De­ductible de­bate

Ex­perts urge new plan de­signs to en­cour­age ef­fec­tive care

Modern Healthcare - - NEWS - By Bob Her­man

Methodist Le Bon­heur Health­care in Mem­phis, Tenn., re­cently dis­cov­ered how high­d­e­ductible health plans change pa­tient be­hav­ior. Mem­phis-based Fed-Ex Corp. moved its 400,000 U.S. em­ploy­ees and de­pen­dents into high-de­ductible plans with health sav­ings ac­counts as of Jan. 1, 2014. Methodist had a con­tract with Cigna, which ad­min­is­tered Fed-Ex’s plan. Most Fed-Ex em­ploy­ees in the Mem­phis area use Methodist providers and fa­cil­i­ties.

Then, in the first three months of 2014, Methodist be­gan los­ing money. The not-for-profit health sys­tem was $17 mil­lion be­hind bud­get at the end of that first quar­ter. Michael Ug­wueke, Methodist’s pres­i­dent and chief op­er­at­ing of­fi­cer, said that when the sys­tem’s num­ber of com­mer­cially in­sured pa­tients came in well be­low ex­pected, it was ev­i­dent that Fed-Ex’s new high-de­ductible plans had con­trib­uted to the loss.

Methodist quickly re­sponded with mod­est lay­offs and added cost-con­trol mea­sures. Some of Methodist’s

pa­tient vol­umes re­turned at the end of the year, af­ter pa­tients met their de­ductibles and were more will­ing to use health­care ser­vices. The sys­tem ended 2014 with a sur­plus. But the ex­pe­ri­ence was a sig­nal to Methodist’s lead­ers that high-de­ductible plans were chang­ing the dy­nam­ics of the health sys­tem, for bet­ter or worse.

“We’ve read and heard about em­ploy­ers in­tro­duc­ing high-de­ductible plans as a means of deal­ing with health­care costs,” Ug­wueke said. But un­til the Fed-Ex ex­pe­ri­ence, “we didn’t re­ally feel it that much.”

Some health pol­icy ex­perts and law­mak­ers see high-de­ductible health plans as a key to re­duc­ing U.S. health­care costs through a con­sumer-driven model. The con­cept is that pa­tients will use health­care ser­vices more thriftily—avoid­ing med­i­cally un­nec­es­sary care and shop­ping around for lower-priced hos­pi­tals, doc­tors, prod­ucts and ser­vices—if they face greater out-of-pocket ex­po­sure to costs. Freemar­ket ad­vo­cates long have pushed this ap­proach.

But some ex­perts ar­gue that high­d­e­ductible plans are blunt and po­ten­tially danger­ous in­stru­ments as cur­rently de­signed. As an al­ter­na­tive, some em­ploy­ers, in­sur­ers and ob­servers are cham­pi­oning value-based in­sur­ance de­sign (VBID) as a way to re­fine the rough edges of high-de­ductible op­tions. VBID plans waive or re­duce out-of­pocket costs for ser­vices and drugs that are con­sid­ered ef­fec­tive treat­ments for pa­tients with chronic health con­di­tions such as di­a­betes. Ad­vo­cates say plans should be de­signed to en­cour­age pa­tients to get such ser­vices by mak­ing them free or low-cost.

While high-de­ductible plans have been grow­ing for a num­ber of years, they have pro­lif­er­ated un­der the Af­ford­able Care Act. In­sur­ers in­creas­ingly have to com­pete on pre­mium for a stan­dard pack­age of benefits, and em­ploy­ers want to avoid the law’s so­called Cadil­lac tax on high-value health plans that starts in 2018. In the ex­panded in­di­vid­ual in­sur­ance mar­ket, con­sumers are look­ing for the cheap­est pre­mi­ums and high-de­ductible de­signs and nar­row provider net­works are two cen­tral ways in­sur­ers are able to of­fer lower rates.

Un­der In­ter­nal Rev­enue Ser­vice rules, a high­d­e­ductible plan for 2015 must have a min­i­mum de­ductible of $1,300 for in­di­vid­ual cov­er­age and $2,600 for fam­ily cov­er­age for pol­i­cy­hold­ers to qual­ify for a tax-ad­van­taged health sav­ings ac­count. Many plans cou­ple high de­ductibles with sub­stan­tial co­pay­ments and coin­sur­ance. Ac­cord­ing to the Kaiser Fam­ily Foun­da­tion, 41% of work­ers with job-based cov­er­age were en­rolled in a plan with a de­ductible of $1,000 or more for sin­gle cov­er­age in 2014, up from 10% in 2006.

RAND Corp. stud­ies in the 1970s and again in 2011 found that peo­ple in high-de­ductible plans re­duced their health­care ex­penses when they had to pay more out of their own pock­ets. But re­searchers found that high-de­ductible plan en­rollees skimped on both nec­es­sary and un­nec­es­sary care. Ex­perts warn that this con­sumer strat­egy will lead to more ex­pen­sive treat­ment down the line.

A re­cent study pub­lished by the Na­tional Bureau of Eco­nomic Re­search found that use of med­i­ca­tions to treat hy­per­ten­sion, high choles­terol and di­a­betes dropped when one em­ployer switched to a high­d­e­ductible health plan that did not ex­empt pre­scrip­tion drug spend­ing. Pa­tients’ out-of-pocket spend­ing for the drugs de­clined, the study found, and most of that de­crease was at­trib­uted to us­ing less med­i­ca­tion.

High de­ductibles are a con­cern be­cause “peo­ple are mak­ing choices about what they will get or not,” said Bernard Tyson, CEO of Oak­land, Calif.-based Kaiser Per­ma­nente, which nev­er­the­less has be­gun of­fer­ing high­d­e­ductible plans.

“Even­tu­ally, with some­thing that re­ally needs to be done, you end up with (pa­tients) drag­ging it out.” Con­se­quently, their con­di­tion and the cost of care “gets more and more se­ri­ous.”

An­other is­sue is how high-de­ductible plans cover pre­ven­tive ser­vices such as choles­terol screen­ings and vac­cines. The ACA re­quires all health plans to cover 17 ser­vices that earn A or B rat­ings from the U.S. Pre­ven­tive Ser­vices Task Force with no de­ductibles or cost-shar­ing. But there’s a wrin­kle: If those screen­ings and pre­ven­tive ser­vices lead to fur­ther tests, pro­ce­dures or pre­scrip­tion drugs, pa­tients are sub­ject to their plans’ cost-shar­ing.

In ad­di­tion, fed­eral rules bar health plans from cov­er­ing clin­i­cally rec­om­mended ser­vices for peo­ple al­ready di­ag­nosed with a chronic ill­ness un­til the de­ductible is met. For ex­am­ple, a doc­tor might rec­om­mend an eye exam for a pa­tient with di­a­betes, but the pa­tient would have to pay for the exam out of pocket be­cause it’s not a pre­ven­tive screen­ing. “You pay the same whether it’s some­thing I beg my pa­tients to do or I beg my pa­tients not to do,” said Dr. Mark Fen­drick, direc­tor and co-founder of the Uni­ver­sity of Michi­gan Cen­ter for Value-Based In­sur­ance De­sign.

Un­der the ACA, the max­i­mum out-of­pocket lim­its for 2015 are $6,600 for an in­di­vid­ual plan and $13,200 for a fam­ily plan. Those high de­ductibles and out-of­pocket max­i­mums are mak­ing health­care un­af­ford­able for many pa­tients, es­pe­cially those with lower in­comes, lead­ing many to skip nec­es­sary care, ac­cord­ing to re­cent re­ports from the Com­mon­wealth Fund and con­sumer ad­vo­cacy group Fam­i­lies USA.

The Com­mon­wealth Fund found that 14 mil­lion adults were un­der­in­sured last year be­cause their de­ductibles equaled at least 5% of their in­come, in­cen­tiviz­ing them to put off care. More than a quar­ter of adults who pur­chased in­di­vid­ual cov­er­age on the ACA ex­changes last year said they skipped med­i­cal pro­ce­dures or did not buy drugs be­cause they cost too much, ac­cord­ing to Fam­i­lies USA. High-de­ductible plans were cited as a pri­mary cause.

“Gain­ing health cov­er­age too of­ten still leaves health­care un­af­ford­able

“We’ve read an­dand heard about em­ploy­ers in­tro­duc­ing high-de­ductible plans as a means of dress­ing and deal­ing with health­care costs" But un­til the Fed-Ex ex­pe­ri­ence, "we didn't re­ally feel it that much" Michael Pres­i­dent Ug­wueke and chief op­er­at­ing of­fi­cer, Methodist Le Bon­heur Health­care

due to high de­ductibles and other outof-pocket costs,” said Ron Pol­lack, ex­ec­u­tive direc­tor of Fam­i­lies USA.

But in­sur­ers ar­gue that the pop­u­lar­ity of high-de­ductible plans proves that con­sumers value lower pre­mi­ums and the free­dom to choose such plans. Roughly 20% of Aetna’s em­ployer­based mem­bers are in high-de­ductible plans, com­pared with 10% in 2009. Michael Booth, pres­i­dent of Ax­ion Risk Man­age­ment Strate­gies, a Chicagob­ased health benefits con­sult­ing firm, noted that the health sav­ings ac­counts linked to high-de­ductible plans give work­ers a tax-ad­van­taged means of pay­ing out-of-pocket costs.

But Kaiser’s Tyson ac­knowl­edged some con­sumers’ un­hap­pi­ness with the plans. He re­cently spent time in Kaiser’s call cen­ters field­ing phone calls from mem­bers who wanted to know why they were re­ceiv­ing out-of-pocket bills they couldn’t af­ford when they were also pay­ing monthly pre­mi­ums. “You hear real peo­ple talk­ing and the real peo­ple don’t like it,” Tyson said. They ask, ‘Why am I pay­ing you 50, 60, 70, 100 bucks ev­ery month for your care, and then I come in and you charge me an­other 30, 40, 50 bucks, and oh by the way, I don’t have that kind of money.’ ”

The prob­lem isn’t just the size of the de­ductible. It’s also the ac­tual prices of health­care ser­vices. Mike Dendy is CEO of Nor­cross, Ga.-based Ad­vanced Med­i­cal Pric­ing So­lu­tions, a com­pany that au­dits health­care bills for self-in­sured em­ploy­ers to en­sure that providers and third-party pay­ers are charg­ing ac­cu­rate and rea­son­able prices. He said third­party pay­ers of­ten don’t closely scru­ti­nize the ac­cu­racy of the charges. Com­pa­nies and pa­tients have to pay the bal­ance, of­ten un­aware the bills haven’t been thor­oughly re­viewed.

High-de­ductible plans are sup­posed to en­cour­age pa­tients to shop around for lower prices and bet­ter qual­ity. While more in­sur­ers are of­fer­ing on­line cost and qual­ity trans­parency tools, such tools still are not widely avail­able or eas­ily us­able, and they of­ten lack cred­i­ble qual­ity in­di­ca­tors about providers. That makes it dif­fi­cult to shop even for non­emer­gency, elec­tive ser­vices.

But per­haps the most per­va­sive prob­lem with high-de­ductible health plans is their in­flex­i­ble de­sign. Uni­ver­sity of Michi­gan’s Fen­drick and oth­ers tout value-based in­sur­ance de­sign as an im­prove­ment. VBID al­lows plans to in­cen­tivize pa­tients to seek out ser­vices that are clin­i­cally rec­om­mended and could im­prove out­comes and re­duce costs. It’s adding “clin­i­cal nu­ance” to plans, Fen­drick said.

Some em­ploy­ers have in­cor­po­rated VBID into their plans. A 2010 Health Af­fairs study said that less than 20% of large em­ploy­ers use VBID, although many more are in­ter­ested in im­ple­ment­ing such de­signs. For in­stance, Pit­ney Bowes re­duced cost-shar­ing for asthma and di­a­betes drugs from 50% to 10% in the early 2000s, which low­ered the long-term health costs of its em­ploy­ees with asthma and di­a­betes. Two Ore­gon public-em­ployee health plans adopted value-based de­ductibles and benefits in 2010. Aetna launched its Rx Healthy Out­comes pro­gram in 2011, which re­duces co­pays for cer­tain drugs that treat chronic con­di­tions.

Last month, mem­bers of the House and Se­nate pro­posed bi­par­ti­san com- pan­ion bills that would cre­ate a VBID demon­stra­tion pro­gram for the Medi­care Ad­van­tage pro­gram. Par­tic­i­pat­ing Ad­van­tage plans would be able to re­duce co­pays and coin­sur­ance to en­cour­age the use of ev­i­dence-based ser­vices, but they would not be able to raise cost-shar­ing.

“When pa­tients forgo high-value med­i­ca­tions or health­care ser­vices due to cost, they are more likely to suf­fer ad­verse and of­ten se­ri­ous events that could have been pre­vented, ul­ti­mately driv­ing up the cost of care,” Sens. John Thune (R-S.D.) and Deb­bie Stabenow (D-Mich.) said in a joint news re­lease.

With value-based in­sur­ance de­signs, “We pre­serve the trans­parency, we pre­serve the con­sumer re­spon­si­bil­ity, we pre­serve the de­ductible lev­els, but we don’t make it a one-size-fits-all de­ductible level,” Fen­drick said.

Oth­ers, how­ever, aren’t con­vinced that any form of high de­ductibles is nec­es­sary or de­sir­able for im­prov­ing care or re­duc­ing costs. Dr. Stephen Kem­ble, a psy­chi­a­trist in Hawaii, notes that de­ductibles are prac­ti­cally nonex­is­tent in his state. Hawaii passed an em­ployer man­date law in 1974 that re­quires all com­pa­nies to pro­vide health in­sur­ance to em­ploy­ees who work more than 19 hours a week. Em­ploy­ers must pay at least half of pre­mi­ums, and worker con­tri­bu­tions can­not be more than 1.5% of their wages.

Em­ployee plan con­tri­bu­tions and de­ductibles av­er­age about 6% of the me­dian Hawai­ian house­hold, the low­est of any U.S. state, ac­cord­ing to the Com­mon­wealth Fund. Health­care costs and pre­mi­ums in Hawaii have grown at a lower rate than the U.S. state av­er­age.

Kem­ble, an ad­vo­cate of a sin­gle­payer health in­sur­ance sys­tem, said it’s un­rea­son­able to ex­pect lower-in­come peo­ple to pay high de­ductibles and $6,600 in max­i­mum out-of-pocket costs. “No one mak­ing $25,000 a year with a se­ri­ous chronic ill­ness can pos­si­bly af­ford that,” he said.

“You pay the same whether it’s some­thing I beg my pa­tients to do or I beg my pa­tients not to do.” Dr. Mark Fen­drick Direc­tor and co-founder Uni­ver­sity of Michi­gan Cen­ter for Value-Based In­sur­ance De­sign

“Gain­ing health cov­er­age too of­ten still leaves health­care un­af­ford­able due to high de­ductibles and other out-of-pocket costs.” Ron Pol­lack Ex­ec­u­tive direc­tor Fam­i­lies USA

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