VBID Summit: The Changing Definition of Equity in Healthcare

Speakers from New York and California explained how they are updating benefits for public employees to include value-based insurance design (VBID) during the opening session of the day-long VBID Summit, held by the University of Michigan VBID Center. They were joined by John Rother, of the nonpartisan, nonprofit organization, the National Coalition on Health Care, which has enthusiastically supported VBID as one way to help the US health system improve accessibility, affordability, quality, and cost-effectiveness of care.

Rother identified 3 key areas where movement is still needed:

1. Medicare Advantage: these plans cannot lower cost sharing for valuable services. A key barrier has been how to offset the cost, but one solution would be to identify low-value procedures.
2. Health savings accounts (HSAs): people who have HSAs cannot avoid their high deductible before they can access benefits for high-value care.
3. Social determinants of health: health plans should have more flexibility to pursue alternative areas, such as housing and food insecurity, which could actually do more to keep people healthy.

David Cowling of the California Public Employees Retirement System (CalPERS) explained how they have been implementing low co-pays for chronic disease medications, free immunization and preventive care, and a reference pricing strategy to lower costs in 4 areas: hip and knee surgery, cataract surgery, colonoscopy, and arthroscopic surgery.

The strategy—internally called value-based purchasing design—sets 1 reference price, and if the consumer goes to a facility that charges more, he or she has to pay the difference.

The next step for CalPERS is to begin implementing VBID strategies more broadly, Cowling said.

Claire Levitt had joined the New York City mayor’s office at a time when no benefit changes had been made for decades. The mayor’s office made an agreement with the municipal labor committee to work together to generate $3.4 billion in healthcare savings from fiscal year 2015 to fiscal year 2018. Importantly, the agreement specified that if the savings exceeded the $3.4 billion by the end of 2018, there would be gain-sharing; the first $365 million of savings would go back to the workforce.

How best to reach these savings? The mayor’s office began to discuss concepts new to the labor unions: the triple aim and VBID. Levitt also mentioned that New York City is considering the reference pricing strategy that CalPERS has been using for years.

One of the strategies that New York has used is raising co-pays for emergency rooms in order to shift utilization away to primary care, where the city lowered co-pays. In addition, some of the medical homes in the area have $0 co-pays. The next challenge is addressing the variation in hospital cost, which is huge in New York City, and this is where Levitt believes reference pricing can help.

“There’s a huge difference in New York City, hospital to hospital,” Levitt said. “We have a huge consolidation of the hospital market. We’re down to maybe 5 hospital systems that are buying up all the community hospitals and huge upward pressure on hospital prices.”

This is an issue being seen across the country, Rother added, and it does reflect the shift in market power as hospitals buy up physicians practices and providers.

“Any notion of true competition is pretty well disappearing,” he said. “So [reference pricing] provides a leverage from keeping things from getting completely out of hand.”

This led the conversation into a debate on the challenge that freedom of choice presents in healthcare. Levitt explained that people believe in going where they want to get the best healthcare, which has led to direct-to-consumer advertising and people making choices not on value, but on perception.

Rother agreed, adding that providing different and better benefits to some subgroups and not others is going to start to create issues. In a world of value-based benefits, people with obesity will receive enhanced benefits than people who are not obese.

“I think that makes perfect sense from a medical, health policy point of view, but if you come at it from a civil rights perspective, or traditional patient advocacy, well then you might see a problem,” he said.

Directing some people to specific facilities that provide more advanced care will likely see pushback. Doing so means getting personal information on people that they may not want to share. New York City ran into this barrier because the labor unions didn’t want anyone looking at individual health information due to privacy concerns.

There is going to need to be a culture shift, the speakers all agreed. However, the idea of freedom of choice may impede progress. In California, Cowling explained that there are benefit design transparency tools available to help with choice, but consumers aren’t being engaged enough to use them.

In New York City, the direct-to-consumer advertising has actually led to a “dramatic shift” in people using the highest-cost hospitals, Levitt said. People with some conditions may need to use those hospitals, but not all. Do all normal deliveries need to take place in the most expensive hospital in the city? Should all patients with cancer go to a specialty cancer hospital? Maybe health equity is not one-size-fits-all, Levitt said.

“The equity is not same for everyone, but maybe optimal care for everyone as per their respective needs,” summed up Clifford Goodman, PhD, of The Lewin Group, who moderated the session.