VBID and alternative payment models comprise two approaches to reform with different incentives that influence underlying motives. The underlying principle of Value-Based Insurance Design (VBID) is to align patient out-of-pocket costs, or cost-sharing (deductibles, co-pays, etc.), with clinical value of services. Decreasing cost-sharing for high-value services and increasing cost-sharing for low-value services is the goal of VBID.
A New Evolution of Value-Based Insurance Design
A few moths ago, the University of Michigan’s Center for Value-Based Insurance Design released a plan for increasing access to quality health care services: VBID X. Under this plan, services defined as “high-value” include cholesterol testing, cardiac rehabilitation, and blood pressure monitors. “Low-value” services include spinal fusions, x-rays/diagnostic imaging, and vitamin D testing, to name a few.
By lowering cost-sharing for high-value services and increasing cost-sharing for low-value services, VBID expands access to care without needing to offset the costs of increased access with higher premiums. This is important especially for patients with chronic illness, who often forgo care when they are unable to afford it-posing consequential risks to disease management and health outcomes.
VBID seems to have gained traction in federal and state policy programs. The principles of VBID were incorporated in the Affordable Care Act, which eliminated consumer cost-sharing for specific preventive care services (screenings, counseling, and immunizations). VBID X targets benefit design specifically for insurance exchanges in the individual market. The ultimate goal is to increase uptake of these plans in the commercial health insurance space. The cost-neutral approach of VBID is attractive in the exchanges, where there is limited flexibility on deductibles and premiums. Furthermore, VBID has bipartisan support and relevance for both public and private payers.
VBID and Alternative Payment Models
When thinking about the direction the health system is headed in the transition away from volume-driven service, alternative payment has emerged as a vehicle that moves us closer towards value-based care. Examples of alternative payment schemes include accountable care organizations, bundled payments, and other provider reimbursement strategies that tend to involve provider-based approaches. In contrast, value-based insurance reform focuses more on ways to use member cost sharing to improve the value of care.
What are the contributions of benefit design to payment reform? Particularly, how can medical services be incorporated into alternative payment models, and what implications would this have on disease management and overall health outcomes? The integration of benefit design to increase timely access to high-value services could result in better care outcomes in an alternative payment strategy. This approach supports providers in making better clinical decisions that will improve health outcomes for patients & potentially lower costs to insurers as a result of less unnecessary care. However, it is worth contemplating how to best align the motives of both payers and providers for a successful integration strategy.
In economic terms, provider incentives target the supply side, while payer incentives such as VBID are aimed at demand. Aligning the incentives is a challenging but critical step in improving the quality of care and patient experiences while containing costs. In addition, understanding how to align incentives with motivations encourages payers and providers to operationalize value in alternative payment and insurance design. Recognizing that there could be some synergy between value-based insurance design and alternative payment mechanisms could offer more opportunities to share accountability for patient care.
The Future of Health Reform
VBID X and other benefit design strategies come at a time of ever-increasing health expenditures. Health insurance companies are being chided for their “greed” and “money-saving tricks”. Several of the candidates in the Democratic debates seem to be in consensus that insurance companies need to be targeted for reaping exorbitant profits. Some are calling for a complete overhaul of the insurance system in favor of a national insurance plan. VBID may be incremental at best, and it certainly does not offer a solution to all the problems with our healthcare system. However, a closer exploration of how such strategies could be aligned with ongoing efforts in other parts of the healthcare system would strengthen partnerships between payers and providers, while maintaining our commitment to value.
Nicole Pereira