New study shows VBID program can save money

Value-based insurance design programs — which reduce patient co-payments for highly effective treatments — can break even financially or possibly save money, according to a new study from University of Michigan, Harvard and other researchers.

In an article published today by Health Affairs, the researchers analyzed data from a large corporation that implemented a VBID program in 2005. Co-payment rates were reduced for employees using five classes of drugs used to treat several serious but common chronic conditions, including diabetes, hypertension and heart disease. The paper can be viewed at http://content.healthaffairs.org/cgi/content/abstract/hlthaff.2009.0119.

In this VBID program, patients using the specified medications were offered at least a 50% co-payment reduction. The study's authors examined both the amounts spent on the high value services and overall spending by the employer using the VBID plan.

"From a total cost perspective, the VBID program likely broke even, and possibly saved money," said A. Mark Fendrick, M.D., co-director of the University of Michigan's Center for Value-Based Insurance Design [www.vbidcenter.org].

The financial returns from an employer perspective will be less favorable, but significant savings from reduced use of non-drug services are likely and will substantially offset the added employer spending on prescription drugs, the researchers found.

"But even if the VBID program were to slightly increase employers' medical costs, our expectation is that as people increase the use of high-value services, their health will not only improve, but overall medical costs will decline."

Fendrick, who also is a professor in the Department of Internal Medicine and professor of Health Management and Policy, created the VBID concept with Michael Chernew, professor in the Department of Health Care Policy at Harvard Medical School. Both are authors on the new study.

"It seems reasonable to conclude that the financial effects of this VBID intervention were at least cost neutral - if not cost saving - from a total cost perspective. Value-based insurance designs could be an important component of a broader cost containment strategy," says Chernew about the study.

Fendrick stresses that VBID programs focus on removing barriers for treatments that are proven to be effective. When costs are reduced, patients are more likely to use high value services. For those with lower co-payments, the percentage of patients not taking their medication declined by about 10 percent in 4 of the 5 drug classes.

The financial impact of behaviors resulting in improved health can be measured in terms of savings on both medical [such as fewer emergency room visits and hospitalizations] and non-medical [such as fewer disability days, less absenteeism and greater worker productivity] spending, Fendrick says.

Fendrick and Chernew currently are working with Congressional leaders on incorporating VBID concepts in health care reform. Language encouraging the use of VBID concepts is in the bill being negotiated in conference committee.

"The clinical benefits of removing barriers to high value services were clear, but before this paper, the economic ramifications of VBID programs were uncertain. We can now say, at worst, VBID programs are cost neutral from a total cost perspective," Fendrick says.

Chernew adds. "Payers are facing tremendous pressure to reign in health care costs. Compared to the status quo, we are confident that, if carefully designed, VBID programs can produce more health at any price." "We believe that VBID should remain an integral part of ongoing health care reform discussions."