There are two powerful influences at work in healthcare today. First, is the emphasis on cost containment, the other is the ongoing focus on improving quality. Many people view these as competing forces since it seems intuitive that higher quality should cost more. In fact, there are ways to improve quality that do not necessarily result in higher costs, especially when viewed in the context of total expenditures over a multi-year time horizon. The value-based approach to healthcare is an attempt to move beyond the cost vs. quality tension and focus on the value of interventions defined as the amount of health produced for the dollar spent.
In recent years, most employers have been forced to increase co-payments (for both medications and non-pharmaceutical interventions) as one way of managing the growing burden of employee healthcare costs. Increased co-payments not only transfer the cost from employer to employee, they also tend to reduce utilization. This is particularly true for low to middle income individuals because the increased out-of-pocket expenses represent a more significant burden on financial resources. While the motivation for patient cost sharing is to reduce the utilization of low value services, a growing body of evidence demonstrates that cost shifting leads to decreases in both essential and non-essential care.
In the short term, across-the-board increases in co-payments appear to make economic sense from an employer’s perspective; however, unintended long-term consequences may ultimately increase the employer’s total cost of healthcare. For example, consider an employee that has a chronic condition such as diabetes, asthma, or high blood pressure. All of these conditions are managed by a medication regimen which reduces the risk of life-threatening and costly complications. As co-payments increase, medication compliance decreases (Ellis and others). Consequences of non-compliance, depending on the disease, include the possibility of emergency room visits, reduced productivity at work or lost days and, eventually, higher treatment costs associated with the progression of the disease. Proactive employers foresee that increasing co-payments will cost them much more in the long run and they look for innovative ways to protect their employees while keeping healthcare expenses down.
A value-based formulary seeks to improve medication compliance, and therefore health outcomes, through reducing or eliminating co-payments on medications used to treat specific chronic conditions.
A value-based approach to your health plan will keep employees healthier and more productive by increasing compliance with key screening exams and therapeutic regimens used in the detection and treatment of chronic conditions.
As a result, value-based approaches improve healthcare achieved per dollar spent when compared to across the board co-payment reduction programs.
A value-based approach to your health plan can result in short-term increases in healthcare expenditures if not specifically implemented using a cost-neutral methodology.