcomes. Methods: We used a Markov model to estimate the societal impact in terms of quality of life, direct costs, and indirect costs of higher co-pays for TKA using
Oregon as a case study. Results: We found that TKA for a working population can generate societal benefits that offset the direct medical costs of the procedure. Delay in receiving surgical care, because of higher co-payment or other reasons, reduced the societal savings from TKA. Conclusions: We conclude that payers moving toward value-based cost sharing should consider consequences beyond direct medical expenses. Keywords: cost sharing, societal benefits, total knee replacement, value-based insurance design.
Introduction
by the procedure’s high cost and growth in utilization, particularly among those younger than 65 years [12,13]. Less clear are the implications for societal welfare of restricting access to TKA— a cost-effective treatment for end-stage OA [14–16]. Increased cost sharing will tend to cause patients to more critically assess the necessity of high-cost procedures. The likely marginal impact of the policy will be more patients choosing to pursue a more conservative approach to care. In the case of OA of the knee, this will typically involve patients choosing to delay surgery until their disease advances further. This would yield short-term savings by temporarily deferring the costs of surgery, but would also postpone the benefits of surgery. In this article, we estimate the societal impact of higher copays for TKA using Oregon as a case study and building on recent work demonstrating the effects of knee OA and surgical treatment on employment and disability outcomes [17,18]. Our findings point to important considerations for future policy discussions surrounding VBID and higher co-payments for knee replacement.
Among policy alternatives considered to reduce health care costs and improve patient outcomes, value-based insurance design (VBID) has emerged as a promising option [1–3]. Under VBID, incentives are used to encourage the use of high-value services or to discourage the use of low-value services. Some payers in the United States, for example, have lowered or eliminated copayments for highly cost-effective or clinically effective outpatient drugs or preventive programs, such as smoking cessation classes. Thus far, most applications of VBID have not used higher cost sharing to discourage the use of specific services. This may be about to change. Current spending levels and the aging of the population are creating enormous pressure to identify solutions to dampen the growth of health care spending. There is also growing recognition that controlling spending will likely mean greater patient cost sharing [4]. In this context, it is not surprising that attention is increasingly focused on the merits of a “carrot-and-stick” approach [5–8]. The state of Oregon may be a harbinger of what is to come in the use of higher co-payments for selective treatments. In April 2011, Oregon introduced a new policy for state employees that imposes an additional $500 co-payment on certain procedures considered by the state to be of “low relative value” [9–11]. Many of the services subject to the additional co-payment are surgical procedures to treat musculoskeletal conditions, including total knee arthroplasty (TKA) for end-stage osteoarthritis (OA). Oregon’s inclusion of TKA in its VBID program is undoubtedly driven
Copyright & 2014, International Society for Pharmacoeconomics and Outcomes Research (ISPOR). Published by Elsevier Inc. This is an open access article under the CC BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/3.0/).
Methods To estimate the impact of higher co-pays for TKA, we first calculated the value of the procedure using a simulation model. Our overall approach was based on Dall et al. [17] and Ruiz et al. [18], with modifications to make the methodology applicable for a working age population in Oregon. Except as noted below, model
* Address correspondence to: Lane Koenig, KNG Health Consulting, LLC, 15245 Research Boulevard, Suite 305, Rockville, MD 20850. E-mail: [email protected]. 1098-3015$36.00 – see front matter Copyright & 2014, International Society for Pharmacoeconomics and Outcomes Research (ISPOR). Published by Elsevier Inc. This is an open access article under the CC BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/3.0/). http://dx.doi.org/10.1016/j.jval.2014.07.006
750
VALUE IN HEALTH 17 (2014) 749–751
assumptions and parameters were based on Ruiz et al. Results were generated for persons between the ages of 40 and 64 years in 5-year age cohorts. For each age cohort, a Markov model (presented in Ruiz et al.) was run until age 67 years when workers were assumed to retire and obtain primary medical coverage from Medicare. For each treatment option examined, the model estimates both direct and indirect costs, as well as qualityadjusted life-years (QALYs). To account for benefit heterogeneity, surgical patients could receive either the full benefit or only a limited benefit from surgery. Indirect costs include missed workdays, lost earnings, and disability payments. A QALY is a unit used to measure both life expectancy and quality of life. One QALY represents a year spent in perfect health, while years spent in imperfect health are represented by some fraction of one. For our case study, we obtained data from Oregon on health plan enrollment by age category. Dependents were excluded from the study. In 2012, more than 40,000 full-time and part-time state workers were enrolled in one of the public employee plans that required high co-payments for TKA. These data were combined with information from the 2009 National Inpatient Sample and population estimates from the US Census Bureau to estimate the age distribution of Oregon state employees undergoing a TKA. Finally, we used the median income for Oregon state employees in 2009 to estimate the costs of missed time from work [19].
Results The results demonstrate that TKA is a highly cost-effective surgical treatment and can yield net societal savings when factoring in indirect costs, such as the impact of knee OA on employment and productivity. As presented in Table 1, direct medical costs for the surgical cohort exceeded those of the nonsurgical cohort by an average of $19,207 and those receiving a TKA rather than continued nonsurgical treatment received 1.9 additional QALYs over the model time horizon. This translates into an incremental cost of $10,108 per QALY gained in a population of similar age and income to Oregon state workers. Benefits in terms of reduced indirect costs (i.e., savings) were higher with TKA than with nonsurgical treatment in all age groups. Indirect cost benefits, which primarily come from higher income as a result of higher levels of employment and earnings for the employed in the surgically treated cohort, vary by age because the length of work life remaining varies with age. For example, we estimated that a TKA for a 42-year-old worker suffering from endstage OA yields a societal savings of $164,687 (or $155,531 excluding disability payments [Disability payments could be viewed as transfers between the government and recipients. Thus, we present results after excluding reductions in disability payments]). For those aged between 60 and 64 years, we estimated that each TKA yields
Table 2 – Effect of delaying total knee arthroplasty on societal savings and QALYs. Delay time
Net societal savings ($)
Change in QALYs
43,842 34,751 18,999 271 6,417
1.92 1.46 1.23 0.95 0.81
No delay 1y 3y 7y 10 y
QALYs, quality-adjusted life-years.
an average societal saving of $25,638 (or $23,472 excluding disability payments). Using the estimated age distribution of Oregon state workers, we found an average total and net (of increased direct medical costs) societal savings of $63,708 and $43,842 per worker undergoing a TKA, respectively. As presented in Table 2, a delay in receiving surgical care, because of higher co-payment or other reasons, reduced the societal savings from TKA. This occurred because benefits accrue over a shorter period of time with delay. Relative to a case with no delay, a delay of 3 years reduced net societal savings from $43,842 to $18,999. Once the TKA procedure has been delayed for more than 7 years, the societal savings turn into a loss. A delay of 10 years results in a societal loss of $6417.
Discussion Effective implementation of VBID principles could be a useful tool for creating a more efficient health care system in the United States. Although the state of Oregon was among the first to apply these principles to a state program, the adoption of VBID and other cost-sharing policy mechanisms is expected to become increasingly common. An estimated 59% of health plans in the United States use monetary penalties to encourage patients to choose more cost-effective treatment options, and many plans financially incentivize patients to participate in shared decision making before treatment [20]. As health care costs continue to rise, such trends toward value-based insurance design are likely to continue as a way to reduce spending. Research demonstrating the extent to which VBID affects consumer behavior is relatively limited, although studies have demonstrated patient sensitivity to cost-sharing variations [21,22]. For example, one study found that lower co-payments for highly valued prescription drugs immediately boosted medication adherence, while another showed a sharp increase in the use of relatively high-cost procedures, such as hip and knee replacement, when
Table 1 – Societal savings from total knee arthroplasty. Age group (y)
Net societal savings (B þ C þ D A) ($)
Total societal savings (B þ C þ D) ($)
Direct medical costs (A) ($)
40–44 45–49 50–54 55–59 60–64 Overall
145,221 116,215 82,719 45,235 5,393 43,842
164,687 135,874 102,570 65,260 25,638 63,708
19,467 19,659 19,851 20,025 20,245 19,207
Difference in indirect costs Household income (B) ($)
Disability payments (C) ($)
155,160 127,269 95,780 60,639 23,522 59,291
9,156 8,378 6,721 4,666 2,166 4,414
Note. Overall category is the component of each column weighted by Oregon state employee age distribution.
Missed work days (D) ($) 371 227 69 45 50 3
VALUE IN HEALTH 17 (2014) 749–751
individuals become eligible for Medicare [2,23]. Recent evidence also suggests that use of services may be more sensitive to increases in cost sharing than reduced out-of-pocket expenses [6]. Thus, Oregon’s policy—if more widely adopted—has the potential of reducing or delaying the usage of TKA. The policy in Oregon attempts to reduce the number of TKAs and attendant direct costs through higher cost sharing on surgery as well as subsidizing preventative care. Patients are not exempt from additional out-of-pocket costs on the basis of the severity of their condition or financial circumstances. As a result, some of those dissuaded from surgery may experience worse health outcomes. Cost sharing will tend to have the largest effect on the behavior of low-income individuals and may exasperate preexisting socioeconomic disparities in health outcomes. This article, along with other research, demonstrates that these consequences can indirectly harm patients, employers, and payers [18]. For some cases, the sum of these costs may significantly offset or exceed the short-term financial benefits resulting from the policy. From a national perspective, the financial impact of one state’s insurance policy for state workers may not appear noteworthy. Oregon’s policy, however, likely reflects broader trends in benefit design. The approach to benefit design other payers follow will significantly influence health care delivery in coming years. There is widespread concern over rising health care costs in the United States. Although some of the observed increases in health spending likely contribute to improved quality of life, there is also evidence of inefficiency. A portion of geographic variation in costs is commonly attributed to overutilization that is triggered by fee-forservice payments [24]. Cost sharing can balance incentives to overtreat by encouraging patients to question whether a proposed treatment option is worth the expense. In searching for savings, policymakers will naturally be drawn to procedures of particularly high cost, such as knee replacement. Although it is true that discouraging inappropriate knee replacements is beneficial, discouraging appropriate procedures is costly. Cost sharing may be too blunt an instrument to efficiently approach this trade-off when dealing with services that are cost-effective for at least some patients. Employers that self-insure have an obvious incentive to consider productivity effects from treatment when making coverage determinations. Third-party payers, however, may be reluctant to consider productivity effects when considering the benefits of treatment. Gains from increased earnings and reductions in missed work appear to be entirely borne by the employee and the employer. This point of view by some payers may be shortsighted. To the extent payers want to provide a competitive insurance product that offers access to “high-value” services to their enrollees, this study demonstrates the benefits of taking a broader perspective in assessing cost-effectiveness. Plans that choose to use financial incentives that discourage the utilization of certain services must do so carefully because the incorrect implementation of such policies can result in both increased total spending and reduced quality of care. The widespread adoption of VBID similar to the plan introduced by Oregon has the potential for unintended consequences that result in societal losses. Although reducing unwarranted variation in the use of certain high-cost services is a laudable goal, highly cost-effective services should not be discouraged solely on the basis of their cost. VBID policies should consider both the benefits and the costs when assessing the value of a service.
Acknowledgments The Authors thank the American Academy of Orthopaedic Surgeons for financial support. We acknowledge Qian Gu and Sheila Sankaran for assistance in conducting the claims analysis
751
and careful review and edits to the manuscript. The authors benefited from additional review and input from the American Academy of Orthopaedic Surgeons Value Team and a panel of clinical experts. Source of financial support: This study was supported by the American Academy of Orthopaedic Surgeons. R EF E R EN C ES
[1] Chernew ME, Juster IA, Shah M, et al. Evidence that value-based insurance can be effective. Health Aff (Millwood) 2010;29:530–6. [2] Choudhry NK, Fischer MA, Avorn J, et al. At Pitney Bowes, value-based insurance design cut co-payments and increased drug adherence. Health Aff (Millwood) 2010;29:1995–2001. [3] Thomson S, Schang L, Chernew ME. Value-based cost sharing in the United States and elsewhere can increase patients’ use of high-value goods and services. Health Aff (Millwood) 2013;32:704–12. [4] Chernew ME. Additional reductions in Medicare spending growth will likely require shifting costs to beneficiaries. Health Aff (Millwood) 2013;32:859–63. [5] Neumann PJ, Auerbach HR, Cohen JT, Greenberg D. Low-value services in value-based insurance design. Am J Manag Care 2010;16:280–6: Erratum in: Am J Manag Care 2010;16:318. [6] Volpp KG, Loewenstein G, Asch DA. Choosing wisely: low-value services, utilization, and patient cost sharing. JAMA 2012;308:1635–6. [7] Robinson JC. Applying value-based insurance design to high-cost health services. Health Aff (Millwood) 2010;29:2009–16. [8] Fendrick AM, Smith DG, Chernew ME. Applying value-based insurance design to low-value health services. Health Aff (Millwood) 2010;29:2017–21. [9] Kapowich JM. Oregon’s test of value-based insurance design in coverage for state workers. Health Aff (Millwood) 2010;29:2028–32. [10] Oregon Educators Benefits Board. 2010-11 new tiers & co-payments. Available from: http://cms.oregon.gov/OHA/OEBB/Pages/2010NewTiers. aspx#_Additional_Cost_Ti. [Accessed July 31, 2012]. [11] Oregon Public Employees’ Benefits Board. 2012 medical plan comparisons. Available from: http://cms.oregon.gov/das/pebb/pages/ 2012benefits/comparemed.aspx. [Accessed July 31, 2012]. [12] Losina E, Thornhill TS, Rome BN, et al. The dramatic increase in total knee replacement utilization rates in the United States cannot be fully explained by growth in population size and the obesity epidemic. J Bone Joint Surg Am 2012;94:201–7. [13] Cram P, Lu X, Kates SL, et al. Total knee arthroplasty volume, utilization, and outcomes among Medicare beneficiaries, 1991-2010. JAMA 2012;308:1227–36. [14] Lavernia CJ, Guzman JF, Gachupin-Garcia A. Cost effectiveness and quality of life in knee arthroplasty. Clin Orthop Relat Res 1997;345:134–9. [15] Hawker GA, Badley EM, Croxford R, et al. A population-based nested case-control study of the costs of hip and knee replacement surgery. Med Care 2009;47:732–41. [16] Losina E, Walensky RP, Kessler CL, et al. Cost-effectiveness of total knee arthroplasty in the United States: patient risk and hospital volume. Arch Intern Med 2009;169:1113–21. [17] Dall TM, Gallo P, Koenig L, et al. Modeling the indirect economic implications of musculoskeletal disorders and treatment. Cost Eff Resour Alloc 2013;11:5. [18] Ruiz D, Koenig L, Dall TM, et al. The direct and indirect costs to society of treatment for end-stage knee osteoarthritis. J Bone Joint Surg Am 2013;95:1473–80. [19] Oregon transparency: opening state government to everyone. State workforce. State employee salary (2011 June). Available from: http:// www.oregon.gov/transparency/pages/state_workforce.aspx [Accessed July 20, 2012]. [20] Value-Based Insurance Design. (2012, May). NBCH Action Briefs, 6. Available from: http://www.nbch.org/nBch-action-Briefs. [Accessed August 1, 2012]. [21] Choudhry NK, Rosenthal MB, Milstein A. Assessing the evidence for value-based insurance design. Health Aff (Millwood) 2010;29:1988–94. [22] Manning WG, Newhouse JP, Duan N, et al. Health insurance and the demand for medical care: evidence from a randomized experiment. Am Econ Rev 1987;77:251–77. [23] Card D, Dobkin C, Maestas N. The impact of nearly universal insurance coverage on health care utilization: evidence from Medicare. Am Econ Rev 2008;98:2242–58. [24] Welch P, Miller M, Welch G, et al. Geographic variation in expenditures for physicians’ services in the United States. N Engl J Med 1993;328:621–7.
Available online at www.sciencedirect.com
journal homepage: www.elsevier.com/locate/jval
Can Value-Based Insurance Impose Societal Costs? Lane Koenig, PhD1,*, Timothy M. Dall, MS2, David Ruiz Jr., MA3, Josh Saavoss, BA1, John Tongue, MD4 1 KNG Health Consulting, LLC,Rockville, MD; 2IHS Global, Inc.,Washington, DC; 3Econometrica, Inc., Bethesda, MD; 4Oregon Health & Science University, Tualatin, OR
AB STR A CT
Background: Among policy alternatives considered to reduce health care costs and improve outcomes, value-based insurance design (VBID) has emerged as a promising option. Most applications of VBID, however, have not used higher cost sharing to discourage specific services. In April 2011, the state of Oregon introduced a policy for public employees that required additional cost sharing for high-cost procedures such as total knee arthroplasty (TKA). Objectives: Our objectives were to estimate the societal impact of higher co-pays for TKA using Oregon as a case study and building on recent work demonstrating the effects of knee osteoarthritis and surgical treatment on employment and disability outcomes. Methods: We used a Markov model to estimate the societal impact in terms of quality of life, direct costs, and indirect costs of higher co-pays for TKA using
Oregon as a case study. Results: We found that TKA for a working population can generate societal benefits that offset the direct medical costs of the procedure. Delay in receiving surgical care, because of higher co-payment or other reasons, reduced the societal savings from TKA. Conclusions: We conclude that payers moving toward value-based cost sharing should consider consequences beyond direct medical expenses. Keywords: cost sharing, societal benefits, total knee replacement, value-based insurance design.
Introduction
by the procedure’s high cost and growth in utilization, particularly among those younger than 65 years [12,13]. Less clear are the implications for societal welfare of restricting access to TKA— a cost-effective treatment for end-stage OA [14–16]. Increased cost sharing will tend to cause patients to more critically assess the necessity of high-cost procedures. The likely marginal impact of the policy will be more patients choosing to pursue a more conservative approach to care. In the case of OA of the knee, this will typically involve patients choosing to delay surgery until their disease advances further. This would yield short-term savings by temporarily deferring the costs of surgery, but would also postpone the benefits of surgery. In this article, we estimate the societal impact of higher copays for TKA using Oregon as a case study and building on recent work demonstrating the effects of knee OA and surgical treatment on employment and disability outcomes [17,18]. Our findings point to important considerations for future policy discussions surrounding VBID and higher co-payments for knee replacement.
Among policy alternatives considered to reduce health care costs and improve patient outcomes, value-based insurance design (VBID) has emerged as a promising option [1–3]. Under VBID, incentives are used to encourage the use of high-value services or to discourage the use of low-value services. Some payers in the United States, for example, have lowered or eliminated copayments for highly cost-effective or clinically effective outpatient drugs or preventive programs, such as smoking cessation classes. Thus far, most applications of VBID have not used higher cost sharing to discourage the use of specific services. This may be about to change. Current spending levels and the aging of the population are creating enormous pressure to identify solutions to dampen the growth of health care spending. There is also growing recognition that controlling spending will likely mean greater patient cost sharing [4]. In this context, it is not surprising that attention is increasingly focused on the merits of a “carrot-and-stick” approach [5–8]. The state of Oregon may be a harbinger of what is to come in the use of higher co-payments for selective treatments. In April 2011, Oregon introduced a new policy for state employees that imposes an additional $500 co-payment on certain procedures considered by the state to be of “low relative value” [9–11]. Many of the services subject to the additional co-payment are surgical procedures to treat musculoskeletal conditions, including total knee arthroplasty (TKA) for end-stage osteoarthritis (OA). Oregon’s inclusion of TKA in its VBID program is undoubtedly driven
Copyright & 2014, International Society for Pharmacoeconomics and Outcomes Research (ISPOR). Published by Elsevier Inc. This is an open access article under the CC BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/3.0/).
Methods To estimate the impact of higher co-pays for TKA, we first calculated the value of the procedure using a simulation model. Our overall approach was based on Dall et al. [17] and Ruiz et al. [18], with modifications to make the methodology applicable for a working age population in Oregon. Except as noted below, model
* Address correspondence to: Lane Koenig, KNG Health Consulting, LLC, 15245 Research Boulevard, Suite 305, Rockville, MD 20850. E-mail: [email protected]. 1098-3015$36.00 – see front matter Copyright & 2014, International Society for Pharmacoeconomics and Outcomes Research (ISPOR). Published by Elsevier Inc. This is an open access article under the CC BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/3.0/). http://dx.doi.org/10.1016/j.jval.2014.07.006
750
VALUE IN HEALTH 17 (2014) 749–751
assumptions and parameters were based on Ruiz et al. Results were generated for persons between the ages of 40 and 64 years in 5-year age cohorts. For each age cohort, a Markov model (presented in Ruiz et al.) was run until age 67 years when workers were assumed to retire and obtain primary medical coverage from Medicare. For each treatment option examined, the model estimates both direct and indirect costs, as well as qualityadjusted life-years (QALYs). To account for benefit heterogeneity, surgical patients could receive either the full benefit or only a limited benefit from surgery. Indirect costs include missed workdays, lost earnings, and disability payments. A QALY is a unit used to measure both life expectancy and quality of life. One QALY represents a year spent in perfect health, while years spent in imperfect health are represented by some fraction of one. For our case study, we obtained data from Oregon on health plan enrollment by age category. Dependents were excluded from the study. In 2012, more than 40,000 full-time and part-time state workers were enrolled in one of the public employee plans that required high co-payments for TKA. These data were combined with information from the 2009 National Inpatient Sample and population estimates from the US Census Bureau to estimate the age distribution of Oregon state employees undergoing a TKA. Finally, we used the median income for Oregon state employees in 2009 to estimate the costs of missed time from work [19].
Results The results demonstrate that TKA is a highly cost-effective surgical treatment and can yield net societal savings when factoring in indirect costs, such as the impact of knee OA on employment and productivity. As presented in Table 1, direct medical costs for the surgical cohort exceeded those of the nonsurgical cohort by an average of $19,207 and those receiving a TKA rather than continued nonsurgical treatment received 1.9 additional QALYs over the model time horizon. This translates into an incremental cost of $10,108 per QALY gained in a population of similar age and income to Oregon state workers. Benefits in terms of reduced indirect costs (i.e., savings) were higher with TKA than with nonsurgical treatment in all age groups. Indirect cost benefits, which primarily come from higher income as a result of higher levels of employment and earnings for the employed in the surgically treated cohort, vary by age because the length of work life remaining varies with age. For example, we estimated that a TKA for a 42-year-old worker suffering from endstage OA yields a societal savings of $164,687 (or $155,531 excluding disability payments [Disability payments could be viewed as transfers between the government and recipients. Thus, we present results after excluding reductions in disability payments]). For those aged between 60 and 64 years, we estimated that each TKA yields
Table 2 – Effect of delaying total knee arthroplasty on societal savings and QALYs. Delay time
Net societal savings ($)
Change in QALYs
43,842 34,751 18,999 271 6,417
1.92 1.46 1.23 0.95 0.81
No delay 1y 3y 7y 10 y
QALYs, quality-adjusted life-years.
an average societal saving of $25,638 (or $23,472 excluding disability payments). Using the estimated age distribution of Oregon state workers, we found an average total and net (of increased direct medical costs) societal savings of $63,708 and $43,842 per worker undergoing a TKA, respectively. As presented in Table 2, a delay in receiving surgical care, because of higher co-payment or other reasons, reduced the societal savings from TKA. This occurred because benefits accrue over a shorter period of time with delay. Relative to a case with no delay, a delay of 3 years reduced net societal savings from $43,842 to $18,999. Once the TKA procedure has been delayed for more than 7 years, the societal savings turn into a loss. A delay of 10 years results in a societal loss of $6417.
Discussion Effective implementation of VBID principles could be a useful tool for creating a more efficient health care system in the United States. Although the state of Oregon was among the first to apply these principles to a state program, the adoption of VBID and other cost-sharing policy mechanisms is expected to become increasingly common. An estimated 59% of health plans in the United States use monetary penalties to encourage patients to choose more cost-effective treatment options, and many plans financially incentivize patients to participate in shared decision making before treatment [20]. As health care costs continue to rise, such trends toward value-based insurance design are likely to continue as a way to reduce spending. Research demonstrating the extent to which VBID affects consumer behavior is relatively limited, although studies have demonstrated patient sensitivity to cost-sharing variations [21,22]. For example, one study found that lower co-payments for highly valued prescription drugs immediately boosted medication adherence, while another showed a sharp increase in the use of relatively high-cost procedures, such as hip and knee replacement, when
Table 1 – Societal savings from total knee arthroplasty. Age group (y)
Net societal savings (B þ C þ D A) ($)
Total societal savings (B þ C þ D) ($)
Direct medical costs (A) ($)
40–44 45–49 50–54 55–59 60–64 Overall
145,221 116,215 82,719 45,235 5,393 43,842
164,687 135,874 102,570 65,260 25,638 63,708
19,467 19,659 19,851 20,025 20,245 19,207
Difference in indirect costs Household income (B) ($)
Disability payments (C) ($)
155,160 127,269 95,780 60,639 23,522 59,291
9,156 8,378 6,721 4,666 2,166 4,414
Note. Overall category is the component of each column weighted by Oregon state employee age distribution.
Missed work days (D) ($) 371 227 69 45 50 3
VALUE IN HEALTH 17 (2014) 749–751
individuals become eligible for Medicare [2,23]. Recent evidence also suggests that use of services may be more sensitive to increases in cost sharing than reduced out-of-pocket expenses [6]. Thus, Oregon’s policy—if more widely adopted—has the potential of reducing or delaying the usage of TKA. The policy in Oregon attempts to reduce the number of TKAs and attendant direct costs through higher cost sharing on surgery as well as subsidizing preventative care. Patients are not exempt from additional out-of-pocket costs on the basis of the severity of their condition or financial circumstances. As a result, some of those dissuaded from surgery may experience worse health outcomes. Cost sharing will tend to have the largest effect on the behavior of low-income individuals and may exasperate preexisting socioeconomic disparities in health outcomes. This article, along with other research, demonstrates that these consequences can indirectly harm patients, employers, and payers [18]. For some cases, the sum of these costs may significantly offset or exceed the short-term financial benefits resulting from the policy. From a national perspective, the financial impact of one state’s insurance policy for state workers may not appear noteworthy. Oregon’s policy, however, likely reflects broader trends in benefit design. The approach to benefit design other payers follow will significantly influence health care delivery in coming years. There is widespread concern over rising health care costs in the United States. Although some of the observed increases in health spending likely contribute to improved quality of life, there is also evidence of inefficiency. A portion of geographic variation in costs is commonly attributed to overutilization that is triggered by fee-forservice payments [24]. Cost sharing can balance incentives to overtreat by encouraging patients to question whether a proposed treatment option is worth the expense. In searching for savings, policymakers will naturally be drawn to procedures of particularly high cost, such as knee replacement. Although it is true that discouraging inappropriate knee replacements is beneficial, discouraging appropriate procedures is costly. Cost sharing may be too blunt an instrument to efficiently approach this trade-off when dealing with services that are cost-effective for at least some patients. Employers that self-insure have an obvious incentive to consider productivity effects from treatment when making coverage determinations. Third-party payers, however, may be reluctant to consider productivity effects when considering the benefits of treatment. Gains from increased earnings and reductions in missed work appear to be entirely borne by the employee and the employer. This point of view by some payers may be shortsighted. To the extent payers want to provide a competitive insurance product that offers access to “high-value” services to their enrollees, this study demonstrates the benefits of taking a broader perspective in assessing cost-effectiveness. Plans that choose to use financial incentives that discourage the utilization of certain services must do so carefully because the incorrect implementation of such policies can result in both increased total spending and reduced quality of care. The widespread adoption of VBID similar to the plan introduced by Oregon has the potential for unintended consequences that result in societal losses. Although reducing unwarranted variation in the use of certain high-cost services is a laudable goal, highly cost-effective services should not be discouraged solely on the basis of their cost. VBID policies should consider both the benefits and the costs when assessing the value of a service.
Acknowledgments The Authors thank the American Academy of Orthopaedic Surgeons for financial support. We acknowledge Qian Gu and Sheila Sankaran for assistance in conducting the claims analysis
751
and careful review and edits to the manuscript. The authors benefited from additional review and input from the American Academy of Orthopaedic Surgeons Value Team and a panel of clinical experts. Source of financial support: This study was supported by the American Academy of Orthopaedic Surgeons. R EF E R EN C ES
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