With most health insurance, patients’ premiums and out-of pocket costs have little to do with the quality or value of the care they get — their copays may be the same for an effective procedure as for an ineffective one. Michael Chernew, PhD, a professor of Health Care Policy at Harvard Medical School, thinks patients should be able to consider “value” — namely cost and quality — when they choose care. But, he says, a shift in that direction won’t be easy. “There is a real question as to how we’re going to incent individuals to choose high-value care,” he says.”

And he thinks copays could be the motivator. Already, some patients may be willing to pay more for a drug that alleviates a medical condition the first time instead of paying less for a procedure that doesn’t work as well. Patients may also be willing to pay more for care at a facility that has lower complication rates. But Dr. Chernew believes they should be required to pay less for the “better” options, which could encourage better care, and in certain cases even save money in the long run.



If you could scale up one remarkable health care idea, what would it be? 


"Don’t look for the easy, universal answer to the questions of cost and quality. It’s going to take a synergy of benefit design and payment reform."

- Michael E. Chernew, Ph.D., Leonard D. Schaeffer Professor of Health Care Policy in the Department of Health Care Policy at Harvard Medical School


That’s the idea behind value-based insurance design (VBID) — to use smaller copays to reward patients who opt for hospitals, doctors and procedures that deliver the best care at the best cost. VBID is intended to encourage the use of what are called “high-value interventions” while simultaneously discouraging the use of “low-value interventions.”

It’s based on the theory that it makes more sense to lower patient costs for high-value services like preventive care and medications to manage conditions like asthma or diabetes. The goal is to averting complications that lead to costly emergency room visits and hospital admissions. At the same time, insurance companies would charge more for low-value services, like proton beam therapy for prostate cancer, which costs 75 percent more than radiation therapy yet doesn’t provide any additional benefit when treating prostate cancer.

Value-based insurance design takes many different forms, Dr. Chernew says. For instance, some insurers use lower copayments to drive patients to selected high value hospitals and doctors. Reduced out-of-pocket costs for higher-value drugs like statins is a common form of VBID. The value comes from increasing the likelihood that patients will take their medicine as prescribed and stay healthy.

Dr. Chernew’s research suggests that the approach is working. He and his colleagues evaluated a company program that reduced copayments for the majority of generic drugs used to treat high blood pressure, diabetes, high cholesterol and asthma from $5 to zero and slashed copayments for brand name drugs in half. According to articles published in Health Affairs, they found that adherence to most medications increased between 7 and 14 percent. The group concluded that VBID increases the use of services that are “likely to improve health” without increasing costs for employers or employees.

While encouraging the use of high-value services can reduce overall health care costs in some cases, VBID programs won’t meet their potential until they also integrate higher copayments for low-value care, Dr. Chernew says. That’s where the paradigm shift needs to occur — and is occurring. Take that proton beam therapy. A growing number of large insurers have stopped covering it altogether, so if a patient still wants it, he’ll have to pay the $30,000 price tag himself.

A presentation at the AcademyHealth 2013 Annual Research Meeting in Baltimore revealed both savings and improved care with California’s pilot program for retired state employees. The California Public Employees’ Retirement System (CalPERS) used lower out-of-pocket costs to drive patients to choose approved facilities that were considered “high-value” for knee and hip replacement surgeries. CalPERS put out a list of these facilities that met certain quality standards and also charged less than $30,000 for the surgery. Patients in the program paid a lower copay if they chose a high-value facility from the list than if they chose a hospital that charged more than $30,000 for the surgery or didn’t meet the quality standards.

Patients who used the high-value options experienced fewer hospital-acquired infections and lower complication rates, saving the health plan 19 percent on each admission, or about $5.5 million. One unforeseen effect of the CalPERS program was that 40 additional hospitals in the state cut their surgery prices to avoid losing patients, according to a July 13, 2013, report in the Los Angeles Times. Those facilities met the quality standards and dropped their prices to get on the high-value list. “That was an unexpected outcome,” says David Cowling, chief of CalPERS’ Center for Innovation.

Dr. Chernew says the greatest challenges in implementing VBID design include communicating the concept to patients and fine-tuning plans. Educating patients on the differences in drug and procedure efficacy and what defines a high-value procedure or facility may be a hurdle, as patients are not used to “shopping” for health care. And designing plans to provide the right incentives may take time and trials. Chernew says insurers may need to charge different copays within each plan for various procedures, drugs and treatments to drive patients toward high-value care. “Obviously, you can’t have a plan with 20,000 different copays, but a plan with a single copayment is probably not sophisticated enough.”

“There’s something in between, and we still have to figure that out.”