Value-based insurance design has been getting attention in the health policy community recently due to its potential to increase health care quality and decrease costs by using financial incentives to promote cost-efficient health care services and consumer choices. On March 20, the George Washington University Milken Institute School of Public Health (Milken Institute SPH) hosted a discussion about value-based insurance design in the U.S. and Israel featuring David Chinitz, PhD, associate professor of Health Policy and Management at the Hebrew University School of Public Health and Sara Rosenbaum, JD, the school’s Harold and Jane Hirsh Professor of Health Law and Policy.
Chinitz, who spoke first, reminded attendees that the concept of value-based insurance design involves linking co-payments or deductibles to evidence-based medicine, and the concept of incorporating value into health delivery has come out of Harvard University’s School of Business—and not the university’s School of Public Health. He said he sees value to the movement but is also aware of concerns within the hospital and physician communities.
The importance of institutional context
Chinitz explained why the institutional context established in different countries, such as universal health care and ways of regulating and controlling expenditures based on ongoing discussions between the medical community and the state, may impact how effectively value-based health delivery and insurance may function. “The institutional framework helps absorb these tools in a way that I think is missing in the U.S.,” he said. “If you look over the history of Western European health systems, the idea of setting limits on expenditures, on physician’s fees, has been in the DNA of those systems since the early 20th century.”
The creation of a mechanism that links determination of universally covered health care benefits to the guarantee of adequate public finance to cover those benefits could be said to have happened in Israel almost by accident. This suggests, he said, that a window of opportunity could open for something like that in the U.S. In countries with social insurance systems, employers and the government set the share of national income that will be earmarked for healthcare. That sets a frame for the workings of the health delivery system, Chinitz explained. All countries in Western Europe, as well as Israel, have wage negotiations with physicians and healthcare providers. The tension between rising wages and a capped budget is what the institution manages. If physicians’ fees go up, the budget itself must be adjusted to compensate for that. “That enables the tradeoffs to be made without everything being supplied or expenditures spinning out of control, which is arguably what is happening in the U.S.,” he said.
Chinitz also spoke about how setting priorities has helped countries in Western Europe and Israel, as well as others like Australia and New Zealand, embrace value-based health care. He says that he believes Israel has the most complete mechanism for setting such priorities. A committee compares what can be very dissimilar groups of therapies that are seeking to be covered publicly to make decisions that the public accepts, he said. These decisions mean that a nation’s health system may not cover some of the most advanced treatments; as in this country, access to such treatments still may require direct, out-of-pocket payments that only a small proportion of the population can afford.
Israel’s national health insurance law mandates a highly detailed standard “basket” of services offered by four competing health insurers that function like U.S. health insurance, although under far stricter regulation. Israeli citizens are entitled to coverage and can make an annual plan election, much like what happens in the U.S. The basket expands, much like insurance plan design changes over time in the U.S., as new technologies become available. But unlike the U.S., expansion is highly controlled in order to consider both the efficacy of treatment and weigh its cost against other factors. Chinitz explained more about how this decision-making process functions and how such issues as cost-effectiveness and population impact are taken into account.
Israel’s experience makes clear that it is possible for governments to maintain institutions that combine technocratic tools with some elements of democratic process in order to make some of the toughest decisions that any society must make while still maintaining trust and legitimacy in the eyes of the public. “It’s obvious that we need blended tools to cope with these kinds of things,” Chinitz said.
“We need to take value-based insurance design and put it into the context of institutional arrangements that are needed to underpin difficult decisions with trust and accountability,” Chinitz argued. Whether the goal is to expand the essential health benefits and then maybe to limit how you increase them, he said, “what’s important is the process by which it is done. The process can be informed by the technocratic tools, but the tools themselves can’t carry the day.”
Rosenbaum: Four issues that stand in our way
During her time at the podium, Rosenbaum—who has spent much of her career on issues related to health reform—laid out four barriers that she perceives as standing in the way of our country’s ability to embrace the Israeli institutional model, which rests on a sense of national solidarity and trust. These barriers are federalism, a deep sense of individual liberty, a deep belief in religious liberty where health coverage and health care are concerned, a deep allegiance to the myth of the deserving and undeserving poor (traceable to our cultural link to the myths that underlie the historical English Poor Law), and finally, America’s “original sin” of slavery, racial otherness, and its terrible legacy on national consciousness. For example, she noted, it is no surprise that the states most likely today to continue to reject the Affordable Care Act’s Medicaid expansion for the poor are the historic Southern slave-holding states. Nor is it surprising that despite the urgent need for social solidarity to support insurance for a population, many Americans believe that they have the constitutional right to buy substandard insurance products. Nor is it a surprise that religious organizations believe that their faith should override any requirement that standard insurance plans cover all FDA-approved contraceptive methods, she said.
Audience questions included one by Patricia (Polly) Pittman, director of the Milken Institute SPH Health Workforce Research Center, who said that she believed that the promise of payment reform may ultimate render our healthcare system to be less physician-centric. She said her thoughts were influenced by the paper she recently published on how the profession of nursing can be expanded to help move our country toward a culture of health.
Robert Bonar, the Gordon A. Friesen Professor of Healthcare Administration at the Milken Institute SPH, made a comment inspired by The Social Transformation of American Medicine, by Paul Starr. The book, considered the definitive history of the American healthcare system, talks about the growth of medicine into a sovereign profession and the power that physicians have in our country. Bonar asked Chinitz to compare the role of physicians in the two countries to shed light on why Israel has been more successful in making decisions that have been difficult to address in the U.S. Chinitz replied that in many countries, and certainly in Israel, power was delimited by having physicians employed within bureaucratic settings that limited their power from early on in the establishment of collective or universal health systems.
Toward the end of the event, Rosenbaum commented with her characteristic wit that one possible way to enhance the United States’ chances of implementing value-based insurance design would be “to take a Clint Eastwood approach to health care and know our limitations.”
A video of the talk is available here