Value-based insurance design in Medicare

Abstract

Drug benefits have responded to the rise in drug costs by increasing patient cost sharing. However, many now realize that increasing cost sharing for high-value preventive-care drugs can be detrimental in terms of reducing patient drug adherence and causing increased inpatient and outpatient costs. Value-based insurance design (VBID) deals with this by decreasing the copayments for high-value preventive-care drugs and raising copayments for drugs with less value. The Medicare Part D drug benefit in the US could benefit greatly from VBID, especially since the Part D stand-alone plans currently have no incentive to reduce inpatient and outpatient costs. While VBID will improve outcomes and avert hospitalizations, it will not result in net cost savings since high drug prices usually overwhelm any inpatient and outpatient cost offsets. Thus, for VBID to reap net cost savings, it must be combined with value-based purchasing of drugs, and it must move beyond just the lowering of copayments and increase incentives by giving rebates to patients so that they can share in the cost savings of improved drug adherence.