A Dumb New Health Insurance Idea: Punishing Patients For Tests and Procedures

Insurers' war on rising drug costs has produced an unanticipated consequence: people with chronic diseases are increasingly unable to afford the medications they need, and that has led to an increased rate of ER visits and hospitalizations. Having realized that that approach is counterproductive, some insurance companies are now offering employers plans that reduce the costs of drugs and, in some cases, doctor visits for chronically ill patients.

Now a group of Oregon insurers are taking this "value-based insurance design" in an entirely new -- but still counterproductive -- direction by making it more expensive for patients to get tests and procedures that the plans regard as "low-value."

Here's how it works under a plan offered by Regence Blue Cross Blue Shield. An employee has a typical deductible of $250 and a $10 or a $20 copay for office visits. If he has a chronic condition such as asthma, diabetes, or heart disease, he can buy drugs at steeply reduced prices and he might have no office visit copayments. But if he needs a knee replacement, a cardiac bypass surgery, or a heart stent, or if he gets a high-tech imaging exam or visits the ER, his deductible and office visit copays double and he has to pay up to half the cost of the procedure or test until he meets the out of pocket maximum for the plan -- $1,500 for an individual and $3,000 for a family.

Now, it certainly makes sense for health plans to lower drug costs so people with chronic conditions can take pills instead of ending up in the ER. According to A. Mark Fendrick of the University of Michigan, a leading expert on value-based benefit design, the failure of some patients to take their medications results in about $100 billion in avoidable health costs, mainly in the form of hospitalizations. But if decreasing drug costs for chronically ill patients could reduce this unnecessary spending and save money for employers, why ding the patients on the other end when they need an expensive test or procedure?

Of course, like Medicare, private insurers are desperately trying to find ways to control costs, and elective procedures and imaging tests look like a good place to find savings. However, the meat-cleaver approach exemplified by the Regence plan is no substitute for physician judgment and informed discussions between doctors and patients. There are, after all, times when patients do need a knee replacement, bypass surgery or a stent, and they shouldn't be forced to make a tradeoff between getting adequate chronic care and being insured against big hospital bills.

As for the idea of punishing patients for visiting the ER, this won't fly with American consumers, and it shouldn't. Even if the ER is over-used by some patients, other people need to know they can go there when necessary -- in some cases, simply because their physician won't see them outside of office hours.

Health plans should go back to the drawing board and think about other ways of reducing costs. One way might be to invest some serious money in helping primary-care physicians create "patient-centered medical homes" that provide better coordination of care and some check on the over-use of specialists.