Oregon’s Value-Based Benefit Design Development

1. Building on Evidence: Oregon’s Efforts on Value-Based Benefit DesignJeanene Smith MD, MPHOffice for Oregon Health Policy and ResearchOregon Health AuthorityOctober 2011

2. Oregon’s Value-Based Benefit Design Development • State originally directed by legislature in 2007 to “develop recommendations for defining a set of essential health services that would be available to all Oregonians under a comprehensive reform plan.” • Focus on using value-based benefit approach in setting levels of cost sharing and use in state purchased plans of OHA (20-30% of lives in most parts of Oregon). • Also considering how to offer in the Exchange and fit inside set cost sharing limits/income levels & Essential Benefits • Underlying methodology based on Oregon’s Prioritized List

3. Oregon Has Long History With Evidence-Based Benefit Design • Prioritized List of Health Services – uses evidence for defining Oregon Health Plan benefits since 1994 • Developed and maintained by the Health Services Commission (HSC) • Services are prioritized according to impact on individual and population health, based on best available evidence • Services necessary to determine a diagnosis are covered; list is used to determine coverage of treatments/follow-up visits • Ancillary services such a prescription drugs and durable medical equipment are covered for conditions in the funded region • Legislature determines funding level (about 3/4 of lines are covered)

4. Current Prioritization Methodology:Step 1: Categories of Care 1) Maternity/Newborn Care (100) 2) Primary & Secondary Prevention (95) 3) Chronic Disease Management (75) 4) Reproductive Services (70) 5) Comfort Care (65) 6) Fatal Conditions – Disease Modification/Cure (40) 7) Nonfatal Conditions – Disease Modification/Cure (20) 8) Self-limited Conditions (5) 9) Inconsequential Care (1)

5. Current Prioritization Methodology:Step 2: Individual/ Population Impact Measures • Impact on Health Life Years (+ 0 to 10) • Impact on Suffering (+ 0 to 5) • Population Effects (+ 0 to 5) • Vulnerability of Population Affected (+ 0 to 5) • Tertiary Prevention (+ 0 to 5) • Effectiveness (x 0 to 5) • Need for Medical Services (x 0 to 100%) • Net Cost (0 to 5)

6. Prioritized List: Example of Line Item Scoring Type II Diabetes Mellitus Impact on Healthy Life Years: 7 Impact on Suffering: 2 Effects on Population: 0 Vulnerability of Population Affected: 2 Effectiveness: 4 Need for Service: 1 Category 3 (Chronic Dz Management) Weight: 75 Net Cost: 4 Total Score: 3300  Line: 33

7. Oregon’s Prioritized List of Health Services

8. Maintenance of the Prioritized List • Biennial review of list • Review of new evidence on existing treatments • New information on effectiveness my be used to move service up/down the list • Must have evidence of harm or ineffectiveness to take off list • Interim modifications • Correct errors • Add appropriate pairings of codes • Delete inappropriate pairings of codes • Incorporate new medical codes • Review of evidence for new treatments, must be more effective or as effective but lower cost to add to list • Incorporate/revise guidelines

9. Oregon’s Value-Based Benefits Design • Little or no cost sharing for: • Value-based services • Basic diagnostic services • Comfort care • Tiered coinsurance/copays for other services • Four tiers based on evidence methodology of Prioritized List • Lower cost sharing for primary care outpatient services • Use of an evidence-based drug formulary also suggested • Some excluded services as in commercial plans

10. Oregon’s Value-Based Benefits Package

11. 20 Sets of Value-Based Services in Oregon’s Value-Based Benefit Package • Value-based services are medications, tests, or treatments that are highly effective, low cost, and have a lot of evidence supporting their use • Most of these services should be provided via outpatient care – ideally in a patient-centered primary care home • These services should be offered at NO cost to patients (no copays or coinsurance) in order to encourage use of these services given their high level of benefit Goal: Have these services used as much as possible

12. Remove Barriers to Care: Examples of Value-Based Services Diabetes • Meds: Insulin, oral glucose lowering drugs • Labs: Hba1c (blood test to check diabetes control) • Other services: Eye exams Congestive Heart Failure (CHF) • Meds: Generic blood pressure meds (beta-blocker, ACE inhibitor, diuretic) • Labs: Annual blood count (CBC), metabolic panel (CMP), cholesterol/lipid profile, urine test; thyroid test (TSH), once • Other tests: EKG, echocardiogram • Other services: Nurse case management

13. Hypothetical Example—Silver Level Plan Robert is single, earns $20,000 per year • He purchases insurance through an insurance exchange • He will get tax credits to assist with his premium • He chooses a VBBP with 10%/30%/50%/70% tiered coinsurance • His deductible is $300; out-of-pocket max is $1,600 – amounts limited due to his income level • Plan uses an evidence-based formulary for medications • $10 for generic, • $30 for preferred, • 50% for nonpreferred

14. Robert Has Type 2 Diabetes • His insulin, eye exams, and diabetic labs/supplies are covered with little or no cost sharing since part of value-based services • His doctor finds a diabetic foot ulcer, and refers him to a surgeon and prescribes a generic antibiotic • No cost sharing for preventive service visit • For the antibiotic, Robert pays a $10 copay based on an evidence-based formulary • The surgeon treats the ulcer; cost: $2,000 • This Tier I service has 10% coinsurance • $300 applies to deductible, and Robert pays 10% of the remaining $1,700 for a total out-of-pocket cost of $470 Note: Today, in a typical commercial plan out-of pocket costs would be $810 plus exams, diabetic meds and supplies copays

15. Preliminary Actuarial Analysis: Expected Utilization Offset Due to Change in Cost Sharing • VBS – moderate increase (10-20%) • Tier I – modest increase (5-10%) • Tier II – None • Tier III – modest decrease • Tier IV – moderate decrease • Rx – moderate decrease • Diagnostic services – varies • Ambulance/ED – None* Overall initial savings estimated 3-5% using commercial data from Oregon Educators Board plan

16. Initial Value-Based Benefits Focus Group Findings Who: Insurers, agents/producers, providers, hospitals, large and small employers, consumers (insured and uninsured), and consumer advocates Key Points: • Value-based/low or no cost-sharing services are appealing • Wellness must have an even greater emphasis • Levels and tiers are complicated • Concern that benefit design is “one-size fits all” approach • Amount of education and communication required to introduce this benefits design is daunting • Concern about who decides what’s important and in what tiers • Benefit design has some inherent inequities • Premiums must be significantly lower to be attractive

17. In Summary – Oregon’s Value-Based Benefit Design • Furthers Oregon’s Triple Aim by incenting the most effective services • Furthers value-based design plans in use by health care purchasers now • Oregon is intent on applying it to state-purchased lines of coverage now (state employees, school districts) and considering how to couple with payment reform • Preliminary review shows that the Oregon’s VBBP cost sharing could be adjusted to fit federal reform limits • Flexibility allowed through federal regulations on value-based benefit design would be helpful

18. For More Information: Background Documents : Oregon Health Services Commission (HSC) http://www.oregon.gov/OHPPR/HSC/index.shtml Cost Sharing Work Group http://www.oregon.gov/OHPPR/HealthReform/CostSharing/CSW.shtml Health Fund Board Benefits Committee Final Report http://www.oregon.gov/OHPPR/HFB/Benefits/FinalRecommendation.pdf Questions: Jeanene Smith: Jeanene.smith@state.or.us Darren Coffman, Director of HSC: darren.d.coffman@state.or.us