Maximizing Benefit Value

There’s no denying that managed care—a broad term used to describe systems and techniques that are used to control the costs and use of health care services—is, in its way, a powerful business model for the health insurance industry. Throughout the 1990s, managed care made healthcare-related industries such as insurance and pharmaceuticals demonstrably more profitable.

But critics are quick to point out that it hasn’t stemmed the precipitous rate of medical inflation. And it hasn’t necessarily led to better care for plan subscribers. In fact, in many cases, it has led to worse health outcomes because of its lack of emphasis on preventive care and ease of use. One hopes it’s not too ambitious or idealistic to suggest that in order to be truly successful, the health care system must actually make people healthier.

Less-than-ideal health outcomes also place an undue financial burden on health plan purchasers (either individuals or the companies that employ them). By taking the cheapest route in the present, the classic managed care approach tends to compromise the future by failing to prevent incipient health problems. The problems then grow until they are catastrophic and expensive: Poorly managed diabetes leads to blindness or an amputation; unrestrained high cholesterol leads to a heart attack.

Ideally, health benefits should be allocated in such a way as to be most efficient over the entire life span of the users. That’s not just good sense; it’s also the idea behind a new, improved model that some industry professionals are calling value-based health care.

“Managed care was a good thing in that it tried to match up evidence with treatment—taking scientific research and [deriving] actual treatment patterns,” says Carolyn Pare, CEO of Buyers Health Care Action Group, a Bloomington-based coalition of private and public employers that is working to move the health care system toward maximized benefit value. “What happened, though, is I think that we got a little too carried away on the cost containment side, and oftentimes we wanted to go with the cheapest option. So even though we know that there are elements of managed care that are critically important, we haven’t really seen the payoff in the cost component yet. In reality, quality plus cost is what equals value. With better quality services, people have better outcomes and therefore are less sick and therefore have to use fewer services.”

Rethinking Drug Coverage

Value-based health care, to date, has addressed this problem primarily in one arena: drug coverage. “It involves making certain drugs free or cheap in order to induce use of them, because it is believed that those drugs are superior to any other,” explains Henry Van Dellen, practice leader at the Minneapolis office of Aon Consulting, a risk management and human resources consulting firm. “Even if they cost more upfront, the idea is that it is worth the extra cost for the best drug in order to prevent a heart attack or some other major complication.”

For example, he says, many physicians believe a certain cholesterol treatment drug has shown better clinical effectiveness than its competitors. Even though it’s costly and is not currently available in a generic, it may be cheaper for the insurer to pay for it upfront than to risk a patient needing surgery or emergency intervention down the road.