Turning a Blind Eye to Value

Abstract

Employers want value in benefit design. Why don’t they get it?

Value-driven decisions by health benefit plans were emerging from the cost-only decision system in the U.S. market — until the recession hit. Many factors, such as more sophisticated medical treatments and testing technologies that result in the consumption of more services, drive the cost of healthcare. As such, even modest savings can be significant for employers and employees in today’s budget crunch. And yet, knowledge about a value-based approach and short-term consequences remains limited among stakeholders in the market.

Affordability and effectiveness are two components of value for health benefit plan sponsors. For example, employers have used value-based purchasing strategies for many services over the years, akin to the collective purchasing power by hospitals and health plans. However, a recent survey (Rosenthal 2007) found that, as a whole, employers do not appear to be implementing health-related programs in line with value-based purchasing principles that include both affordability and effectiveness. Health plan quality information, such as that from the National Committee for Quality Assurance and eValue8, is used about two thirds of the time by employer decision makers but less than one quarter of the time by healthcare providers — with neither having much effect on pay-for-performance decisions.

The Deloitte Center for Health Solutions (2007) reported that although employers are not ready to adopt value-based purchasing, they see its potential to lower costs and to improve the quality of services provided through contracted health plans. Their ambivalence lies in a concern that value-based purchasing is limited in its potential to contain costs. And yet, RAND has reported that the promise for cost containment can be found in the past 20 years’ worth of published literature, which suggests that spending could be reduced 30 percent without adversely affecting health (Garber 2007).

As a medically focused, regulatory–compliance-driven market, most healthcare system and plan design efforts reside in reactive management or service coverage. For example, employees with cardiovascular disease (CVD) are at risk for a stroke or a heart attack but are not routinely screened. The lack of proactive detection and subsequent risk stratification for CVD has emerged as a leading cost item in medical claims. Good screening-and-detection programs identify people for appropriate management therapies that can avoid costly emergency hospitalizations.

Value-based health designs provide a balanced playing field for coverage decisions if they include affordability and effectiveness parameters. To reach their potential, value-based strategies for medical or pharmacy bene fit design need to incorporate the principles known about behavior change and patient relationships — from wellness to hospitalization. Such thinking can lead to a view of integrated health coverage that shifts away from stakeholder interrelationships and silo benefit tactics. One result is that benefit decision makers will become more educated and sophisticated in knowing how the system operates and what they want to fix.

Value-based design also requires looking beyond individual costs and addressing plan sponsor issues in each product’s value proposition prior to coverage. For example, what is the impact of treating a condition with various medical, surgical, drug, and nondrug treatments available in a benefit program? Among drug choices, even with a single-source product, the relative value to the employer could be evaluated on the basis of the most appropriate level of coverage in the benefit program and not a national standard. When drug alternatives are available, data beyond clinical information alone can be used to determine the best overall economic fit for an employer benefit program.

Statins, for example, represent a large pharmacy cost, but are an asset in the management of CVD. Efforts to date have focused on generic drug substitution due to the influence of vendors, who gain the most from that practice. But generic substitution alone is a self-limiting value proposition from an employer’s total-cost perspective, and it ignores the bigger value proposition of managing CVD risk.

Most benefit plan strategies continue to focus narrowly on access or copayment modifications through current vendor relationships. This practice ignores the marketplace principle of providing value to the business enterprise through a reasoned value proposition that creates a winning workforce. Clearly, value is in the eye of the plan sponsor.

FIGURE.

Average pharmacy benefit premiums PMPM among HMOs, 2007

PMPM=per member per month.

Source: Sanofi-aventis Managed Care Digest Series 2008

TABLE.

Leading causes of employee absenteeism and presenteeism

Top 10 health conditions viewed from multiple perspectives
Medical	Pharmacy	Productivity	Total cost
Other cancer	High cholesterol	Fatigue	Back/neck pain
Back/neck pain	GERD	Depression	Depression
Other chronic pain*	Arthritis*	Back/neck pain	Fatigue
Coronary heart disease*	Diabetes*	Sleeping problem	Other chronic pain*
Sleeping problem	Depression	Other chronic pain*	Sleeping problem
High cholesterol	Hypertension	Arthritis*	High cholesterol
Hypertension	Asthma*	Hypertension	Arthritis*
Diabetes*	Allergy	Obesity	Hypertension
Headache	Anxiety	High cholesterol	Obesity
Depression	Coronary heart disease*	Anxiety	Anxiety

^*These conditions may be treated with biologic medications. GERD=gastroesophageal reflux disease.

Data are based on Health and Work Performance Questionnaire analysis of 15,380 employees. Total cost combines the medical, pharmacy, and productivity data.

Source: Loeppke 2007