As policy makers grapple with potentially undoing or modifying the largest expansion of health insurance in a generation, the cost and generosity of benefits hold center stage. Traditional underpinnings of insurance plans—premiums, deductibles, copayments, and coinsurance—frequently create barriers to the optimal use of these plans by consumers. They also can exacerbate inequities in health care, by inhibiting the use of services known to benefit health. Novel approaches to insurance plan design to produce a more equitable and efficient distribution of health care expenditures are warranted.
Following the principle of equality, insurance benefit designs traditionally have offered the same benefit structure to all enrollees. Consumer cost sharing at the point of service is typically uniform regardless of need or potential clinical benefit—often it’s based on the acquisition cost. This one-size-fits-all mentality seems like a great idea on the surface but can create deeply unfair outcomes. For example, in a traditional tiered pharmacy benefit, patients have the same out-of-pocket cost for a life-saving cardiac drug as they do for a medication that treats an annoying, but ultimately benign, toenail fungal infection. Or, a patient with a chronic disease enrolled in a high-deductible health plan must pay the full cost of medications and supplies to control their illness until the plan deductible is met, reducing adherence to treatments that keep people healthier and offset later costs. Sometimes these examples are shared as unintended policy quirks of our current system, but when the issue is access to needed care, it becomes an awfully cruel joke.
Instead, we should be designing insurance coverage in a way that provides access to care for people who need it, when they need it. That requires a subtle but important shift from equal access to equitable access. The first approach treats all people, regardless of clinical need, the same. The second recognizes that clinical need is an essential factor in determining where to direct resources and does not apologize for treating people with different needs differently.
There are a number of innovations in plan design that address the issue of inequities, including pairing insurance benefits with social or clinical supports for people with chronic disease and enhancing coverage for products that improve upstream risk factors, such as the Diabetes Prevention Program. A feasible and effective approach to better aligning expenditures with patient-centered outcomes is value-based insurance design (VBID). VBID structures consumer cost sharing around the idea of clinical nuance, which recognizes that the value of medical services depends on who receives it, who provides it, and where it is provided. This nuanced strategy supports the goals of equity by reducing financial barriers to specific services for targeted populations who need them most. This approach can also be used to deter the use of services when there is low or no expected clinical benefit to the patient.
To be sure, VBID addresses financial barriers to treatment, and there are myriad other access barriers that contribute to health inequities. Nevertheless, it represents an important step in promoting equitable access to care and the use of value in determining how to best spend limited health care resources.
VBID is being used across a wide variety of populations in both commercial and government-funded health insurance, including Medicaid, collectively bargained benefits, and a large number of employer plans. In January 2017, the Centers for Medicare and Medicaid Services launched a Medicare Advantage demonstration permitting plans to offer, for the first time, a different level of benefits to Medicare Advantage members based on their clinical diagnoses. Still, there are barriers to implementing VBID in some settings, including traditional Medicare and in high-deductible health plans that include health savings accounts. Designs that fail to distinguish between differing needs among beneficiaries hinder progress toward health equity. Lessons learned from other areas of public health and health care can be instructive here.
Equity Versus Equality
The concept of equity is most often applied to health outcomes, in terms of addressing the burden of disease borne by one group compared to another. The solution to these inequities often involves assessing the distribution of health determinants and allocating resources accordingly. For example, an inequitable burden of heavy metal poisoning in children may be best remedied by noting the quality of housing in which the children live and improving it. This is why we do not fund lead remediation programs equally across the community, but equitably, so that those most in need are most likely to receive the intervention.
Equity is also embedded in the financing of our health system. For example, Medicaid Disproportionate Share Hospital payments follow the principle of equity rather than equality: Health care organizations that bear the greatest share of uninsured or underinsured patients receive the largest share of funds from this program.
The most common definition of health inequities comes from Margaret Whitehead, who defined them as differences that “are unnecessary and avoidable but, in addition, are also considered unfair and unjust.” Health differences rooted in genetic or biological variation (breast cancer rates between women and men, for instance) are often unavoidable. Health differences from freely chosen health behavior (such as orthopedic injuries between skiers and non-skiers) may be unnecessary and avoidable, but may not be unfair or unjust. But what about different rates of breast cancer among women of different races? What about different orthopedic injury rates between low-wage and high-wage workers?
In most situations, a fair health care system ought to concern itself more with equity than equality. It’s true that equality is optimal in certain situations, such as in the voting booth—one person, one vote—or in hiring practices—in which the same standards should exist for everyone applying. If people responded identically to, and had equal need for, clinical services, then access to those services should be equal. Since this is clearly not the case, it makes sense to discriminate based on the likelihood of clinical benefit. In other words, we should not let the potential negative effects of “bad” discrimination (for instance, failing to prescribe a drug based on a person’s racial or sexual identity) obscure the potential advantages of “good” discrimination, which would make it easier for some groups to obtain a service based on clinical need. Equity is premised on the idea that some types of discrimination—treating unequals unequally—is not only good but also necessary.
In particular, tailoring insurance benefits in this way allows individuals to access the best care for their clinical situation. To help ameliorate disparities, patients who are in the most need and services shown to have the most benefit should be supported by their insurance coverage at the most generous levels.
Ensuring Access Through Equitable Benefits
Allowing benefit programs to adapt to those who are most likely to benefit from care could allow physicians to better tailor treatment to each patient and allow patients to better respond to evidence-based recommendations. Using VBID promotes this goal in three distinct ways.
First, VBID reduces cost sharing for specific services that are shown to have the highest clinical benefit. For example, section 2713 of the Affordable Care Act (ACA) requires that health insurance plans provide coverage for specified preventive services without a beneficiary copayment or a contribution toward a deductible. Those preventive services designated by the US Preventive Services Task Force, the Centers for Disease Control and Prevention Advisory Committee on Immunization Practices, and the Health Resources and Services Administration must be provided without consumer cost sharing.
Second, VBID enhances benefits for specific patient populations. For example, a VBID plan may lower costs for annual eye examinations for people diagnosed with diabetes mellitus but not for enrollees for which this service is not clinically indicated.
Third, whereas traditional benefit designs can keep people from accessing innovative medications due to higher cost, VBID can help tailor cost sharing to the specific clinical circumstance. Under today’s more traditional formulary arrangements, patients who have a suboptimal response to a first-tier—usually generic—drug are often subject to higher cost sharing for therapies that may be more effective but are on higher tiers. A “reward the good soldier” approach allows a more dynamic and equitable cost-sharing reduction, as copayments are reduced on second-line therapies once first-line therapies fail. Patients whose conditions may be harder to treat, and who today are financially penalized for that, are able to access potentially beneficial drugs more easily. To conserve costs, patients who respond to first-line therapies may not receive the same level of copayment reductions for second-line treatment.
Coverage arrangements in most insurance plans are designed under principles of equality rather than equity. To fully realize the benefits of medical advances, ensure access for those who could benefit most, and enhance the efficiency of our health care expenditures, we need to change this paradigm. Equitable benefit design recognizes that many chronic conditions often require tailored therapies for achieving results and allows for discrimination based on clinical need. Where this has been implemented, the result has been better quality health care and a reduction in health disparities, often without additional cost. Better health outcomes, especially for those most in need, require us to apply principles of equity in all aspects of our health care system, including benefit design.
Authors’ Note
Betsy Cliff has received funding from the Centers for Medicare and Medicaid Services. A. Mark Fendrick has received research funding from the Agency for Healthcare Research and Quality, California Public Employees’ Retirement System, Gary and Mary West Health Policy Center, Laura and John Arnold Foundation, National Pharmaceutical Council, Patient-Centered Outcomes Research Institute, Pharmaceutical Research and Manufacturers of America, Robert Wood Johnson Foundation, State of Michigan, Centers for Medicare and Medicaid Services, and the State of New York. He has consulted for AbbVie, FMS, Inc., Geisinger Health Plan, Janssen, Lilly, MedZed, Merck, Risalto, Sanofi, Sempre Health, Takeda, TriZetto, Welth, and Zansors. He is a partner in V-BID Health.
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