Options for The Michigan State University Faculty & Academic Staff Health Benefit Plan Roger Feldman Blue Cross Professor of Health Insurance University.

Options for The Michigan State University Faculty & Academic Staff Health Benefit Plan

Roger Feldman

Blue Cross Professor of Health Insurance

University of Minnesota

My Charge

Assess MSU’s information needs to address the following questions: What options would have the best impact on health care

quality and cost for the faculty and academic staff? What options are distractions to be avoided? What options could be implemented quickly versus over the

longer term? What options would have immediate versus longer term

payoff? Options apply only to active faculty & academic staff

and dependents

Data Sources Consultant’s own experience Literature review Interviews with 4 key informants:

Dann Chapman, Director of Employee Benefits, University of Minnesota

Dave Haugen, Director of Center for Health Care Purchasing Improvement, State of Minnesota

Richard Hirth, Associate Professor and member of Committee on Health Insurance Premium Redesign, University of Michigan

Pam Beamer, Assistant Vice President for Human Resources, Michigan State University

Frame of Reference All informants emphasize that their employers are

non-profit organizations (state government or universities) “We are not profit-making organizations” “We don’t make money by taking benefits away from

employees” Health benefits are a key to attracting and retaining

employees in these organizations The goals of health plan redesign are to reduce

costs and improve quality Cost reduction that reduces quality is not acceptable

Key Areas for Consideration

Optimize incentives for patients and providers Evidence-based medical practice Consumer-based plans View community providers as a system Improve the prescription drug benefit Change the health care environment

Optimize Incentives for Patients and Providers

Patients: Disease management and wellness programs Variable cost sharing Convenience clinics Better information on price and quality

Providers: Pay for performance

Option #1: Disease Management and Wellness Programs The focus of disease management (DM)

programs is to “promote recognized standards of care through member and physician care-supported interventions, and to assure program effectiveness in delivering health status improvement and cost reduction outcomes”

JE Pope et al, Health Care Financing Review, 2005

DM Results Programs typically focus on patients with

chronic conditions (e.g. diabetes) Costs are high and predictable Medical care with episodic, acute focus may not

achieve optimal management of chronic conditions DM for diabetes achieved 24.7% reduction in cost

with higher quality scores for some indicators Another diabetes intervention achieved

improvement for 6 HEDIS quality measuresSources: VG Villagra and T Ahmed, Health Affairs, 2004;

LM Espinet et al, Disease Management, 2005

Wellness Programs Emphasis on changing behavior (e.g. poor diet or lack of

exercise) that may result in chronic illness Wellness issues may not show up on medical claims An alternative detection approach is member surveys

University of Minnesota and Minnesota State Employees Group Insurance Program (SEGIP) implemented wellness surveys in 2006

UM employees received $65 after-tax bonus for completing the survey; State employees received $5 reduction in office visit co-payment

Completion rates: 48% (UM), 73% (SEGIP) Employees identified as eligible for wellness programs

may participate on voluntary basis

Wellness Implementation Issues Wellness surveys/programs can be up and running in 6-

7 months Some initial member concerns over confidentiality at UM Very few complaints after program was initiated High degree of employee acceptance at UM and SEGIP

Should dependents be allowed/encouraged to participate? UM dependents can take the survey but there is no reward and

very few took it SEGIP does not have dependent participation at this time Dependent participation would require additional financial

incentives

The next big thing: discounts for health club membership Key issue: what is the return on investment?

Wellness Implementation Issues, cont. Who should conduct surveys and administer

wellness programs? UM uses outside vendors for survey (Staywell) and

programs (Harris Health Trends) Health plans were competitors and unhappy losers

SEGIP lets plans run their own surveys and programs No griping from plans - but this approach may

involve loss of uniformity and ability to analyze the results

Option #2: Variable Cost Sharing Cost sharing in health insurance is important

because it provides an inventive for patients to consider the cost of care when making decisions

Michael Chernew (“A Benefit Based Co-Pay,” Harvard University working paper, 2006) has proposed that cost sharing be targeted to maximize benefits: It should be lowest for services where consumer

demand does not respond strongly to price It should be highest on the margin where incentives

matter

Examples of Variable Cost Sharing Hypothetical examples:

Cost sharing for cancer drugs or kidney dialysis should be very low because consumer demand is unresponsive to price

“where expenditures are large because of serious illness and there there are multiple clinically acceptable treatment options, cost sharing should be modified so that it only applies on the margin where care seeking decisions are being made” (Chernew, p. 6)

Actual examples: University of Michigan M-Care HMO waived cost

sharing for diabetes medicines Destiny Health (see consumer-based health plans)

covers chronic medications so members don’t need to pay from their health care spending accounts

Problems with Variable Cost Sharing What if a service is used mainly by higher-income

workers, who may be less sensitive to price than are lower-income workers? Higher-income workers, on average, might wind up

paying less cost sharing than lower-income workers Administrative complexity

Some therapies are used for different conditions Dann Chapman is worried about patient ‘pushback’ if

the same therapy had different coverage depending on how it was used

Option #3: Convenience Clinics Both UM and SEGIP recognize the

advantages of convenience clinics, staffed by nurse practitioners and physician assistants who are qualified to evaluate, diagnose and prescribe medications for simple illnesses Users receive $5 reduction in office visit co-

payment State employees can combine this with $5

reduction for completing wellness survey

Convenience Clinics: Brief Facts Cost ~ $50-$60 (1/2 of office visit cost, 1/3 of urgent

care visit, ¼ of ER visit) Sore throat accounts for 40% of visits to Minute

Clinics, followed by ear infections and bronchitis About 40% of patients are kids, 60% adults Convenience and cost are the key factors to users High degree of user acceptance Can be implemented easily It’s up to patients to determine if referral doctors are

in their provider network

Option #4: Better Information

Information on quality and price is a critical – but untested – component of the ‘consumer activation’ strategy

Sponsors are struggling to take the first steps to provide information, but we have to compare progress to the current state of affairs, not to an ideal world

Quality Information: MN Community Measurement A nonprofit organization that monitors how

well physician groups deliver preventive care and manage a variety of health conditions

SEGIP members can find quality ratings including process and quality of care

Program started in 2006 There were 30,000 ‘hits’ on the website

during open enrollment

Quality Information: Wisconsin Collaborative for Healthcare Quality A consortium of physician groups, hospitals,

health plans and labor organizations Quality information is available on physician

groups, hospitals, and health plans Example: Percent of women who had

postpartum medical visit ranged from 64% to 94% by medical group

Price Information

Humana Inc. lets 44,000 members compare prices for 30 inpatient and six outpatient operations at most Milwaukee-area hospitals Plan was put together for Business Health Care

Group of Southeast Wisconsin Price for colonoscopy ranged $940-$1,150 at low-cost

hospital to $2,890-$3,530 at high-cost hospital

Source: Milwaukee Journal-Sentinel, February 23, 2006

A similar program is being run by the Medica health plan in Minneapolis

Next Step: Information on Price and Quality The long-term goal is to provide meaningful

price and quality information to enrollees Makes sense only if enrollees have incentive

to use providers that offer lost cost and high quality

Overall importance: high Payoff: long-term

Option #5: Pay for Performance Payments to providers typically have been

independent of quality Fee-for-service reimbursement may even

discourage quality ‘P4P’ systems link payment to quality

measures at the individual provider, clinic site, or group level

Does P4P Improve Quality?

Laura Peterson et al (Annuals of Internal Medicine, 2006) reviewed the literature: 5 of 6 studies assessing quality rewards for individual

physicians show improvement on one or more quality measures

7 of 9 studies of group rewards reach similar conclusions

But the effects may be small, especially when incentives are directed at the group rather than the individual doctor, when the rewards are small, and when providers are paid by multiple payers

Examples of P4P Effects Rosenthal et al found small improvement

(3.6% difference) in rates of cervical cancer screening after a group incentive program

Fairbrother et al randomly assigned 60 physicians to a control group and several incentives e.g. $1,000 for 20% improvement in pediatric immunization rates The bonus group rate improved 25.3% but the

difference versus controls was not significantSources: MB Rosenthal et al, JAMA, 2005; G

Fairbrother et al, AJPubH, 1999

Bridges to Excellence A national, purchaser-led program for rewarding

performance excellence among physicians Minnesota SEGIP implemented diabetes care

program through Bridges: 5 indicators for optimal care: HbgA1c < 7, LDL < 100,

Blood pressure < 130/80, non-smoker, aspirin for patients over 40

Providers receive $100 per patient for ‘superior performance’ (>10% of patients meeting standards for optimal care at the group level)

Group average = 6% No evaluation results at this time

P4P Implementation Issues Most P4P programs focus on process-of-care goals

rather than outcomes Some evidence suggests that P4P improves

documentation but not actual performance Suggested approach: combine process goal

(documentation of smoking cessation advice) with outcome (quit rate)

P4P may encourage ‘dumping’ Should you pay for achieving absolute performance

goals, performance improvement, or for each patient achieving the goal?

Evidence-based Medical Practice Build an evidence-based medical plan Centers of excellence

Option #1: Build an Evidence-based Medical Plan (EBP) Many therapies are overused or have

questionable benefits The rate of back surgery in the U.S. is almost 40%

higher than in any other developed county Across countries, the rate of back surgery increases

almost linearly with the number of neurosurgeons Medicare patients in Fort Myers FL are twice as likely

to have back surgery as those in Miami, without objective indicators that they need more surgery

Sources: GM Gaul, Washington Post, July 24, 2004; DC Cherkin et al, Spine, 1994

Back Surgery, continued Nationally, 300,000 patients per year have surgery

to relieve the symptoms of sciatica (ruptured disk impinging on the root of the sciatic nerve causing leg pain)

A 2-year study compared waiting and back surgery for 2,000 patients with sciatica

There was no difference in outcomes, although surgery appeared to relieve pain more quickly

Source: JN Weinstein et al, JAMA, November 22- 29, 2006

Principles for Building an EBP Only cover treatments that work

Require at least one peer-reviewed study showing that treatment is effective

When treatment works for some people, establish an objective probability threshold for effectiveness

Can be combined with variable cost sharing Provide 100% coverage for evaluation and

management of back pain, but require cost sharing for surgical intervention

Obstacles to Building an EBP The same procedure may work on some

patients but not others Specifying the rules for coverage would be

complex and possibly confusing ‘Managed care backlash’ – patients don’t trust

health plans to make decisions in their best interest

Likely resistance from providers

First Steps in Building an EBP

Start with a small number of procedures for which there is no scientific evidence of effectiveness

Get physicians to make the coverage decisions, then publicize them very clearly to members

Long-term horizon for both implementation and payoff

Option #2: Centers of Excellence Quality differs

significantly among providers

Quality is often associated with volume

Survival after liver transplant at Mayo Clinic vs. national data

60%

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75%

80%

85%

90%

95%

100%

1 mo. 1 year 3 year

Mayo ClinicNational

Source: Liver transplant volumes and statistics for Mayo Clinic

Centers of Excellence

Some employers and the federal government are interested in this idea

Advance Health Advisors is working with HealthPartners HMO in Minneapolis to identify centers of excellence for bariatric surgery

Plan is to come up with a ‘short list’ and then explore direct contracting with these centers and/or patient incentives to use them

Centers of Excellence: Information Needs How to select centers?

Quality only (best quality) Price and quality (best buy)

Will the proposed centers provide adequate access to services for MSU employees?

Can MSU work with health plans to contract with the proposed centers?

Medicare Coverage for Bariatric Surgery Effective February 12, 2006, Medicare covers

bariatric surgery, but only if the patient has a complicating problem (e.g. diabetes) and only if the procedure is performed in a facility that does a large number of procedures and has highly qualified surgeons

Selection based on quality: Medicare recognizes certification programs of the American College of Surgeons and the American Society for Bariatric surgery

Certified Bariatric Centers in MICenter Number of Surgeons

Harper University Hospital, Detroit

2

Henry Ford Hospital, Detroit 2

Spectrum Health – Blodgett Campus, Grand Rapids

3

Port Huron Hospital, Port Huron

2

Source: Surgical Review Corporation

Additional Complication: Risk Selection EBP is not a ‘one size fits all’ model EBP would have to be offered as a choice

along with traditional health plans If past evidence from HMOs is a guide, EBP

would attract healthy (or at least compliant) enrollees

MSU would have to adjust payments to plans to reflect lower risk in EBP and higher risk in other plans

Consumer-based (High Deductible) Health Plans What are they? Who chooses them? Do HDHPs experience favorable selection? Are HDHPs bad for the chronically ill? Do HDHPs control costs? Why offer a HDHP?

‘Classic’ HDHP Model – Definity Health

Definity Definity HealthHealthCareCare

AdvantageAdvantage

Web- and Web- and Phone-Phone-Based Based ToolsTools

Health ToolsHealth Toolsand Resourcesand Resources

Health Tools and Resources• Care management

program• Internet enabled

Health Coverage• Preventive care covered

100%• Annual deductible• Expenses above

deductible covered at 80-100%

Health Reimbursement Account (HRA)• Employer allocates $$$ to

HRA• Member directs HRA• Account rolls over at year-end

• Account does not belong to

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The HSA ModelAn HSA is a special account owned by the individual where tax-free contributions to the account are used to pay for current and future medical expenses.

Used with High Deductible Health Plan (HDHP)

Bush Administration has proposed refundable tax credits for individuals to purchase plans with HSAs

HSAs offered by UnitedHealth, the Blues, Aetna (w/preventive meds), Cigna, Humana, and Kaiser Permanente

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Who Chooses HDHPs?

Strongest and most consistent evidence: HDHPs are preferred by highly-compensated employees

A large employer that offered a PPO and POS plan introduced an HRA plan in 2001 38% of employees choosing the HRA had income

above the firm’s 75% percentile 19% of POS and 29% of PPO enrollees were

above the 75th percentileSource: ST Parente, R Feldman, and JB

Christianson, Health Services Research, 2004

Do HDHPs Experience Favorable Selection? When the University of Minnesota offered an HRA in

2002, there was no evidence of favorable selection (Parente, Feldman, and Christianson, HSR, 2004)

In the large employer previously mentioned, HRA enrollees had lower baseline illness burden than PPO and POS enrollees

In our largest sample of 80,000 covered lives in 3 employers, there is evidence of mild unfavorable selection against HRA plans

HSA may experience favorable selection because healthy employees see account as tax-preferred saving

Are HDHPs Bad for the Chronically Ill? Short answer: No Employees with chronic illness are equally likely as other

employees to join a HDHP, to understand key plan coverage features, and to report having a particularly positive or negative experience with their plan

HDHP enrollees with chronic illnesses assign higher ratings to their plan than do other HDHP enrollees. They are more likely than other HDHP enrollees to use informational tools (p<.05), more likely to anticipate spending all of their savings account dollars (p<.05), and more likely actually to spend more than the deductible.

Source: Parente, Christianson, and Feldman, Disease Management and Health Outcomes, forthcoming

Do HDHPs Control Costs?

HDHP cohort had initial favorable selection vs. PPO and POS

But the cost difference disappeared by 2nd year

2003 saw continuation of unfavorable trend

$0$1,000$2,000$3,000$4,000$5,000$6,000$7,000$8,000$9,000

2000prioryear

2001 2002

HDHP cohortPPO cohortPOS cohort

Sources: Parente, Feldman, and Christianson, HSR, 2004; Feldman, Parente, and Christianson, Inquiry, forthcoming

Design is Important

The HDHP in this study had very generous benefits:

Coverage Employer Contribution

Gap Coinsurance Above Gap

Single $1,000 $500 0%

2-person $1,500 $750 0%

Family $2,000 $1,000 0%

Why offer an HDHP? Dann Chapman is not convinced that “there is

any silver bullet” in HDHPs However, a minority of employees may want this

choice HDHPs can drive consumer engagement

Dave Haugen: SEGIP unions don’t like HDHPs But they could be an “elegant way to design a

health plan” if the size of the employer’s contribution were linked to enrollee behavior change

Designing a HDHP to Change Employee Behavior In 2008, Ridgeview Medical Center in

suburban Minneapolis will begin paying $50/month extra into HSA accounts for employees who: Stop smoking as verified by regular testing; or Discontinue use of lipitor and control cholesterol

through diet, exercise and stress management Bonus is about equal to single employee’s

monthly out-of-pocket premium Payments may continue up to 18 months

View Community Providers as a System Eliminate wrong surgery ‘Get it right’ the first time – reduce drug

prescribing errors

Option #1: Eliminate Wrong Surgery Wrong surgery’ (wrong site, wrong procedure

or wrong patient) was identified as a problem by a consortium of Minneapolis hospitals, Mayo Clinic, and the Institute for Clinical Systems Improvement (ICSI)

Objective: eliminate wrong surgery Structure: semi-annual CEO group meeting;

monthly operations meeting; and safe site collaborative with ICSI providing support

Some Preliminary Results

05

1015202530354045

Wrong rate /millionsurgeries

Source: G Mosser, “On the Road to Right Surgery: Illustrations of Organizational Change,” University of Minnesota working paper, May 8, 2006

Barriers to Improving Health System Performance Payoffs may be significant but progress to date has

been slow and difficult Lack of standard protocol

Limited engagement of CEOs

Inadequate means for achieving focus within hospitals

Autonomy of surgeons

Economic threat to hospitals For further information, consult Dr. Gordon Mosser,

University of Minnesota

Option #2: Reduce Drug Prescribing Errors Medication errors harm at least 1,500,000 people

each year and may kill 7,000, according to the IOM (National Academies News, July 20, 2006)

Costs of treating medication errors in hospitals alone are at least $3.5 billion per year

Computerized provider entry order (CPOE) can reduce medication errors by 55%, according to DW Bates et al, JAMA, 1998

Adoption of CPOE is lagging, especially in small physician practices

Strategies to Reduce Drug Errors Patient incentives to use ‘Leapfrog’ hospitals

Leapfrog is a buyer-driven initiative that rates hospitals according to several quality criteria, including CPOE

Provider incentives to adopt CPOE Estimated to cost about $.50 to $1.00 per member

per month based on 2,000 patient panel (Robert Wood Johnson Foundation, Achieving Electronic Connectivity in Healthcare, 2004)

Requires collaboration with health plans to identify physician practices meeting criteria for subsidy

Improve Prescription Drug Benefit

Generic substitution Buy Canadian

Option #1: Generic Substitution MSU adopted 3-tier tiered pharmacy plan in

2002 and 4 tiers in 2006 69% of covered workers have 3-tier benefits,

according to the Kaiser Family Foundation Generic dispensing rate increased from about

35% in 2001-02 prior year to about 50% in 2006-07

This is good progress but the plan could do more to encourage generic substitution

Generic Substitution at UM

University of Minnesota requires employees and dependents to pay the full marginal cost of a brand name drug if a generic is available

Generic prescription rate increased from 46% in 2005 prior year to 61% in 2006

Projected savings = $2-3 million (6.7-10%) Actual savings = $4-5 million (13.3-16.7%) There is a medical necessity ‘escape clause’

and no major user complaints have surfaced

Option #2: Buy Canadian

“Minnesotans deserve affordable prescription medicine” – Governor Tim Pawlenty

‘Minnesota Advantage Meds’ program State employees who order drugs from a list at a

Canadian pharmacy pay zero co-payment The State will reimburse the pharmacy Top 4 drugs used by MSU enrollees (lipitor,

prevacid, singulair, nexium) are on the list

Buy Canadian Results

Between May 13 and July 31, 2006, 13,507 Canadian orders were placed

$103 savings per prescription - $58 to program in reduced cost; $45 to member in waived co-payment

Still represents only 1% of the drugs purchased by SEGIP members

For more information, visit http://www.advantage-meds.state.mn.us/index.html

Change the Health Care Environment Self-insurance Encourage new statewide bidders

The Health Care Environment Lansing is a difficult health care market

2 main hospitals Most MSU doctors practice in both hospitals Very difficult to make them available on different terms Impossible to exclude either hospital

Provider-owned health plan (PHP) historically has been fully insured MSU has pushed PHP to offer self-insured product PHP is in process of doing this

MSU operates under political constraints Must offer a statewide health plan at multiple campuses Only qualified bidder is Blue Cross, a non-restrictive PPO with

almost every hospital and doctor participating

Option #1: Continue the Push for Self-Insurance According to Dave Haugen:

Self insurance is more flexible than full insurance The employer doesn’t pay a premium to the

insurers Above all, the employer owns its data

University of Minnesota Experience Health plans initially objected to data release

Primary fear was that UM would ‘reverse engineer’ the claims to figure out plans’ fee schedules

Dann Chapman’s advice: Be proactive – tell plans how you intend to use the

data Address plans’ specific concerns (e.g. over fee

schedule information) Discuss proposed new uses for data (e.g. profiling

physicians) with plans But “hang tough” because you own the data

Option #2: Encourage New Statewide Bidders UnitedHealth Group (the previous

administrator for PHP) had a ‘non-compete’ agreement but has severed that relation and is now in a position to bid for statewide coverage UnitedHealth Group has a nationwide network of

participating doctors and hospitals Aetna is also a potential bidder for statewide

coverage

Concluding Comment: Use Local Talent Prior to 2003, the University of Michigan offered a

choice of health plans and contributed 100% of the single coverage premium regardless of plan cost

Provost appointed committee chaired by SPH professor with other highly-regarded faculty members

Committee recommended that University make a fixed contribution based on premiums of two lowest-cost comprehensive plans

University adopted Committee’s recommendations This was a smart move (see JP Vistnes, PF Cooper

and GS Vistnes, Int J Health Care Finance & Economics, 2001)