Value-Based Insurance Design

Value-Based Insurance Design: Moving the conversation from how much to how well

The history of healthcare is marked by an interesting paradox: Despite countless innovations with proven clinical benefits such as immunizations, cancer screenings and other preventive care measures, evidence indicates that Americans consistently underutilize these high-value services.

For over a decade, health service researchers at the University of Michigan, led by Mark Fendrick, M.D., have been working to unravel this mystery, and have devised a novel and remarkably intuitive response to it: Value-Based Insurance Design, or V-BID.

Fendrick, a professor of Internal Medicine and Health Management and Policy at U-M, directs the U-M Center for Value-Based Insurance Design, which studies and promotes the V-BID approach.

V-BID is an alternative to the traditional “one-size fits all” approach to insurance that requires the consumer to pay the same out of pocket cost for every diagnostic tool, procedure, or drug, regardless of its proven benefit.

V-BID replaces the one-size-fits all model with the concept of clinical nuance, which acknowledges that 1) not all services, procedures, tests and drugs are of equal value, and 2) the benefits of a specific clinical action vary based on who receives it, who performs it and where it takes place.

In the V-BID model, patients face low or no-cost barriers for high-value services (those with proven clinical benefit); for low-value services (those for which clinical evidence is weak and/or indicative of potential harm), the opposite is true.

While some may argue that consumers should pay more, not less, for services in order to increase their stake in the outcome, evidence indicates that higher costs and co-pays decrease patients’ utilization of all types of healthcare.

In the long run, this can lead to higher costs, as patients may forgo preventive measures and delay care until conditions become more severe – and more expensive to treat.

How well does V-BID work? Over the last decade, V-BID has been successfully implemented by hundreds of public and private payers.

A 2013 summary of 13 studies published in Health Affairs reports improved consumer adherence with high-value services, lower consumer out-of-pocket costs, and no significant increase in total spending by payers.

Earlier this year, a subsequent report in Health Affairs provided more insight into which V-BID initiatives had the greatest consumer compliance, confirming that more generous plans, as well as those that addressed the needs of high-risk individuals, offered wellness programs and used mail-order prescription formularies, were most successful.

Given the compelling evidence that V-BID is a marked improvement in health insurance, it’s no surprise that it's one of the few components of healthcare reform that has gained widespread bipartisan support.

V-BID is part of the Affordable Care Act, removing patient cost-sharing for selected high-value services, immunizations and preventive services. V-BID is also a prominent topic in discussions of reform of Medicaid and Medicare on Capitol Hill – employee-sponsored insurance programs offered in multiple states.

The bottom line: Public and private payers are increasingly moving toward clinically nuanced V-BID plans to produce more health for the money spent.

Resources

Explore the key components of V-BID in this infographic →

More from IHPI: Shifting the Health Care Cost Discussion from How Much to How Well →