Value-Based Insurance Gains Traction

As the U.S. moves more fully and, one hopes, more gracefully into the broader health coverage resulting from the Affordable Care Act (ACA), the concept of “value-based insurance” is finding a broader audience.

As reported by, the idea is that if people get more treatment than they need, they will pay more for it. “One of the central features of a value-based system,” said Reuters, “is a financial ‘stick.’ If patients insist on medical procedures that science shows to be ineffective or unnecessary, they’ll have to pay for all or most of the cost.

We’ve discussed the common practice of overtesting, overdiagnosis and overtreatment many times. Why it is bad not only for financial, but for physical health.

Reuters told the story of 17-year-old Tanner Martin, who developed excruciating back pain that often would be treated first with an imaging scan. His mother, Konnie, wondered if the pain indicated a serious injury that could cause permanent disability.

But as chief executive officer of San Luis Valley Regional Medical Center in Alamosa, Colo., she is involved in the facility’s value-based insurance program. So when the Martins went to the medical center, they first watched a short video. It explained that the best approach to back pain like Tanner’s is stretching, strength-building and physical therapy; X-rays and MRIs, according to rigorous studies, are unlikely to make a difference. If they still wanted an X-ray, they would be charged $300 on top of the basic cost of the test.

So they waited, knowing that they could change their minds if Tanner’s condition worsened. After three weeks of therapy, his back was fine.

“My assumption was that a back injury was always severe, needing intervention,” Konnie Martin told Reuters said. “I was very misinformed about the need for imaging.”

Imposing a surcharge if patients choose procedures that research shows probably won’t help resolve their problem is key to San Luis Valley’s two-year experiment in value-based insurance. It uses a combination of financial carrots and sticks to encourage patients to make informed choices about medical services that not only will help them, but avoid ineffective, unnecessary, expensive and possibly harmful ones.

One provision of the ACA is to allow state Medicaid programs to adopt value-based designs. Michigan and South Carolina, Reuters reported, have done so, as has at least one private insurance plan sold on the government exchange.

The ACA also encourages doctors and hospitals to form Accountable Care Organizations (ACOs). They are networks of providers that coordinate care in an effort both to ensure care consistency and communication, and lower costs. Members are paid more if they keep their patients well.

About 4 million Medicare beneficiaries are in ACOs, and, according to, combined with the private sector, more than 400 have signed up. About 14 in 100 people in the U.S. are served by an ACO, and you might be one, even if you don’t know it.

As Reuters pointed out, advocates of value-based insurance know that although the “supply side” (hospitals and doctors) is key to value, health-care spending reforms also must involve the “demand” side – patients.

Patients who know they’re at least partly responsible for paying for care not likely to benefit them are less likely to ask their providers for it, whether it’s an antibiotic prescription or an ultrasound test.

Some patient advocates are concerned that some procedures would be considered off-limits in a value-based system.

“We have reservations about financial obstacles that might keep patients from getting care they need,” Joyce Dubow, senior health-care reform director at AARP, told Reuters.

AARP, the research and lobbying group formerly known as the American Association of Retired Persons. is a partner in Choosing Wisely, a program in which medical specialists identify procedures that have been proved scientifically not to benefit patients. Its list, said Reuters, is a benchmark for discouraged procedures in value-based insurance plans.

“We don’t want people getting medical procedures they don’t need,” Dubow told Reuters, “but we don’t see Choosing Wisely as a vehicle for benefit design. Many of the items on the list are equivocal and not ‘never’ procedures.”

But supporters of value-based coverage say they don’t penalize patients if the benefits of a procedure are subject to debate; for example, screening mammograms. And doctors still use their judgment about the utility of a given procedure for a given patient.

And that’s what the best health care does – it considers the patient, the history, the situation and the options. And chooses the most effective means of solving that problem for that person.

And, often, it’s the simplest.

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