By Jennifer Boehm and Jeff Munn, principals, Hewitt Associates
Sponsors of consumer-directed health plans (CDHPs) have seen lower cost increases and greater use of preventive services by providing clear incentives and better information, so that health care consumers make rational purchasing decisions. It is no wonder that CDHP enrollment continues to grow among all sizes of employers. Yet CDHPs are not without critics. In fact, under a new type of "value-based" plan design, individuals with certain chronic conditions actually get a reduction or elimination of their out-of-pocket costs for "high value" services and treatments, apparently contradicting one of the tenets of CDHP design. This debate has garnered a lot of attention. Which side is correct? We think the answer is both sides. We´ll explain how value-based plan designs can (and, some would argue, should) work with consumer-directed health care plan designs.
Value-Based Plan Design: A Primer
The concept of value-based plan design is well established. Two prominent researchers, A. Mark Fendrick, M.D., of the
First, certain medical services for certain conditions are of higher value than others. There is substantial medical evidence that health outcomes and mortality rates are improved if patients with these targeted conditions are more compliant with these services. (Pay-for-performance incentives for medical providers also are based on this idea.)
Second, the more an individual has to pay, the less likely the individual is to get and maintain the recommended care. The results of the original
Can Value-Based Design Work with Consumer-Directed Health Care?
Some have argued that "free drugs" or "cheap care" are the exact opposite of consumer-directed health care; we don´t think so. Consumer-directed health care is about alignment of incentives. The original health reimbursement account (HRA) programs often encouraged preventive care, and the tax code permits health savings accounts (HSA) to offer free preventive care. Consumer-directed health care explicitly recognizes that some services are more valuable than others. Value-based design takes that concept one step further, looking at incentives in a fiscally responsible, yet clinically sensitive way. We see these concepts as complementary rather than competing. Are there challenges? Yes and no. While HRA sponsors should have the flexibility to implement a value-based design, HSA sponsors face some regulatory hurdles. It is not entirely clear which services must be subject to a high deductible. The ideas around preventive care continue to evolve, as will market practices, particularly around prescription drugs. Even if services are subject to a high deductible, though, the HSA rules appear to allow those services to have greater discounts than other services. And of course the tax code will continue to evolve.
More to Come
Both CDHC and value-based design will continue to evolve as well to meet the demands of the market. Neither is a complete solution to our health care crisis. However, as strong as each of these concepts are independently, when combined they can be even more responsive to the health care needs of consumers and patients.
Jeffrey D. Munn leads Hewitt´s Health Management Design and Development Team from its
