cdhps and disease management: screeching noise or harmony? april 2005 john riedel mba, mph vince...

CDHPs and Disease Management: Screeching Noise or Harmony?

April 2005

John Riedel MBA, MPH Vince Kuraitis JD, MBA Riedel & Associates Better Health Technologies(303) 697-0719 www.bhtinfo.com (208) 395-1197

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Outline of the Presentation

I. CDHP Background II. CDHPs Have Aspects That Are “DM Friendly” III. However, CDHPs Have Aspects That are NOT

“DM Friendly”

IV. Two Scenarios of How CDHPs and DM Come Together V. Developing “DM Friendly” CDHPs VI. Take Away Points

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Our Thesis in a Nutshell• Two purchasing trends are hot among employers:

– Consumer Driven Health Plans (CDHPs)– Disease Management (DM)

• Although these purchasing trends arose in isolation, they are destined to merge.

• CDHPs have some “DM friendly” features and some that are NOT so “DM friendly”.

• At this point, it is not clear ultimately how CDHPs and DM will come together. We see the potential for two divergent scenarios – 1) DM + CDHPs = Population Health, or – 2) DM + CDHPs = Hell in a Handbasket.

• We suggest that employers can:– Purchase “DM friendly” CDHPs– Encourage the development of 2nd Generation CDHPs that

support care for people with chronic conditions

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Objectives of This Presentation

• Raise awareness of the inevitable convergence of two major trends:– CDHPs

– Disease Management

• Create awareness of the potential for conflict between:– The current trajectory of CDHP development

– The current trajectory of DM development

• Identify issues that are complex, controversial, and formative– Stimulate discussion

– NOT provide the final word

• Suggest ways to provide for synergistic development of DM within CDHPs

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I. CDHP Background

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Employers have 2 primary motivations for shifting toward CDHPs:

1) Cost control by shifting cost sensitivity to consumers. Employers want employees to experience the “true cost” of health care.

2) Encouraging informed consumerism by providing employees with financial incentives, health care information & tools to become more cost accountable and health outcomes conscious.

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There is Potential for Rapid Adoption of CDHPs

• Employers believe they cannot continue to absorb continuing increases in health care costs.

• Medicare Modernization Act of 2003 legislation paved the way for HSAs; Treasury and IRS notices in 2004 clarified many ambiguities.

• CDHPs offer a short-term reduction in costs – higher deductibles translate to lower premiums.

• CDHP offerings are becoming mainstream. – Traditional health care insurance vendors have developed

CDHP options., e.g.. Kaiser, Blue Cross and Blue Shield Plans, Commercial Insurers.

– Milliman Survey, October 2004 (see next slide)• 89% of those responding expect to offer a CDH plan to employers

within the next year, up from 29% in last year’s survey. • 96% of respondents intend to offer a high deductible plan within

the next year, up from 48% in last year’s survey.

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Vendors “Shelves are Stocked” With CDHP Offerings

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• Early experience with CDHPs is generally positive• Projections for CDHP enrollment range from modest

to robust:– “40 million or more enrollees with HSAs by the end of the

decade” [Health Industries Research Council, Fall 2004]

– 7% of U.S. population will be enrolled in a CDHP by 2007 and 24% in 2010. This represents $88 billion in health plan premiums in 2007 and $413 billion in premiums in 2010 [Forrester Research, 2003]

– A spokesman for the House Ways and Means Committee Says Congress’s Joint Committee on Taxation expects one million accounts will have been opened by 2004 and three million by 2013. [Wall Street Journal; September 9, 2004]

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II. CDHPs Have Aspects That Are “DM Friendly”

Employers Value DM as One of the Most Effective Cost-Containment Strategies

[Kaiser/HRET Survey, 2004]


Some Aspects Of CDHPs Are Supportive Of DM

CDHPs and DM are eye-to-eye about the need for high-quality:

1)Consumer information

2)Consumer tools

3)Supported by a robust, customized technological infrastructure


CDHP/DM Harmony

• Accurate, reliable information is a key to appropriate health care decisions by consumers– Evidence based guidelines– Quality & outcomes information about providers– etc.

• Patients need training in self-management approaches

• Ideally, information should be personalized based on patients’ knowledge, skills, beliefs, motivations, health literacy, and availability of psychosocial support

• Information delivery should be enhanced through a robust, user-friendly technological infrastructure– Shared decision making tools– Interactive web sites– etc.

The State-of-the-Art of: 1) Information,

2) Tools, & 3) Technological Infrastructure:

IMMATURE

For example, a recent CapGemini report showed that many aspects of payer website functionality were in early stages of development [CapGemini, November 2004]


Connecting the Dots....

• Health plans feel pressured to develop and provide CDHP offerings

• Competitive CDHP offerings require advanced– Information– Tools– Technological infrastructure

• ...which are being developed faster and better than would otherwise occur (regardless of whether CDHPs are actually selling or not)


III. However, CDHPs Have Aspects That are NOT “DM

Friendly”


Some Aspects Of CDHPs Are NOT Supportive Of DM

Where CDHPs and DM are NOT eye-to-eye: Increased cost sharing creates the potential for patients to:

1) Defer needed care

2) Reduce adherence to prescribed treatment regimens


Potential for Patients to Defer Needed Care

The Consumer Driven Care Guidebook describes the issue:

Increased consumer cost sharing, and consumer control of expenditures from savings or spending accounts may cause consumers to defer needed medical care for financial reasons. Such deferrals would not only produce a bad health outcome, but also drive long-term health care costs higher.

The trends are new enough that no definitive long-term study of this issue is possible without the additional passage of time. Shorter-term studies have been produced supporting both sides of this argument, and are largely inconclusive to date.

However, it is difficult to argue that the greater the financial barriers or incentives not to receive care, the greater the potential exists for deferral of care. Therefore, a challenge in plan design will be to identify at what point such thresholds tip towards deferral, and structure the plan designs below those tipping points. [MCOL, 2004]


Potential for Patients to Reduce Adherence to Prescribed Care

• A growing body of evidence suggests that shifting costs to consumers results in reduced utilization of health care. This creates the potential to reduce adherence to prescribed care.

• The following two slides show examples:– RAND study: Doubling co-payments was associated with reductions in

use of 8 therapeutic classes. The largest decreases occurred for nonsteroidal anti-inflammatory drugs (NSAIDs) (45%) and antihistamines (44%). Reductions in overall days supplied of antihyperlipidemics (34%), antiulcerants (33%), antiasthmatics (32%), antihypertensives (26%), antidepressants (26%), and antidiabetics (25%) were also observed. [JAMA; May 19, 2004]

– Harris Interactive survey: Due to costs, members of high-deductible health plans were more likely not to visit the doctor (33% vs. 17%), to take medication less often than needed (29% vs. 14%), and not to fill prescriptions (28% vs. 15%).


RAND Study – Increasing Co-Pays Reduces Utilization of Rx

[JAMA; May 19, 2004}

Harris Interactive Survey – HDHP Consumers Have More Compliance Problems

[Source: Harris Interactive, 2005]


How Big a Deal is Adherence to Prescribed Treatments?

“Increasing the effectiveness of adherence interventions may have a far greater impact on the health of the population than any improvement in specific medical treatments.”

World Health Organization, 2001


HRAs vs. HSAs Have Vastly Different Implications For DM

• Health Reimbursement Arrangements (HRAs) allow employers more flexibility to structure benefits that are “DM friendly”.

– Employers have the option to structure first dollar coverage for a wide range of benefits. First dollar coverage allows for employers to pay for specific services e.g., preventive care, DM, with pre-deductible dollars.

– HRAs provide a transitional approach which is more appealing to larger, more sophisticated companies.

• Health Savings Accounts allow employers virtually no flexibility to structure benefits that are chronic care and/or “DM friendly”.– The underlying philosophy of HSAs is focused on exposing

employees to “true, full costs” of health care.– HSA regulations allow very limited flexibility for preferential

benefit structures, e.g., benefit structures that provide first dollar coverage and/or incentives for DM or related programs. HSAs allow minimal discretion to differentiate coverage among different health care components, e.g., Rx, hospitals, doctors, etc.

– HSA regulations do allow for first dollar coverage of preventive care. However, DM is not defined as preventive care.

– Employers generally view HSAs as a more potent CDHP vehicle because the savings feature encourages employees to view funds as “my money”.


IV. Two Scenarios of How CDHPs and DM Come Together

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Two Scenarios of DM and CDHPs

• DM + CDHPs = Population Health– Creating empowered, knowledgeable consumers– Benefit design encourages chronic care: lower copays,

first dollar coverage of DM tools (drugs), appropriate utilization of drugs

– Long-term adherence to evidence based treatment– HRAs

• DM + CDHPs = Hell in a hand basket– Cost reduction at any cost– Benefit design indifferent to chronic illness– Short-term cost shifting to consumers– HSAs


V. Developing “DM Friendly” CDHPs


Practical Suggestions – How to Buy a “DM Friendly” CDHP

• Shop vendors. Some vendors are more sensitive to issues relating to the potential for deferral of care and adherence to treatment regimens.

• Compare CDHP offerings in areas that are “DM friendly”, but can be highly variable across CDHP offerings:1) Consumer information

2) Consumer tools

3) Supported by a robust, customized technological infrastructure


What Will the 2nd Generation of CDHPs Look Like?

• Our discussions with employers suggest that they are more focused on understanding, evaluating, and implementing the 1st Generation of CDHPs than they are in thinking about the 2nd Generation of CDHPs.

• However, a wide range of 2nd generation CDHP features are under consideration – mostly by consultants, vendors and thought-leaders.

• Some of these features could be used to create CDHPs that are more “DM friendly.”


• Ask for features that are “DM friendly”, e.g.:– Under HRAs, providing first dollar coverage for routine

treatment of chronic conditions, DM services, drugs used for chronic conditions

– Allocating additional HRA dollars specifically to benefit individual employees with chronic conditions.

– “Bucketing” HRA funds for specific services with specific dollars that will not roll over. For example, employers could provide an incentive for employees to enroll in a DM program. A portion of the HRA funds, e.g., 20% of an employer contribution, would not roll over at the end of the benefit period. This creates a “use it or lose it” incentive for employees.

– Creating a Flexible Spending Account (FSA) to cover routine treatment of chronic conditions, etc.

– Etc., etc. Our list is not exhaustive.


• Some features to facilitate “DM friendly” CDHPs will require legislative and/or regulatory changes.

• For example, allowing first dollar coverage for chronic care treatment and DM services under HSAs is not permissible.


VI. Take Away Points


• The potential exists for rapid adoption of CDHPs• Since employers value DM as an effective cost-containment

strategy, the integration of DM within CDHPs is essential.• CDHPs and DM are eye-to-eye on the need for high quality,

consumer-oriented decision support tools. Yet the quality and availability of consumer-oriented decision support tools is lacking.

• Increased cost-sharing by consumers leads to potential for deferring needed care and reducing adherence to prescribed treatment.

• Employers, CDHP vendors, and others need to experiment with specific approaches and mechanisms to discover the best ways to integrate DM within CDHPs.


AppendixReidel & Associates Consultants, Inc.

Better Health Technologies, LLC


Riedel & Associates Consultants, Inc. (R&ACI)

• John E. Riedel is the Founder and President of R&ACI. • R&ACI has been providing strategic consultation to

employers, managed care firms, pharmaceutical companies, hospitals and provider groups, and managed care vendors in the area of demand management for nine years.

• Through his employer surveys and training in demand management and health and productivity management John has worked with over 300 of the Fortune 1000 companies.

• Focusing on market research, product positioning, and evaluation design, R&ACI has worked with over 40 clients including Healthwise, Pacificare, Florida Hospital System, Merck-Medco Managed Care, Pharmacia, Sanofi-Aventis, Schering-Plough, American College of Occupational and Environmental Medicine, Pfizer, Quest Communications, Dow Chemical, Glaxo Smith Kline, Integrated Benefits Institute, and 15 Blue Cross and Blue Shield Plans.


Better Health Technologies, LLC

• Vince Kuraitis is founder and Principal of Better Health Technologies

• Creating value for patients and shareholders• Strategy, business models, partnerships• Disease/care management and e-health • Consulting/Business Development• E-Care Management News

– Complimentary e-newsletter– 3,000+ subscribers in 27 countries worldwide– Subscribe at www.bhtinfo.com/pastissues.htm


Better Health Technologies -- Clients

Pre-IPO CompaniesCardiobeat

EZWeb

Sensitron

Life Navigator

Medical Peace

Stress Less

DiabetesManager.com

CogniMed

Caresoft

Benchmark Oncology

SOS Wireless

Click4Care

eCare Technologies

The Healan Group

Fitsense

Established organizationsSamsung Electronics, South Korea -- Global Research Group -- Samsung Advanced Institute of Technology -- Digital Solution CenterMedtronic -- Neurological Disease Management -- Cardiac Rhythm Patient ManagementSiemens Medical SolutionsJoslin Diabetes CenterNational Rural Electric Cooperative Association Disease Management Association of America Blue Cross Blue Shield of Massachusetts PCS Health SystemsVarian Medical SystemsVRIWashoe Health SystemS2 SystemsCorpHealthPhysician IPACentocor


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cdhps and disease management: screeching noise or harmony? april 2005 john riedel mba, mph vince...

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