The University's impact on health care reform legislation

BY DARRYN FITZGERALD
Daily Staff Reporter
Published October 28, 2009

The much-debated health care reform legislation winding its way through U.S. Congress carries a distinct University of Michigan stamp on it.

Research from the School of Public Health’s Center for Value-Based Insurance Design has contributed directly to the legislation that is currently being considered in both the House of Representatives and the Senate.

The basic philosophy of V-BID is to encourage insurers to modify their payout structures to make essential drugs more affordable for individuals, which in theory could, over time lower their total payouts and provide care that promotes the overall health of society.

To accomplish this, the researchers suggest the prices of medical products and services should be modified so those more beneficial to patients — like hypertension medication — are relatively less expensive than those less vital to an individual’s health — like erectile dysfunction medication.

“The people who do nothing to keep themselves healthy pay the same amount as those who eat what their grandmother tells them,” said Mark Fendrick, one of the group’s researchers.

The way the health care system functions now with co-pays, most patients pay the same amount to receive medical services of entirely different medical values, the researchers said. But both their findings and the current health care crisis indicate that this one-size-fits-all approach isn’t working.

“(Under the current system) there’s no distinction between something that has a high - versus low-clinical value, between a drug that would save your life or make your hair grow back,” Martin said.

V-BID was established in 2005 by University faculty members Dean Smith, Allison Rosen, Michael Chernew and Fendrick, who came together to combine their clinical and economic expertises. They set out to apply their skills to produce leading research on the health and economic outcomes of innovative insurance designs.

After publishing many articles in academic peer-review journals, the researchers, under the guidance of the School of Public Health’s Director of Government Relations Jennifer Martin — who spent much of her career in Washington, D.C. working on Capitol Hill and in the White House — were able to share their findings with national newspapers and, most recently, on the Senate floor.

“We brought this to the Michigan Congressional Delegation and others so that as this idea became better known it would be known as a University of Michigan idea,” Martin said. “The idea was that our Michigan constituents and representatives would say ‘this is an idea out of my state.’ ”

Through their research, Fendrick, an associate professor of health management and policy, and his colleagues determined that reducing patients’ co-payments increases their medication adherence.

Results from one of their studies yielded a 7- to 14-percent reduction in non-adherence — meaning that with lower prices on co-payments, more people will actually get the drugs they need.

The underlying principle of value-based insurance is that people will buy more of the health services that they need.

“You give somebody their asthma drugs, you keep them out of the ER,” Fendrick said. “It’s pretty intuitive.”

Pricing in the current system prevents patients from making decisions that have their best health interests in mind.

“We’re not providing any kind of structural incentive for high-value health services,” Martin said. “It’s about getting the patient to access the care they need. The more you increase the co-pays, the less they buy the stuff they need.”

In order to provide patients with more of the care that benefits them the most, V-BID researchers are working to help bridge the gap between patients and health care providers.

“We view V-BID as a demand-side initiative,” Fendrick said. “If doctors continue to make a ton of money by doing the low-value stuff, they’re not going to care. We need to bring together the supply and demand side.”

Through a value-based insurance design, patients can get better care at a better price, the researchers argue, tackling both the health and financial concerns within the health care reform debate.

“We’re in a situation now where costs are going to continue to escalate if we don’t do something,” Martin said. “No matter what happens, we want there to be some clinical nuance so that health is not sacrificed, so that we enable people to still get the high value services they deserve — putting health back into health care reform.”

Fendrick explained that although the debate has focused almost exclusively on the economic impact of the health care system, Obama’s track record in the reform process shows that his main concern was health care improvement.

Although his actions in the debate have strayed from that goal and demonstrated more concern for cost, Fendrick said there is hope that he will ultimately help redirect the discussion.

“The focus of the health care conversation is on money,” Fendrick said. “Everyone is focused on the deficit and the budget and the cost. What we’re trying to do is remind people why we have health care in the first place.”

"Reducing health care spending should not be the exclusive objective of health care reform efforts,” he later wrote in an e-mail. “We must not forget that the goal of the health care system is to improve health, not save money."

Because legislators are still debating health care reform bills in the House and Senate and amendments to legislation can be made, several specifics are still unknown about how the logistics of V-BID would get carried out if the bills are passed in a different form.

However, Fendrick said the issue is further complicated by language and enforcement differences between the two bills.

Introduced by Sens. Kay Bailey Hutchison (R–Texas) and Debbie Stabenow (D–Mich.), U.S. Senate Bill 1040 “actually makes V-BID concepts legal — so no one can challenge it,” Fendrick said.

“In the House bill it says that every health plan can do it,” he added.

If the national legislation passes, insurers will have the option of creating a pricing plan and offering a quality of service tailored to V-BID principles.

“There is really no one V-BID intervention,” Fendrick said. “It really comes down to how much you’re willing to spend on it and how much you’re willing to do.”

Although a value-based insurance design would give insurers more leeway to determine a pricing plan that meets their financial needs, its setup would still offer a better value to the policyholders.

“We guarantee more health at any price point,” Fendrick said.