Health IT Vendors Push Value Based Insurance DesignHealth IT Vendors Push Value Based Insurance Design

If Congress passes legislation to create a demonstration project that will test value-based insurance design (VBID) methodologies for Medicare beneficiaries, then we can expect to see further technology investment in VBID, IDC analyst Janice Young predicts.

The Seniors' Medication Copayment Reduction Act of 2009, S. 1040, is a bipartisan bill that was introduced last year by Senator Kay Bailey Hutchison (R-TX) and Debbie Stabenow (D-MI) in May. The bill was referred to the finance committee, which has not yet scheduled a hearing on it. However, as the bill moves through Congress, analysts and stakeholders note that, if enacted, the legislation -- which calls for establishing a model to test whether lowering copayments in Medicare can improve health while reducing costs for chronically ill patients -- could significantly increase technology investments to support VBID.

VBID is a way to reduce chronically ill patients' out-of-pocket costs for medicines and medical services. By doing this, patients with chronic diseases are better able to afford doctor visits, medications, and other health and wellness activities, which can help prevent a worsening of their medical condition, as well as result in a reduction in hospital visits.

This approach to healthcare, Young said, will require that health plans make additional technology investments to implement personalized value-based benefits for members and to upgrade older IT infrastructures.

"VBID requires a more flexible functionality at the member level than is currently available in legacy architectures. Furthermore, the value-based benefit design information for the member or group must be linked to information available to physicians," Young said.

Young also noted that by introducing VBID into Medicare, the model can be tied to other efforts in health IT, such as better information delivery, investment in electronic health records (EHRs), and the movement toward administrative simplification.

"We now have the following: we have an information technology infrastructure emerging, we know best practices for chronic disease management, and we know that the senior population has extraordinarily high incidence of these chronic diseases. We're in a perfect position to test the VBID model," Young added.

If the VBID model is to gain further traction, however, the claims payment system must be able to support ad hoc changes in benefits. She also noted that many claims systems have limited capacity to integrate personalized benefits within the backend claims environment.

"The real shift is the ability to create benefits and incentives that then track to claims payment and care management applications so that the financial incentives are upheld. It is relatively easy to inform a member that a co-pay will be waived based on specific behavior; more difficult to automate this, as information may be behavioral or clinical or from health and wellness program registrations," Young said. "This requires a more flexible benefit and claims processing environment that can use additional processing variables and automate member level changes."

At the time the bill was introduced, Sen. Hutchison wrote an editorial that was published in the Houston Chronicle supporting the VBID model. She wrote: "A number of employers have shown the cost-effectiveness of reducing prescription drug copayments through a value-based insurance design model. A notable example is Pitney Bowes, which reduced copayments for asthma and diabetes medications for their employees. Because more employees took their medication regularly, the company found that it saved more than a million dollars through reduced hospitalizations, fewer emergency room visits and less need for expensive 'rescue' medications."

To help impress upon lawmakers the importance of the legislation, executives from the Trizetto Group, a company that provides VBID technology solutions, recently held a special briefing for congressional staffers on the bill.

"We were on Capitol Hill promoting and encouraging passage of the bill because it's a strong way to help get patients with chronic conditions more effective treatment while reducing their costs and improving their quality of care," said Gail Knopf, VP of VBID strategy at Trizetto.

Trizetto, SeeChange Health, and other companies are actively developing software platforms that use claims administration systems to identify and reduce chronically ill patients' out-of-pocket costs for pharmacy and medical services.