The increasing financial burden on consumers concerned Fendrick, a general internist.

“I was motivated by the fact that my patients – even those with good insurance – couldn't afford to pay for the medical services I begged them to do, such as immunizations, cancer screenings, and filling prescriptions for potentially life-saving medications,” he says.

Clinical nuance

The growing problem of cost-related non-adherence inspired Fendrick and his University of Michigan colleague Michael Chernew (now at Harvard Medical School) to find a better way.

Fendrick coined the phrase, “clinical nuance,” which is the basis upon which the concept of value-based insurance design is built.

“The first tenet of clinical nuance is that medical services differ in the level of health produced,” Fendrick explains.

In other words, certain clinician visits, diagnostic tests and drugs are more important than others in terms of the amount of individual and population health produced.

“The second tenet of clinical nuance is that for every medical service, there will be variations in clinical value depending on who gets the service (that value could vary due to patient characteristics like, for example, gender and family history), who delivers it (provider characteristics like whether the clinician is a primary care provider or a specialist) and where it's provided (for example, inpatient or outpatient care).”

These concepts are critical because value-based insurance designs reduce or remove financial barriers to specific high-value services for those individuals who are most likely to benefit. It seems simple – a mere reallocation of funds to those services or providers that produce high-quality (and vital) health care services for the money and away from those that don't. Such a move toward clinical nuance would require payers to utilize tools that measure both the quality of the care delivered by a provider and the specific medical needs of the patient.

“Clinical nuance is an essential element of the movement from volume to value in that in that it specifies the appropriate clinical circumstances for care,” Fendrick notes. “Such an approach seems more intuitive than increasing consumer costs for all services regardless of the clinical benefit produced – I think we should provide nuanced incentives for clinicians and consumers to improve access to those services that accepted metrics deemed as high-quality care. These includes services like cancer screenings, glucose control and eye exams for diabetics, and use of guideline-recommended medications, such as beta-blockers after a heart attack or long-acting medications that reduce asthma flares.”

Lacking innovation

Although payers, insurers and clinicians are implementing value-based thinking in payment model structure and negotiations, a similar innovation has yet to revolutionize health benefit design. And that means increasing numbers of patients who faithfully meet their premium obligations for their employer-provided or exchange-purchased health plans yet can't afford vital medications or physician-recommended screenings.

“There is growing momentum regarding a shift from volume to value on the payment reform side,” Fendrick says. “The move away from fee-for-service to quality-based payment programs is encouraging. But I am greatly concerned that the rapid proliferation of insurance plans with higher co-payments and deductibles is making it harder for consumers to access the same services that value-based payment models are using to benchmark doctors.”

He offers an eye exam for a patient with diabetes as an example.

“As a primary care physician, I am provided a bonus based on my eye exam completion rate for my patients with diabetes,” Fendrick explains. “As I strive to practice high-quality care, it makes no sense to me that a diabetic patient enrolled in certain high-deductible health plans has no coverage for an eye exam and other guideline-recommended services until the deductible for the year has been met.”

And an eye exam is far from the only (or most significant) non-deductible-exempt expense that a patient with diabetes might not be able to afford – there are medications to fill, smoking-cessation and weight loss programs, and other services that, when offered to these specific patients, could eliminate millions of dollars of future health care expenditures.

Although a plan with V-BID elements is not yet accessible for all Americans, Fendrick notes that substantial progress has been made regarding the adoption of clinically nuanced plan designs since he and Chernew first published the V-BID concept more than a decade ago.

“One of the most popular aspects of Obamacare, or the Patient Protection and Affordable Care Act, is the elimination of consumer cost-sharing for specific preventive care such as immunizations and screening for cancer, depression, HIV and diabetes,” he says. “This is nuanced coverage. Although they might not be aware of the term 'clinical nuance,' all health plans are already implementing value-based insurance design since they now must provide colon cancer screenings, PAP smears and other preventive care at no cost to specifically defined patient groups.”

Fendrick says that employers should be excited about the prospect of value-based insurance based on the accumulating published evidence.

First, “if you allow consumers to pay less for something, they'll buy more of it,” he points out.

V-BID programs that lower consumer out-of pocket costs have been shown to modestly increase adherence – between 3 percent and 13 percent, depending on the size of the subsidy, the population studied and how effectively the program was communicated, among other factors.

“Under no circumstance should those gains be perceived as a panacea to our adherence problems,” Fendrick cautions.

“Second, the V-BID programs are a welcome give-back in an environment of take-aways,” he continues. “As consumers are asked to pay more for everything, lower out-of-pocket costs are something that I believe brokers and employers can market well, even if the V-BID coverage enhancements are relatively small. Third – most well-designed V-BID programs for common chronic diseases do not increase total costs. While cost savings are unlikely to occur for several years, we do produce more health at the same price. It's like flying first-class for the price of a coach ticket. These programs may not be big price-savers – nor were they ever intended to be. If you need savings in the short term, it is necessary to couple V-BID cost-sharing reduction 'carrots' with increases in cost-sharing for low-value services 'sticks'. We have developed tools to assist with these tradeoffs.”

Breaking economic barriers

Last, Fendrick notes that the populations that benefit most from value-based insurance plans are those individuals who are economically vulnerable or those who are dealing with multiple chronic diseases.

“We're very pleased to know that V-BID is one of many available tools that can be used to help reduce the well-documented disparities in health care that exist among socioeconomic levels,” he says.

In addition to the lack of clinical nuance in the health care space, there have been other obstacles to implementing V-BID principles. High-deductible health plans, which have been skyrocketing in popularity, almost universally lack the nuance that value-based insurance design demands, and health savings account plans cannot cover high-value secondary services because the Internal Revenue Service “safe harbor” rule does not allow for making such services deductible exempt – so at the moment, a V-BID/HSA hybrid plan is not a possibility.

“Convincing the IRS to refine the 'safe harbor' provision to allow more services to be provided as deductible-exempt is a major initiative for the V-BID Center and its broad, bipartisan, multi-stakeholder coalition” Fendrick says.

He calls the proposed hybrid a high-value health plan, which he hopes will one day soon be a valid consumer alternative to HDHPs.

“If successful, the Center's proposed HVHP would exempt more essential medical services from deductibles while maintaining high deductibles for services with little or no evidence of benefit,” he explains. “A V-BID Center collaboration with Harvard and University of Minnesota researchers estimates that more than 40 million Americans would enroll in this type of 'smarter' high-deductible plan.

“The evidence documenting the negative impact of higher deductibles on access to evidence-based care will be an important momentum-driver for the V-BID movement,” Fendrick predicts. “As a colleague, Joseph Ditre, often reminds me, 'The one thing worse than being uninsured is paying health care premiums and still being uninsured.' Unfortunately, that's a predicament in which a growing proportion of Americans are finding themselves as they are enrolling in these very skinny plans with little coverage before the deductible is met.”

Public policy issues – such as adjusting the IRS safe harbor rule and inching V-BID ideas into Medicare and Medicaid programs – have been front-and-center for Fendrick as he's worked to overcome hurdles to implementation.

“VBID is one of the few health care ideas with bipartisan political support,” Fendrick notes when referring to bipartisan legislation to include VBID principles in Medicare Advantage plans. “As evidence is accumulated and momentum builds, brokers will be increasingly instrumental to the dissemination of value-based insurance design among employer groups – and to the implementation of its use by consumers.”