Final Contract
Report (continued)
Incentives to Select a High Value Health Plan, Provider Network, or Provider
Question 4. What is a "tiered" health plan?
Tiered health plans offer provider lists sorted into tiers based on quality
of care, cost, or some combination of these. Patients in these plans are
given financial incentives in the form of lower out-of-pocket costs—copayments
or premiums—to use providers in the preferred tier. Other providers
may be used, but the patient must pay more to use them.
The first approaches that health plans took to arranging providers in tiers
in the 1990s and in the early 2000s were based wholly or primarily on the
providers' agreement to discounted fee schedules (or, less often,
on measures of total annual cost). More recently, however, the trend has
been for plans to incorporate quality into the equation, although the relative
weight given to quality versus cost varies among programs. Another major
change is the increasing use of measures of efficiency, such as the average
expenditures required to treat an episode of bronchitis, rather than agreement
to discounted fees or prices as the measure of "cost."
There is substantial information from the Medicare program and other sources
that quality of care is not correlated with cost or with
efficiency.44 This
implies that, in most parts of the country, providers can be arrayed along
two axes—quality and efficiency (go to Figure 1)—and that some
providers will rate favorably on both dimensions whereas others will not.
As a value-enhancing strategy, health plans could, for example, reduce out-of-pocket
costs to patients who choose providers with both higher quality and lower
costs (lower left hand corner of Figure 1).
The application of tiering can occur either at the point of care—when
a patient has a clinical need—or annually during the open enrollment
season (this is referred to as a premium-tiered plan). An
example of the point-of-care approach is the plan offered by Boeing to its
employees. When Boeing beneficiaries need hospital care, they must
choose to use either a hospital compliant with Leapfrog measures or a non-compliant
hospital.(f) If the patient uses a Leapfrog-compliant hospital, all costs are covered after
the deductible. If a patient chooses a non-compliant hospital, the patient
must pay 5 percent of the bill.45
United Healthcare (UHC) has a similar program, the UnitedHealth designation
program.46 In
this program, UHC designates physicians from 21 specialties as either high
quality (one-star physicians) or both high quality and low cost (two-star
physicians). Enrollees pay the lowest copayments for using designated two-star
providers, the highest copayments for providers with no stars, and medium
copayments for one-star providers. An innovative feature of this program,
which may boost credibility with consumers, is that physicians cannot be
designated as being low cost without also being high quality—that
is, there is no "one-star" designation for being only a low
cost physician.
The Buyers Health Care Action Group (BHCAG) is a Minnesota-based coalition
of employers that began purchasing health care together in 1993. In 1997,
BHCAG introduced the Patient Choice program, the Nation's first premium-tiered health
plan.47 In
Patient Choice, local provider networks are placed into performance tiers
based on both quality of care and risk-adjusted total cost of care. BHCAG
members' employees can choose among three tiers of networks, with
decreasing performance ratings associated with increasing monthly premiums.
In 2006, patients in Tier 1 networks had the lowest premium; patients
selecting Tier 2 networks paid the lowest premium plus 16 percent of total
costs; and patients selecting Tier 3 networks paid the lowest premium plus
38 percent of total costs. This tiering strategy is accompanied by extensive
resources for consumers to understand each network's performance rating,
including reports of quality measures, such as which physicians have received
Bridges to Excellence awards and the hospitals' performance ratings on Leapfrog
and other measures.
Efforts to establish tiering approaches have been hampered by a paucity
of adequate and reliable data on quality, creating some concern that tiering
will be based primarily on cost or efficiency. For this reason, some tiering
programs include only conditions for which data on quality are available;
that is, there may be tiers among hospitals for patients seeking maternity
services if data are available about the quality of maternity care, but
no tiers for neurosurgical services in the same hospitals if there are no
data on the quality of those services.
Another important limitation of some
tiering programs is that costs are sometimes assessed in terms of expenditures
per component of care, such as per hospital day or fee per visit, rather
than an overall measure of the costs of treating a particular disorder,
disease, or condition.
Question 5. How do tiering and other benefit design options fit into the framework of consumer financial incentives?
Premium-tiered health plans ask the consumer to choose a network of providers
during the annual enrollment period—which for most consumers is not a
time of immediate clinical need. Other approaches create incentives that are
present whenever the consumer faces a specific clinical decision. Health plans
with a high deductible in combination with an HSA create an incentive for patients
to seek conservative options, such as a trial of bed rest before having magnetic
resonance imaging (MRI) for low-back pain.
There are strengths and weaknesses in each approach. On the one hand, some
might argue that it is more feasible to get the consumer's attention
during an open enrollment period, when consumers expect to receive information
about health benefits and prices. Patients with a chronic illness may be particularly
motivated to seek information about providers' performance ratings. On
the other hand, healthy consumers usually are not anticipating care utilization,
and they may not take the necessary time to review data about quality and cost
during the open enrollment period.
In addition, most plans and providers have good results in some clinical areas
but need improvement in others. Incentives that target decisions during annual
open enrollment, to some extent, assume that there are providers or networks
that are preferable or less preferable for the entire spectrum of clinical
medicine, which may not be the case.
In contrast, point-of-care approaches, whether involving differential copayments
for higher performance providers or incentives to choose specific treatment
options, are just the opposite. They highlight the link between clinical and
financial outcomes and allow the consumer to choose their provider after they
have become ill, which could permit them to better tailor their decision to
the specific circumstances and needs they have. However, in some instances—especially
when the consumer has insufficient information, education, or time—these
approaches may be burdensome to the consumer.
Unfortunately, there is no evidence yet on the relative quality and cost implications of annual enrollment period incentive strategies versus point-of-care approaches.
Do incentives to reduce drug costs work?
One of the areas in which consumer financial incentives have been applied
and studied most closely is the use of tiered copayments for drug coverage.
The goal of tiering drug coverage is to direct patients to choose the
lower cost option from among a group of drugs that insurers consider
potentially equally effective.
Tiered drug benefits that offer lower copayments for drugs in lower
tiers (e.g., generic drugs) generally have been successful in decreasing
the use of higher cost drugs for many drug
classes.48-52 However,
tiering programs that focus solely on cost can have the effect of increasing
out-of-pocket drug expenditures for a subset of patients, increasing
the risk that they will stop buying the medications rather than switching
tiers. Therefore, although consumer incentives designed to discourage
overspending on drugs have reduced total drug costs, they sometimes keep
patients from using drugs they need to prevent complications later.
In 2005, 74 percent of employer-sponsored drug coverage had three or
four tiers, compared with 27 percent in 2000. In 2006, the average copayment
for generic drug tiers was $10, as opposed to $22 for preferred brand-name
tiers and $35 for non-preferred brand-name tiers.2
Increasing consumers' out-of-pocket costs for drugs is potentially a
concern because, although there are few studies of the health impact of
implementing tiered benefits or adding additional tiers,53-54 there
are substantial data showing that cost-sharing applied with a broader
brush—for instance, increasing all prescription copayments or dropping
brand-name coverage—leads to underuse of drugs that are actually
important to a patient's care.55-63
This sensitivity to medication cost occurs even in high-risk groups.
Among seniors with a history of coronary artery disease or myocardial
infarction, the use of statins—important cholesterol-lowering drugs—was
27.4 percent among those with drug coverage provided by their former
employers, but only 4 percent among those without drug coverage.59
Additionally, worse health outcomes,64
such as uncontrolled hypertension, worsening heart disease,65 increases in emergency room visits,66
hospitalizations,65 nursing
home admissions,66 serious
adverse events,66 and
declining self-reported health status,65,67 have been associated with greater cost-sharing.
An example in which consumer financial incentives have been applied
more selectively is "reference pricing." This concept involves
coverage of a preferred drug among a class of drugs—for example,
statins—at low cost, and requires patients who choose other drugs
within the class to pay the difference in price out of their pocket.
The distinction between reference pricing and tiering generally is that,
in most tiered formularies, if there is no generic drug within a class,
then all the drugs are in a higher copayment tier.
A reference pricing strategy recognizes that, for patients who need a drug from a brand-name-only
class, leaving those patients with no alternative but high copayments
will reduce adherence to the drug regimen. Therefore, a preferred brand-name
drug in that class should be chosen—usually after negotiating for
a discount from the manufacturer—and offered at a low copayment
as the reference priced drug.
In theory, reference pricing—and tiering generally—is most
applicable in classes where several drugs are equally effective but vary
in cost, especially if the health plan or government purchaser is able
to negotiate a good price for one of the drugs in the class. A reference
pricing strategy has been adopted in parts of Canada for selected drug
classes without increasing hospitalization or decreasing medication
use.53-54
In summary, simply increasing copayments for all drug classes or dropping
brand-name drug coverage altogether will move some patients to lower-cost
drugs. However, this will also increase the rate at which patients with
chronic diseases stop taking important medications, which can lead to
worse health and increased long-term costs. More selective financial
incentives—such as reference pricing within specific classes of
drugs in which there is an effective, low-cost option—appear to
be more effective in shifting medication use without having a negative
health impact. |
Question 6. What quality and cost performance measures should be used to define tiers?
Table 2 lists criteria sometimes
considered in evaluating candidate performance measures. These criteria include
the potential impact of improving performance on the measure, based on how common
or severe a condition is or how much variation in performance there is among
providers. Recently, it also has been proposed that the potential impact on
disparities should be considered when choosing performance measures.68 However, practical considerations can also be important, such as whether a measure can
be calculated in a transparent way from a reliable data source at a reasonable
cost and whether it can be used in quality improvement initiatives or for consumer
choice of provider.
Because a major goal of the use of incentives may be to reduce total costs,
some employers and government programs use cost or efficiency measures—ideally
in combination with quality measures—as a basis for designating preferred
providers. The Agency for Healthcare Research and Quality recently released
a summary of the state-of-the-science on efficiency measurement (Go to the box
"Measuring Efficiency," below for more information).
Measuring Efficiency: The First Step in Incorporating Efficiency into Consumer Incentive Strategies
Efficiency measurements may have a place in a consumer incentive strategy,
but the use of efficiency measurements without companion quality indicators
may not benefit either the purchaser or the consumer.
McGlynn70
suggests that we measure efficiency as the resources required to create a health
care product. Efficiency can be measured either for a specific service,
like providing chemotherapy for a patient with colon cancer, or for specific
outcomes, like preventing death from colon cancer. In the current
environment, efficiency is more often assessed relative to services than
to outcomes. The focus on cost per service raises the issue that services
might not be comparable—for example, that chemotherapy is delivered
at Clinic A in such a way that fewer complications ensue than at
Clinic B, or that the doctors and nurses are more empathetic and
supportive at Clinic A than at Clinic B.
The calculation of resources used can address either physical inputs—for
example, the number of doctor visits and nursing hours spent over the
course of chemotherapy at Clinic A—or the dollar value of the
input. The approach focusing on physical inputs is called "technical
efficiency," while the approach focusing on dollar value is referred
to as "productive efficiency." Most existing commercial
efficiency measurement software, known as "episode groupers,"
is used to measure productive efficiency for services—for
example, the dollars required to complete the chemotherapy course at Clinic A.
Most efficiency measurement systems are proprietary and are available
from a small number of vendors specializing in this area. They generally
report observed-to-expected cost ratios, or similar ratios, after some
adjustment for severity of illness or case mix, either for episodes of
care or for a population of patients over a period of time. Assessing
the cost of chemotherapy for colon cancer at Clinic A is an example of the episode-based approach. A population approach involves assessing the total expenditures on a group of patients, usually over
the course of a year, correcting for the illnesses they experience during
that time period. While the population approach is in some ways analogous
to summing episode expenditures over a year, it also incorporates the
frequency of episodes in the population, correcting for the diseases
that its members have.
There are some important caveats to the use of these commercial software
packages to assess efficiency. First, none of the measurements
generated by these packages have been carefully validated in the way
that drugs, for instance, are evaluated before they are approved for
use. In general, existing commercial systems are not explicitly designed
to account for quality of care or outcomes. In fact, the Ambulatory Care
Quality Alliance (AQA), among others, suggests that we use the term
"cost" to refer to all measures that lack a quality component.
Either definitional framework for cost and efficiency leads
to a similar recommendation: purchasers should consider presenting
efficiency measurements together with quality data—otherwise,
consumers may conclude that the program addresses only cost control
on behalf of purchasers, rather than value and other factors that
reflect the consumers' own interests. In addition, if providers offer
low cost but poor quality, they may score well on efficiency measurements
in the short term but cause greater long-term costs.
For all of these reasons, the use of efficiency measurements without
simultaneous measurement and reporting of quality of care in the same
clinical areas may not actually benefit purchasers. A better approach,
for example, would be to measure the costs of chemotherapy for colon
cancer at Clinics A and B while also calculating survival rates and
surveying patients about their experiences with the respective clinics. |
A second measurement issue related to tiering is that providers who have high
quality and/or efficiency on one service may perform poorly on another. In
most existing tiered plans, the tiering method puts providers in the same tier
for all categories of care; that is, Hospital A is simply given "preferred" status
rather than being identified as "preferred" for orthopedic surgery
but not for cardiac care. With this approach, quality criteria should cover
as broad a spectrum of care as possible. Alternatively, some tiered plans target
only the categories of care for which measurements of clinical quality are available.
Question 7. What do consumers want to know about the quality and cost measures used to create tiers?
There are no studies that define what consumers want to know about, or even
whether consumers understand, the basic economic concept behind tiering or
any other incentive program. It is clear, however, that consumers respond to
price differences among providers or health plans. Financial incentives most
affect those people who are in poor health,71 use more
medications,57 have more chronic
health problems,57-58,72-74 and have a lower income.54,74-76
There are limits on how much complexity consumers can understand in an incentive
plan. For instance, tiered pharmaceutical formularies are one of the simplest
and most common forms of tiering, yet only 29 percent of patients in such plans
know their usual copayments, and only 43 percent know whether there are limits
on the total number of medications or the total medication costs that their
plan covers.77 This
low degree of comprehension is consistent with findings reported earlier, which
confirmed the difficulty that patients have with understanding complex benefit
designs such as those that have been offered by some Medicare
HMOs.78-80
Among commercially insured patients, knowledge about benefit coverage—outpatient,
inpatient, mental health, emergency room, and out-of-area services—is
also poor.81 While
many enrollees in commercial plans know about coverage for hospitalizations
(90 percent) and doctor visits (80 percent), fewer know whether their insurance
covers mental health (54%) or treatment for alcohol abuse (43
percent).82 Those
who are least likely to be knowledgeable about their plans are those who are less
educated,77,83-84 have a lower
income,83 are not
already enrolled in the program,80 are
older,85 and are members
of a minority group.84-86
The implications of these findings vary depending on the approach to consumer
incentives used. Consumers' lack of knowledge is of particular concern,
for instance, when point-of-care tiering or tiered formularies are used to
influence decisions that occur frequently and with time constraints, such as
choosing a medication to be prescribed during a doctor's office visit.
To make an optimal choice of medication often requires the patient and the
provider not only to have access to accurate information quickly, but also
to be able to process complex information about the benefits and costs of various
treatment options within a short timeframe.
Many studies show that patients84,86 and providers alike currently lack timely access to these data.87 For
example, 54 percent of patients who self-reported being in a tiered plan said
they are never or only sometimes aware of their out-of-pocket drug costs at
the time a drug is prescribed for them.86 In contrast,
there may be better opportunities for information gathering and for careful
consideration when decisions must be made less frequently, such as decisions
about selecting a doctor or the annual choice of a health plan, or when the
decision-making process—while it may have a deadline—can be conducted over weeks or months.
Many of the more vulnerable patients, such as those who are elderly or very
sick, may not be the primary decisionmaker in choosing among their health care
options. Among Medicare beneficiaries, only 68 percent made their own health
insurance decisions; 24 percent received help, and 9 percent had a
proxy.78 There
is some indication that this lesser degree of involvement may be because
health decisions are increasingly complicated, requiring help even when consumers
may be capable of making decisions by themselves in other areas of
life.88
There are studies in the Medicare literature showing that people want and
use many different sources of information about health care
programs,83 and
they use information in multiple formats before they enroll in a plan. In one
study, seniors eligible for Medicare wanted different sources of information,
including addresses, phone numbers, a Web site, and postcards about seminars;
and they wanted this information at different sites—Social Security offices,
senior centers, doctor's offices, pharmacies, libraries, churches, and
grocery stores.89
In practice, consumers want and actually use information from multiple sources.
Medicare beneficiaries used, on average, three sources of information: advertisements
(55 percent); newspaper or magazine stories (47 percent); friends or family
(44 percent); experiences with HMOs (34 percent); and television (33
percent).83 With respect to their decision about enrolling in Medicare Part D and choosing a plan, 27 percent of beneficiaries said they talked to a pharmacist, 26 percent
to a physician, 17 percent to an insurance agent, and 17 percent to a
counselor.90
It is important not only to measure a person's knowledge about information
sources but also to assess what information is actually used. With respect
to Medicare Part D, 64 percent of beneficiaries knew about the toll-free
number, and 62 percent knew about the Web site, but only 12 percent had called
the hotline, and only 9 percent had looked for information on the Web
site.90 There is
less research about how seniors use these information sources after
enrollment—for example, research that would help determine how to give
them the information they need about drug benefits or keep them up to date with changes.
The source of information is also important. Medicare beneficiaries have different
levels of trust, depending on the information source. For example, the Social
Security Administration is a source most seniors would trust.78 Among those who are 64 years old and younger, 43 percent say they have limited knowledge about where to find
information.89
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Incentives to Select a High Value Treatment Option
Question 8. In the special case of incentivesfor choosing among treatment options, what information or decisionmaking tools, if any, should be offered to consumers as accompaniments to financial incentives?
As most patients initially lack relevant medical knowledge, they cannot
be expected to make good medical decisions without help. The introduction
of incentives, in itself, will not obviate the need to help patients facing
difficult clinical decisions understand their situation and their options.
In those areas where good decisionmaking aids are available for patients,
they have been very beneficial. However, for most clinical conditions, we
do not yet have such decisionmaking aids.
Patients who have access to decisionmaking aids have greater knowledge
about their options, have more realistic expectations about the impact
of treatment, and are more active participants in making decisions about
their care. Interestingly, informed patients are more conservative than
their doctors and are about 20-25 percent less likely than their physicians
to choose the most aggressive surgical option for a particular
condition.91 Among
the clinical areas in which decisionmaking aids are available are
prenatal screening, screening for breast and prostate cancer, management
of actual symptoms from gynecologic and prostate disease, management of
back pain, and treatment options for coronary artery disease and several cancers.
Decision aids are available from a variety of medical specialty societies
and commercial vendors, although not all have been studied equally well
or are of equivalent quality. Decision aids vary in the content they include,
but generally they explain the underlying condition and its prognosis, describe
the treatment options available, and discuss the effectiveness of each option.
Many different media are used, including written materials, audio or videotapes,
interactive computer programs or Web sites, and counseling or educational
sessions—but there is little research to demonstrate the relative strengths of one medium versus another.
In general, information from a variety of media and repetition are preferable
because the topics are usually complex, and patients may not be prepared to hear
a message clearly the first time it is presented. Narratives about the results of
different options, especially when presented by people whose background is similar
to the patient's, may be particularly effective in helping patients understand
the differences among treatment options.92
Decision aids are best when used in the larger context of the patient's involvement in
medical decisionmaking. Five elements are essential in enabling patients to realize this
participation:93
- The patient is aware of and understands all the treatment options available
to him or her.
- The patient understands the risks and benefits of the available options.
- The patient realizes that he or she has a right to play an active role
in decisionmaking.
- The physician encourages the patient's participation in choosing
treatments.
- The patient is given time to consider the decision.
These elements emphasize two factors: first, getting the patient and the
physician to recognize that a variety of options are available—patients
initially may not know that they do have options, and physicians may tend
to focus on the option that they believe the patient should choose; and
second, acknowledging that the patient has a role in the decisionmaking
process and needs time to make a decision.
This discussion of decisionmaking aids focuses on situations in which there
is a major decision to be made at a specific point in time—for example, "Should
I have surgery or radiation therapy for my prostate cancer?" A conceptually
related issue, but one with a different timeline, is involvement of the
patient in the management of his or her chronic disease. In that situation,
given the right support, patients can take over decisionmaking about managing
their condition from their health care providers—for example, a patient
with heart failure could adjust her medication doses based on instructions
from her physician without necessarily having to have an office visit.
Some patients' self-management programs have produced higher quality outcomes at lower costs than conventional models of care.94 Several
elements are essential to enabling patients to manage their participation
in such a program (go to Table 3).
These include a self-management toolkit that teaches the patient how to
recognize symptoms that suggest a change in treatment is needed, how to
make the change and assess its effect, and then how to make adjustments
as needed, even without consulting the physician. This approach also presumes
that patients are taught simple testing procedures, such as checking their
blood sugar levels, and already have the prescriptions needed to change
their medicines or dosages.94
Asthma offers a classic example of the opportunities for patients' self-management.
With the appropriate instructions and prescriptions, a patient with asthma
could learn to recognize increasing shortness of breath as a potential reason
to change his inhaler regimen. He could then perform a simple test with
a reusable, hand-held peak flow meter costing about $20 to see if his airflow
is reduced. If it is, he could take extra doses of one of his medications
and test again later to see if his peak flow has improved. If not, he could
add an inhaler to reduce lung inflammation. This self-management can be
done safely and often without involving his physician for every episode of increased shortness of breath.
As with decision aids, self-management tools are available from a variety
of medical specialty societies and commercial vendors. Vendors of disease
management systems and products often incorporate a self-management program
into the overall disease management method. Again, not all of these
programs—whether for self-management or disease management—are
of uniform quality or have been tested thoroughly, so it is important to
incorporate a plan for evaluating the impact of the program into the initial
arrangements for implementing them in the patient's care regimen.
In general, there has been less use of both decision aids and self-management
tools than would be optimal. Although there is no research addressing the
impact of incentive programs on use of decision aids or self-management, it
is logical to anticipate that incentives may focus patients' and providers' attention
on the fact that there are important choices to be made, so that patients
and their providers may be more willing to use decision aids and self-managementtools.
f. The Leapfrog
Group is a voluntary employer association aimed at mobilizing employer
purchasing power to recognize and reward improvements in health care
safety, quality, and customer value. The Group's membership includes
representatives from many of the Nation's largest corporations
and public agencies that buy health benefits on behalf of their employees,
dependents, and retirees. For more information on the Leapfrog Group
and Leapfrog measures, go to http://www.leapfroggroup.org. Accessed on October 10, 2007.
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